<PAGE>
As filed with the Securities and Exchange Commission on March 9, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MERCATA, INC.
(Exact name of registrant as specified in its charter)
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Delaware 5999 91-1929287
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
110 - 110th Avenue N.E.
Bellevue, Washington 98004
(425) 468-9800
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Tom Van Horn
Chief Executive Officer and President
110 - 110th Avenue N.E.
Bellevue, Washington 98004
(425) 468-9800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
Christopher W. Wright Scott L. Gelband
Patrick A. Pohlen Patrick J. Devine
Matthew D. Latimer Amy L. Watson
Andrew E. Christensen Perkins Coie LLP
Cooley Godward LLP 1201 Third Avenue, Suite 4800
5200 Carillon Point Seattle, WA 98101-3099
Kirkland, WA 98033-7355 (206) 583-8888
(425) 893-7700
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the 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,
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
number 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 number of the earlier effective registration statement for the
same offering. [_] _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Title of Each Class of Securities Proposed Maximum Aggregate Amount of
To be Registered Offering Price (1) Registration Fee
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<S> <C> <C>
Common Stock, $.001 par value...................... $100,000,000 $26,400
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell nor does it seek an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated March 9, 2000.
Shares
Mercata, Inc.
[MERCATA LOGO] Common Stock
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This is an initial public offering of shares of common stock of Mercata, Inc.
All of the shares of common stock are being sold by Mercata.
Prior to this offering, there has been no public market for the common stock.
It is currently estimated that the initial public offering price per share will
be between $ and $ . Mercata has applied to list the common stock on
the Nasdaq National Market under the symbol "MCTA".
See "Risk Factors" beginning on page 6 to read about factors you should
consider before buying shares of the common stock.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
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<TABLE>
<CAPTION>
Per Share Total
--------- ----------
<S> <C> <C>
Initial public offering price............................. $ $
Underwriting discount..................................... $ $
Proceeds, before expenses, to Mercata..................... $ $
</TABLE>
To the extent the underwriters sell more than shares of common
stock, the underwriters have the option to purchase up to an additional
shares from Mercata at the initial public offering price less the
underwriting discount.
-----------
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
Robertson Stephens
-----------
Prospectus dated , 2000.
<PAGE>
INSIDE FRONT COVER PAGE:
Background featuring a swirl design on the upper half of the page.
Top: At the upper left hand corner of the page, are the words "Welcome to
Mercata." in bold text.
Middle: At the center left of the page are the words "The Power of buyer-driven
commerce." in bold text.
Bottom: At the bottom center of the page is the Mercata logo. Under the
"Mercata" logo is an underscore and beneath the underscore is the text
www.mercata.com with the word "mercata" in the web site address featured in
bolded text.
FRONT COVER PAGE GATEFOLD
Top of Gatefold: Across top of gatefold in large bold letters are the words
"Mercata brings group buying power to the people."
Left Gatefold: At the top of the page on the right is a banner with the words
"Mercata aggregates buyers' purchasing power to achieve volume pricing
benefits."
Directly below the banner in double-spaced, italicized text are the words
"Unlike traditional retailers (which typically aggregate a supply of products)
Mercata aggregates demand in the form of a growing community of online buyers.
By bringing together buyers with similar purchasing interests, Mercata
aggregates their purchasing power, enabling them to receive discounts on high-
quality, brand-name products."
At the top of the page on the left is a picture featuring 10 disembodied human
heads in the center of a circle, surrounded by eight walkie talkies with arrows
pointing from each walkie talkie to the group of heads.
Immediately below the picture in double spaced, italicized text are the words,
"With Mercata's patent-pending, demand aggregation business methods and
technology, prices can dynamically decrease, based on parameters determined by
the seller, as more visitors join a buying group."
At the center left of the page are the words "Drive prices down with PowerBuy
(TM) group purchases." The word "PowerBuy" in the phrase is bolded and larger
than the rest of the text and features a swirl design in place of the letter
"o." The words "group purchases" in the phrase are smaller than the rest of the
text and are placed directly below the word PowerBuy.
<PAGE>
At the bottom left of the page is the Mercata logo and at the bottom center of
the page is a headshot of a smiling woman with glasses wearing a turtleneck.
Immediately to the right of the woman, in single-spaced, italicized text are the
words "Mercata has developed the We-Commerce (TM) Network, an e-commerce
solution that enables merchant, portal, community and content Web sites to offer
merchandise for sale using our proprietary business methods and technology."
Immediately below the text is a circle containing a logo consisting a background
of two interlocking circles and the words "we.commerce network."
Right Gatefold: On the left hand side of the page is a screen shot of
Mercata's Web site. At the top of the screenshot on the left is the Mercata
logo and in the middle is the phrase "Buying Power to the People." In the upper
left hand corner is a swirl design. Below these three items is a navigation bar
featuring the following sections from left to right: "Home," "Customer Service,"
"Your Account," "PowerBuy Center," "Help Center" and "Shopping Cart." On the
left side of the screenshot is a column featuring the following headings from
top to bottom: "Quick Search (Go), Show PowerBuys/Show All products, PowerBuy
Center, Appliances, Baby, Electronics, Gifts & Gadgets, Home & Kitchen, Lawn &
Garden, Luggage, Sports & Fitness, Tools, Watches & Jewelry, DVD Players!, Sign
Up to Hear About Special Offers (It's Free!), Earn up to $125 in Store Credit
(Share the Power Referral Program), Shop by Brand (See what products we carry
from your favorite brands), Smart Shopper (Learn with Buyer's Guides) (Save in
the Rebate Center), Product Request (What products should we add? And which
ones should we offer in PowerBuy group purchases? JoinWe-Commerce Affiliates
(Make money with Mercata), Certified Merchant Guarantee (Mercata is proud to be
an AOL certified merchant)."
In the center of the screenshot is a column featuring the following text and
pictures from top to bottom:
1. "Drive Prices Down with PowerBuy (TM) group purchases (the word "PowerBuy
is in larger text and has a swirl in place of the letter "o." The words "group
purchases" are in a smaller font directly below the word "PowerBuy.")
2. PowerBuy Showcase (with letter "o" in PowerBuy replaced with swirl)
3. Picture of DVD Player next to the following text "Philips / Philips DVD/CD
Player DVD825. The DTS and Pro Logic connections, recordable DVD playability
and user-friendly controls help this compact unit deliver maximum entertainment.
Time remaining: 4 hours, 40 minutes Current PowerBuy Price: $219.74." Below
picture of DVD are the words "5 Free DVDs!" with pictures of DVD cases above
them.
4. Picture of Makita Drill next to the following text, "Makita / Makita 12-
Volt, 3/8-inch Variable Speed Cordless Drill 6223DWE. Compact, lightweight and
sized just right, this Makita cordless drill is like your favorite pair of
jeans: reliable in a variety of situations and always comfortable. Time
Remaining: 10 hours, 18 minutes Current PowerBuy Price: $101.87
<PAGE>
5. Picture of Sharp Camcorder next to the following text, "Sharp / Sharp
Digital Camcorder w/3-inch LCD, VL-SD20U. The LCD view screen rotates 235
degrees, the 10X optical and 100X digital zoom lenses can capture all the
action, and the image stabilizing technology reduces any shaking. Time
Remaining: 4 hours, 29 minutes. Current PowerBuy Price: $748.95
6. Picture of Graco Baby Stroller next to the following text: "Graco / Graco
LiteRider Travel System in Laramie. The car seat of this travel system has a
base that stays in your car - simply detach it from the base and it goes right
into the lightweight stroller. Time Remaining: 1 day. Current PowerBuy Price:
$119.87.
On the right side of the screenshot is a column featuring the following text and
pictures running from top to bottom:
1. A box with the following text, "Special Offers Double your Warranties!
Get double FREE double warranties on electronics purchases you make from us over
the next year. Details. FREE GROUND SHIPPING in the continental U.S. and Canada.
Read our Shipping [remainder not seen due to superimposed box]
2. Enlarged box with two Audiovox mini 2-way radios to the side and the
following text, "PowerBuy Summary / MSRP: $110.00 (struckthrough) / Start Price:
$79.99 / Current Price: $63.23 / Price Drop: $16.76 / Ground shipping: FREE!* /
Shipping details Offer Started: 29 Feb 10:00 PM Ends: 03 Mar 10:00 PM / (or
when supply runs [remainder of text covered by picture of radio] ) / Remaining:
13 hours, 2 minutes"
3. Picture of watch with the following text "Polar M52 Heart Rate Monitor
w/Chest Transmitter, Current PowerBuy Price: $122.71 PowerBuy Ends: Today
4. Picture of two Audiovox mini 2-way radios with the following text,
"Audiovox Pair of 14 Channel Mini 2-way Radios, FR2302 Current PowerBuy Price:
$63.23 PowerBuy Ends: Today
At the bottom of the screenshot are the words, "Get Help Making the Right
Choice." Below that text in a smaller font is the text "Mercata helps you make
informed buying decisions in our Buyer's Guide Center. Each guide covers a
different type of product, detailing key features, answers to frequently asked
questions, glossary terms and more."
Below that clause are the following words:
"Home/ Careers/About Us/ Customer Service/ Affiliate Program / PowerBuy (TM)
Center/ Help Center / Shopping Cart / Privacy Policy / Terms and Conditions /
Site Map / We-Commerce (TM) Network"
"Copyright (C) 1999, 2000 Mercata, Inc. All rights reserved."
"Mercata, We-Commerce, PowerBuy, Share the Power, Buying Power to the People,
the Power Swirl design and the Power of We are trademarks of Mercata, Inc. All
other trademarks are property of their respective owners."
<PAGE>
"We-Commerce Network / Reviewed by Trust.e Site Privacy Statement / BBB A Better
Business Bureau Program / BBB Online Click to Check"
On the left side of the page there are three segments of single-spaced,
italicized text with dotted lines going from the text to areas on the
screenshot. The three text segments state:
1. "Mercata offers products from over 300 brands in categories such as
appliances, baby products, electronics, gifts and gadgets, home and kitchen
items, lawn and garden products, luggage, sporting goods, tools, and watches and
jewelry."
2. "Visitors may notify us of products and brands they are interested in
purchasing through the Product Request feature."
3. "Our Smart Shopper area provides details regarding product features and
specifications, answers to frequently-asked questions, lists glossary terms, and
more."
At the bottom section of the page there is a frame with text that reads,
"Mercata offers a rewarding and exciting buying experience."
At the bottom of the page are the words "Mercata, We-Commerce, PowerBuy, Share
the Power, Buying Power to the People, the Power Swirl Design, and the Power of
We are trademarks of Mercata, Inc. The use or display by Mercata of other
parties' trademarks, trade names, or service marks is not intended to and does
not imply an endorsement of Mercata by these parties.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding Mercata and the financial statements and the notes to
those statements appearing elsewhere in this prospectus.
Our Business
We are a provider of Internet-based demand aggregation services. Our
business model empowers buyers with common purchasing interests to achieve
discounts on high-quality, brand-name products and services. Demand aggregation
operates on two basic principles: (1) sellers are more likely to offer
discounts to buyers when merchandise is purchased in volume and (2) buyers are
more likely to purchase merchandise as prices decrease. We call our Internet-
based form of demand aggregation "We-Commerce(TM)". On our Mercata.com Web
site, buyers participate in group buying through PowerBuy(TM) group purchases.
PowerBuys are limited-time buying opportunities in which the price of the
featured product or service dynamically decreases, based on parameters
determined by the seller, as more visitors join the buying group.
Through the use of our proprietary business methods and technology,
individual buyers are able to combine their purchasing power to receive volume
pricing benefits on featured merchandise. Using this same technology, a seller
may gain access to actual buyer demand and price sensitivity data, enabling the
seller to adjust prices during a PowerBuy in order to achieve sales objectives,
such as increasing units sold, revenues, gross profit dollars or gross margin
percentage.
For online businesses, we offer an e-commerce solution through our We-
Commerce Network. Currently, the We-Commerce Network has two principal types of
participants:
. merchants that desire to sell their products and services on their Web
sites using a dynamic pricing mechanism and extend the reach of their
merchandise offerings to other Web sites; and
. portal, community and content Web sites that desire to enhance their e-
commerce capabilities by providing users a novel buying experience.
Within this network of online businesses, PowerBuy group purchases can be
conducted simultaneously on multiple Web sites, thus potentially increasing the
number of individual buyers within any given PowerBuy. To date, participants in
the We-Commerce Network include DealTime.com, Inc., Football Northwest LLC
(Seahawks.com), Go2Net, Inc., Mercata.com, the Microsoft Network LLC (MSN),
mybytes.com (a division of Youthstream Media Networks, Inc.), Online Office
Supplies Company and SAVIshopper.com, Inc.
We began offering products for sale on Mercata.com in May 1999. In the
fiscal year ended December 31, 1999, we generated net revenues of $6.3 million
and received orders from over 72,000 customer accounts.
Corporate Information
We were incorporated in Delaware on September 23, 1998. Our principal
executive offices are located at 110 --110th Avenue N.E., Bellevue, Washington
98004. Our telephone number is (425) 468-9800. Our Web site is located at
http://www.mercata.com. Information contained on our Web site does not
constitute part of this prospectus.
Mercata(TM), We-Commerce(TM), PowerBuy(TM), Share the Power(TM), Buying
Power to the People(TM), the Power Swirl design and The Power of We(TM) are
trademarks held by us. This prospectus also includes trademarks, trade names
and service marks of other companies. Use or display by Mercata of other
parties' trademarks, trade names or service marks is not intended to and does
not imply an endorsement or sponsorship of Mercata by these parties.
3
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by Mercata............ shares
Common stock to be outstanding after the
offering.................................. shares
Proposed Nasdaq National Market symbol..... MCTA
Use of proceeds............................ For working capital and general
corporate purposes, including
marketing and the expansion of
the We-Commerce Network; further
development of our demand
aggregation service; potential
acquisitions or development of
complementary products, services,
technologies or businesses; and
potential strategic investments.
</TABLE>
Common stock outstanding after this offering is based on shares outstanding
as of March 1, 2000. The share numbers above exclude:
. 2,560,094 shares of common stock issuable upon exercise of outstanding
stock options as of March 1, 2000 at a weighted average exercise price
of $0.54 per share;
. 1,664,205 shares of common stock available for future grant or issuance
pursuant to our 1999 Equity Incentive Plan as of March 1, 2000, which
shares will be unavailable for future grant or issuance upon the closing
of this offering; and
. 4,750,000 shares of common stock available for future grant or issuance
after the closing of this offering pursuant to our 2000 Equity Incentive
Plan and our 2000 Employee Stock Purchase Plan.
Except as otherwise noted, all information in this prospectus:
. reflects the issuance of 2,522,250 shares of Series C preferred stock in
March 2000;
. reflects the automatic conversion of all shares of our preferred stock
outstanding as of March 1, 2000 into 27,722,250 shares of common stock
upon the closing of this offering;
. excludes the potential issuance of 840,750 shares of Series C preferred
stock upon conversion of an outstanding $10.0 million convertible note,
which transaction currently is subject to regulatory review;
. assumes the underwriters do not exercise the overallotment option
granted to them.
4
<PAGE>
Summary Financial Information
(in thousands, except per share data)
The following summary financial information is derived from our financial
statements included elsewhere in this prospectus. You should read the following
summary financial information in conjunction with those financial statements
and the notes to those statements.
<TABLE>
<CAPTION>
Period from
September 23,
1998 (inception) Year Ended
to December 31, December 31,
1998 1999
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<S> <C> <C>
Statement of Operations Data:
Net revenues.................................. $ -- $ 6,308
Cost of revenues.............................. -- 5,775
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Gross profit.................................. -- 533
Operating expenses:
Sales and marketing.......................... 498 29,683
Technology and development................... 664 3,915
General and administrative................... 761 3,494
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Total operating expenses.................... 1,923 37,092
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Operating loss................................ (1,923) (36,559)
Interest income (expense), net................ (12) 467
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Net loss...................................... $(1,935) $(36,092)
======= ========
Basic and diluted net loss per common share... $ (0.48) $ (21.33)
======= ========
Pro forma basic and diluted net loss per
common share ................................ $ -- $ (2.25)
======= ========
Weighted average shares used to compute basic
and diluted net loss per common share........ 4,000 1,692
Weighted average shares used to compute pro
forma basic and diluted net loss per common
share........................................ -- 16,044
</TABLE>
See Note 1 to the financial statements for an explanation of the
determination of the number of shares and share equivalents used in computing
per share and pro forma per share amounts.
The following table presents summary balance sheet data as of December 31,
1999 on an actual basis; on a pro forma basis to reflect the issuance of
2,522,250 shares of our Series C preferred stock and the issuance in March 2000
of a $10.0 million convertible note payable, and the automatic conversion of
all our preferred stock outstanding as of March 1, 2000 into common stock upon
the closing of this offering; and on an as adjusted basis to give effect to the
pro forma adjustments and the receipt of the estimated net proceeds from the
sale of shares of our common stock in this offering at an assumed initial
public offering price of $ per share, after deducting underwriting
discounts and commissions and estimated offering expenses payable by us.
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------
Pro Forma
Actual Pro Forma As Adjusted
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<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........................ $13,874 $53,874 $
Convertible note payable......................... -- 10,000
Working capital.................................. 8,309 38,309
Total assets..................................... 22,793 62,793
Total stockholders' equity....................... 12,235 42,235
</TABLE>
5
<PAGE>
RISK FACTORS
You should consider carefully the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones we face. Additional risks and uncertainties presently not known to us
or that we currently deem immaterial may also impair our business operations.
If any of the following risks actually occur, our business, results of
operations and financial condition could be materially and adversely affected.
Additionally, the value of our stock could decline, and you may lose all or
part of your investment.
Risks Related to Our Business
Our limited operating history makes forecasting future results difficult.
We were incorporated in September 1998 and began selling products on our
Mercata.com Web site in May 1999. Accordingly, we have only a limited operating
history on which you can evaluate our business and prospects. Our prospects
must be considered in the light of the risks, uncertainties, expenses and
difficulties frequently encountered by companies in their early stages of
development, particularly companies in new and rapidly evolving markets, such
as online commerce, and companies with new and unproven business models. You
must consider the risks associated with our ability to:
. execute successfully our business and marketing strategy;
. expand and enhance our product and service offerings;
. expand the We-Commerce Network;
. source merchandise and work with manufacturers, distributors and our
third-party warehouse facility to fulfill orders;
. attract visitors to Mercata.com, convert visitors to customers,
encourage repeat purchases and maintain a high level of customer
satisfaction;
. maintain and enhance our brands;
. continue to develop and upgrade our technology; and
. attract, integrate, retain and motivate qualified personnel.
If we are unsuccessful in addressing these risks and uncertainties, our
business, results of operations and financial condition will be harmed.
Our business model is unproven.
Our demand aggregation business model is unproven. We will be successful
only if buyers purchase and sellers offer products through Mercata.com or the
Web sites of other participants in the We-Commerce Network. Prior to the launch
of Mercata.com, we believe relatively few buyers and sellers had bought and
sold goods and services over the Internet using a group buying method. The
method of aggregating demand to reduce prices on products sold online is new
and may not become a popular method of purchasing goods and services.
Therefore, it is impossible to predict the degree to which buyers and sellers
will use our group buying service. It is possible that buyers and sellers will
never utilize our group buying service to the degree necessary for us to
achieve profitability or sustain our operations. In addition, merchandise
suppliers may be reluctant to use a newly-developed business model to
distribute and sell products. If we are unable to attract a sufficient number
of buyers or source a sufficient amount of merchandise, our business could be
harmed.
6
<PAGE>
Failure to successfully promote and maintain our brands would adversely affect
our business.
Our ability to develop and maintain awareness of the Mercata, We-Commerce
and PowerBuy brands is critical to achieving widespread acceptance of
Mercata.com and the We-Commerce Network, as well as our overall e-commerce
model. Due in part to the emerging nature of e-commerce and the substantial
resources available to many of our competitors, our opportunity to achieve and
maintain a significant market share may be limited. We launched our Web site in
May 1999 and, accordingly, we have had a limited amount of time to establish
our brands. Successfully promoting and positioning our brands will depend
largely on the effectiveness of our marketing efforts, our ability to source
desired products at competitive prices and our ability to attract well-known
companies to participate in the We-Commerce Network. If our planned marketing
efforts are ineffective, we may need to increase our financial commitment in
creating and maintaining brand awareness, which could divert financial and
management resources from other aspects of our business, or cause our operating
expenses to increase disproportionately to our revenues. In addition, our
inability to promote our brands successfully could result in decreased customer
awareness and lower sales on Mercata.com.
If we fail to expand the We-Commerce Network, our business will be harmed.
Our success will depend, in part, on our ability to expand the number of
participants in the We-Commerce Network. Our failure to expand this network
could significantly harm our business. In addition to Mercata.com, we currently
have only eight participants in the We-Commerce Network, three of which are
affiliated with one of our significant stockholders. In addition, our
relationships with current We-Commerce Network participants may not be
indicative of relationships we may have with We-Commerce Network participants
in the future. To date, we have not generated any service fee revenues from the
We-Commerce Network. We do not know if we will ever be able to generate
revenues from the We-Commerce Network services we offer or to attract
additional participants to the We-Commerce Network.
Our success will also depend, in part, on our ability and the ability of We-
Commerce Network participants to generate traffic, source merchandise and
generate sales transactions across the We-Commerce Network. For this to occur,
our existing and future network participants must drive sufficient numbers of
users to their e-commerce Web sites and must devote sufficient resources to
making their sites attractive to buyers and sellers. In addition, there must be
demand for the merchandise being offered on those sites. We have little control
over the activities or efforts of the participants in the We-Commerce Network.
We cannot assure you these participants will be successful in accomplishing any
of these objectives, and their failure to do so could impede our growth and
harm our business.
We may make mistakes when we set or adjust our PowerBuy pricing mechanism
during a PowerBuy purchasing period, which could result in reduced buyer
demand, adverse supplier reaction or decreased gross margins.
In adjusting the price at which we offer a product or service during a
PowerBuy, we may make pricing decisions that reduce buyer demand, adversely
affect our suppliers or decrease our gross margins. We consider several factors
when making these pricing decisions, including customer acquisition,
maximization of gross margins, generation of revenues and the amount of product
available for sale. It is possible that, in an effort to pursue one or more of
these objectives, we could alienate buyers or otherwise harm our business. For
example, when our PowerBuy prices are adjusted to maximize margins, the price
of offered products may not fall to a level that would make it an attractive
purchase for most buyers, and therefore we could lose potential customers and
fail to sell the products. Likewise, a decision to reduce prices dramatically
in an effort to acquire new customers may negatively affect our gross margins
and our relationships with current or potential
7
<PAGE>
suppliers. If we fail to anticipate adequately the buyer or supplier reaction
to, or the overall financial effect of, our PowerBuy management decisions, our
business will be harmed.
Our quarterly operating results vary significantly and may cause our stock
price to fluctuate.
Our quarterly operating results have varied significantly in the past and
will vary significantly in the future, which makes it difficult for us to
predict our future operating results. Our future operating results may fall
below the expectations of securities analysts or investors, which would likely
cause the trading price of our common stock to decline. In addition, we may
make purchasing, pricing, customer acquisition, customer service, acquisition
or financing decisions that could adversely affect our operating results.
Our quarterly operating results will fluctuate for several reasons,
including:
. our ability to attract visitors to Mercata.com, convert visitors to
customers, encourage repeat purchases and maintain a high level of
customer satisfaction;
. our ability to anticipate demand accurately;
. changes in gross margins of our current and future product and service
offerings;
. the mix of products we sell;
. the mix of revenues derived from products we sell, and the revenues
derived from We-Commerce Network services offered by us;
. introductions of new products and services by us or our competitors;
. technical difficulties, system downtime or Internet brownouts, including
breakdowns in our system operations caused by security breaches;
. timing of upgrades and developments in our systems and infrastructure;
. the effects of any future acquisitions of technologies or businesses,
and related integration efforts;
. our ability to prevent credit card fraud;
. our level of merchandise returns; and
. disruptions in service by common shipping carriers due to strikes or
other occurrences.
Both seasonal fluctuations in Internet usage and traditional retail cycles
affect our business. Internet usage generally declines during the summer. Sales
in traditional consumer retail markets usually increase significantly in the
fourth calendar quarter of each year. The fourth quarter seasonal impact may be
even more pronounced in certain product categories, such as consumer
electronics. For these reasons, you should not rely on period-to-period
comparisons of our financial results to forecast our future performance.
We have incurred significant net losses, and we expect to incur significant net
losses for the foreseeable future.
Since our inception in 1998, we have incurred significant net losses,
resulting primarily from costs related to establishing our brands, developing
our proprietary business methods and technology, developing relationships with
distributors and other suppliers, attracting customers and building our user
databases. We incurred net losses of $1.9 million for the period from our
inception on September 23, 1998 to December 31, 1998 and $36.1 million for the
year ended December 31, 1999. As of December 31, 1999, we had an accumulated
deficit of approximately $38.0 million, and we expect to incur significant net
losses for the foreseeable future.
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To succeed, we must invest heavily in marketing and promotion, and in
developing our We-Commerce business methods, technology and operating
infrastructure. We expect to increase our operating expenses in order to
enhance our brands, expand the We-Commerce Network, increase our customer base,
support our growing infrastructure and introduce new products and services.
From time to time we sell products below target margins and, on rare occasions,
we sell merchandise below cost in order to acquire customers. In addition,
products sold using our PowerBuy pricing mechanism sometimes have lower gross
margins than fixed priced products. Accordingly, we may need to generate and
sustain substantially higher revenues in order to become profitable. If we do
achieve profitability, we cannot be certain we will be able to sustain
profitability on a quarterly or annual basis.
We depend on third parties to fulfill all of our customer orders, and any
problems with these parties could impair our operating results and harm our
reputation.
In 1999, we relied on third-party distributors to fulfill approximately 67%
of our customers' orders in terms of revenues. The remaining orders were
fulfilled at our third-party warehouse. We cannot ensure that our fulfillment
partners fill our customers' orders accurately and that orders are shipped
promptly and in appropriate packaging. If any of our existing fulfillment
arrangements were to be terminated, our business could be disrupted, and we
could incur significant costs in attempting to make alternative arrangements.
Our distribution network is also dependent heavily upon third-party carriers,
primarily United Parcel Service, for product shipments. UPS accounted for
approximately 93% of our customer shipments by units in the fiscal year ended
December 31, 1999. We therefore are subject to the risk that labor shortages,
strikes, inclement weather or other factors may limit the ability of UPS and
other carriers to meet our shipping needs. Our shippers' failure to deliver
products to our customers in a timely manner would damage our reputation and
adversely affect our operating results. If UPS or our other existing shippers
are unable or unwilling to deliver our products to our customers, we will need
to arrange for alternative carriers. We may be unable to engage an alternative
carrier on a timely basis or upon terms favorable to us.
Our third-party carriers may also increase their shipping rates. For
promotional reasons, we currently pay ground shipping charges for our
customers. For competitive reasons, we may be required to continue paying
shipping charges for our customers in the future, and any increase in shipping
charges would decrease our operating margins and could harm our business.
Because we do not have long-term or exclusive vendor contracts, we may not be
able to get sufficient quantities of products in a timely manner.
If we are not able to offer our customers sufficient quantities of
merchandise in a timely manner, we could lose customers, and our net revenues
could decrease. In addition, we may be limited in our ability to obtain new or
popular products. Our success depends on our ability to procure these types of
products in sufficient quantities at competitive prices, particularly for the
holiday shopping season. As is common in the industry, we do not have long-term
or exclusive vendor arrangements that guarantee the availability of products
for resale. Therefore, we do not have a predictable or guaranteed supply of
such products.
If we fail to expand our fulfillment operations successfully, net revenues
could fall below expectations, and we could incur unexpected costs.
We must be able to fill customer orders quickly and efficiently. If we do
not expand our third-party fulfillment operations and systems to accommodate
increases in demand, particularly during the holiday shopping season, we will
not be able to increase our net revenues in accordance with the expectations of
securities analysts and investors. We intend to add to the capacity of our
fulfillment operations by entering into agreements with additional fulfillment
partners. It may be difficult for us to
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assimilate new partners into our fulfillment operations quickly or at all, or
to integrate their systems and technologies into ours. It is also possible that
our existing fulfillment partners may adopt new systems or technologies that
are difficult to integrate or are incompatible with ours. If we fail to
maintain or expand our fulfillment operations, we may lose sales and our
reputation may suffer. Even if we are successful in expanding our fulfillment
operations, our planned expansion may cause disruptions in our business, and
our fulfillment operations may be inadequate to accommodate increases in
customer demand.
We do not generate cash sufficient to fund our operations, and we will need
additional financing to continue our growth, which we may be unable to obtain.
To date, we have funded our operations from the sale of equity and debt
securities and have not generated sufficient cash from operations. Cash from
operations must increase significantly for us to fund anticipated operating
expenses. If our cash flows are insufficient to fund these expenses, we will
need to fund our growth through additional equity or debt financings or reduce
costs. Poor financial results, unanticipated expenses or unanticipated
opportunities that require financial commitments could give rise to additional
financing requirements sooner than we expect. We may not be able to obtain this
financing on satisfactory terms, or at all. If we issue securities to raise
capital, our existing stockholders may experience additional dilution and the
new securities may have rights senior to those of our common stock. If adequate
funds are not available or are not available on acceptable terms, our ability
to enhance our services, fund our growth, respond to competitive pressures or
take advantage of business opportunities would be significantly limited, and we
might need to significantly restrict our operations.
We have experienced significant growth in our business in recent periods, and
any inability to manage this growth and any future growth could harm our
business.
Our historical growth has placed, and any further growth likely will
continue to place, a significant strain on our management, administrative
resources, software and systems. Any failure to manage growth effectively could
seriously harm our business. We have grown from 39 employees on December 31,
1998 to 104 employees on December 31, 1999. We have also expanded our
operations significantly. To be successful, we will need to continue to
implement management information systems and improve our operating,
administrative, financial and accounting systems and controls. We will also
need to train new employees and maintain close coordination among our executive
management, merchandising, operations, program management and Web site design,
engineering, customer acquisition and retention and customer service
organizations. These processes are time consuming and expensive, will increase
management responsibilities and will divert management attention from other
business concerns.
Failure to adapt to changing technology may negatively affect our business.
To remain competitive, we must continue to enhance and improve our
proprietary group buying business methods and technology, including our We-
Commerce business methods and technology, and the functionality and features of
Mercata.com, the We-Commerce Network and the systems we use to process
customers' orders and payments. We may need to adopt wireless and broadband
technologies to facilitate better access to our services. The Internet and the
online commerce industry are changing rapidly. Competitors may introduce new
technologies, or use new or existing technologies more effectively. In
addition, new industry standards and practices may emerge. If we do not respond
quickly and effectively to these developments, our existing Web site,
proprietary business methods, technology and systems may become obsolete and
visitors could stop using Mercata.com or the We-Commerce Network. Our business
could also be affected negatively by technical difficulties, system downtime,
Internet brownouts or break-ins by unauthorized persons.
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Our ability to expand our registered user and customer database and to keep
this database current and confidential is critical to our success.
Failure to keep our proprietary registered user and customer database
current and confidential, or the damage to or the destruction of the
information in this proprietary database, could seriously harm our business.
Our failure to expand effectively our database of registered users and
customers to create targeted direct marketing offers, or enhance and refine our
techniques for segmenting this information to maximize its usefulness, may harm
our business. In addition, if federal or state governments enact privacy
legislation resulting in the increased regulation of electronic mailing lists,
we could experience increased costs in complying with potential regulations
concerning the solicitation of consents to keep or add customer names to our
mailing lists.
We may not be able to compete successfully against current and future
competitors.
The e-commerce market is new, rapidly evolving and intensely competitive. We
expect competition to intensify in the future because current and new
competitors can enter our market and launch new Web sites and e-commerce
services at a relatively low cost. For example, Yahoo! Inc. recently announced
that it will be entering the group buying market in the second half of 2000,
and America Online, Inc. announced it will do so during the first quarter of
2000. Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share, any of which could seriously harm our
net sales and results of operations.
We currently or potentially compete with a variety of companies, including:
. other group buying services such as Accompany, Inc. and Letsbuyit.com,
NV;
. Internet portals such as America Online, Inc. and Yahoo! Inc.;
. online retailers such as 800.com Inc., Amazon.com, Inc., Buy.com, Inc.
and Priceline.com;
. providers of e-commerce services or functionality such as Fairmarket,
Inc., Freemarkets, Inc., MySimon Inc. and Inktomi Corporation;
. business-to-business sellers such as Onvia.com, Inc. and Staples, Inc.;
and
. traditional brick and mortar retailers such as Circuit City Stores,
Inc., Costco Wholesale Corporation and Wal-Mart Stores, Inc.
Many of our online and traditional store-based competitors have longer
operating histories, larger customer or user bases, greater brand recognition
and significantly greater financial, marketing and other resources than we do.
Many of these competitors also can devote substantially more resources to Web
site and systems development and may be better able to leverage customer bases
and supplier and other relationships. In addition, large, well-established or
well-financed manufacturers and retailers may join with online competitors, or
other companies as the use of the Internet and other online services increases.
Our competitors may be able to procure products from vendors on more
favorable terms, fulfill customer orders more efficiently, adopt more
aggressive pricing or inventory availability policies and attract more clients
for their e-commerce services than we. Our online competitors may also adopt
new technologies or methods that have greater performance and features than
ours. We also may face additional competition as we expand our product and
service offerings into new categories. In addition, new technologies and the
expansion of existing technologies, such as price comparison programs, may
increase competition. Dealing with these competitors may require significant
additional expenditures and could affect our business, results of operations
and financial condition. We cannot assure you that we will be able to compete
successfully against these competitors.
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Online security breaches could seriously harm our business.
If third parties are able to penetrate our network security or otherwise
misappropriate users' personal or credit card information, we could be subject
to liability. Our liability could include claims for unauthorized purchases
with credit card information, impersonation or other similar fraud claims as
well as for other misuses of personal information, such as for unauthorized
marketing purposes. These claims could result in costly and time-consuming
litigation which could harm our business and divert the attention of management
from other concerns.
In addition, anyone who is able to circumvent our security measures could
cause interruptions in our operations. Recently, several well-known Web sites
were targeted by unauthorized persons and experienced short-term disruptions in
service. We cannot assure you we will be able to prevent similar disruptions of
service. Breaches such as this could seriously harm our business.
We depend on our key personnel and the loss of any key personnel may harm our
business.
Our success depends to a significant degree upon the continued contributions
of our key management, engineering, sales and marketing and finance personnel,
many of whom would be difficult to replace. In particular, we rely on our
President and Chief Executive Officer, Tom Van Horn. In addition, several key
members of our management team joined us in February 2000, including Scott
Scharfman, our Chief Financial Officer, and Warren Meyer, our Executive Vice
President of the We-Commerce Network. Our future success depends on these
officers effectively working together with our original management team. The
loss of services of any of our key personnel, especially the services of Mr.
Van Horn, may seriously harm our business and results of operations. We do not
have employment contracts or maintain "key person" life insurance policies for
any of our key personnel.
We devote, and will continue to devote, substantial resources to attract
high-quality employees. Competition for such personnel is intense, particularly
in high technology centers such as the Pacific Northwest. In making employment
decisions, particularly in the Internet and high technology industries, job
candidates often consider the value of stock options they may receive in
connection with their employment. If the value of our common stock decreases,
it could harm our recruiting efforts. If we do not succeed in attracting new
personnel or retaining and motivating our current personnel, our business could
be harmed.
If the protection of our technology and intellectual property is inadequate,
our business could be harmed and our brands and reputation could suffer.
We regard our pending patents, copyrights, service marks, trademarks, trade
dress, trade secrets and similar intellectual property as critical to our
success. We rely on patent, trademark and copyright law, trade secret
protection and confidentiality or license agreements with our employees,
consultants, customers, partners and others to protect our proprietary rights.
The steps we take to protect our proprietary rights may be inadequate.
Effective patent, trademark, service mark, copyright and trade secret
protection may not be available in every country in which we will sell our
products and services online. We believe that there are companies that have
infringed our trademarks in the past, and similar infringements may occur in
the future. Any infringement of our trademarks could result in customer
confusion, damage to our reputation or brands and harm to our business.
We have filed 11 United States and international patent applications
relating to our demand aggregation business methods and technology. We also
endeavor to identify and protect new inventions. Nevertheless, it is possible
that:
. our pending patent applications may not result in the issuance of any
patents;
. if our pending patents are issued, one or more of these patents could be
challenged successfully by third parties, which could result in the loss
of our right to prevent others from exploiting the group buying methods
and technology claimed in such patents;
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. if our pending patents are issued, our ability to rely on one or more of
these patents to offer our demand aggregation services could be
prevented if third parties prevail in an interference action in the U.S.
Patent and Trademark Office and thereby obtain priority of invention for
the subject matter claimed in any issued patents; and
. current and future competitors could devise new methods of competing
with our business that are not covered by our patent applications.
We currently are aware of several online businesses that appear to use group
buying transaction models. Any patents issued to us may not prevent these or
other competitors from developing and operating e-commerce businesses that use
a group buying-based approach.
Intellectual property claims against us can be costly and could impair our
business.
Other parties may assert infringement or unfair competition claims against
us. Although we have not been notified of any such claims to date, we cannot
predict whether third parties will assert claims of infringement against us, or
whether any future assertions or prosecutions will harm our business. If we are
forced to defend against any such claims, whether they are with or without
merit or are determined in our favor, we may face costly litigation and
diversion of technical and management personnel. As a result of such a dispute,
we may have to develop non-infringing business methods or technology or enter
into royalty or licensing agreements. Such royalty or licensing agreements, if
required, may be unavailable on terms acceptable to us, or at all. The patent
field covering Internet-related business methods and technologies is new and
rapidly evolving and surrounded by a great deal of uncertainty, and we believe
other pending patent applications relating to demand aggregation may exist. If
there is a successful claim of patent infringement against us, and we are
unable to develop non-infringing business methods and technology or license the
infringed or similar technology on a timely basis, it would impair our
business.
If we cannot protect our domain names, it will impair our ability to
successfully build our brands.
We may be unable to acquire or maintain Web domain names relating to our
brands in the United States and other countries in which we may conduct
business. As a result, we may be unable to prevent third parties from acquiring
and using domain names relating to our brands. Such use could damage our brands
and reputation and take customers away from our Web site. We currently hold
over 50 domain names, including "www.mercata.com". The acquisition and
maintenance of domain names generally is regulated by Internet regulatory
bodies. Governing bodies may establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain
names. If we cannot prevent others from using similar domain names we may be
unable to successfully build our brands, which could negatively affect our
business. Furthermore, the relationship between regulations governing domain
names and laws protecting trademarks and similar proprietary rights is unclear.
Therefore, we may be unable to prevent third parties from acquiring domain
names that are similar to, infringe upon or otherwise decrease the value of our
trademarks and other proprietary rights.
Our facilities and systems are vulnerable to natural disasters and other
unexpected problems, and the occurrence of a natural disaster or other
unexpected problem could damage our reputation and reduce our net sales.
Substantially all of our computer, communications and information systems
and our administrative offices are housed at our leased office space in
Bellevue, Washington. The occurrence of an earthquake, fire, flood, volcanic
eruption or other natural disaster or unanticipated problems such as power
loss, telecommunications failure or break-in at our headquarters could cause
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interruptions or delays in our business, loss of data or render us unable to
accept and fulfill customer orders. In addition, substantially all of our
computer hardware for operating our Web site currently is located at the
facilities of Exodus Communications, Inc. in Tukwila, Washington. We currently
do not have a backup system in place. In addition, we have no formal disaster
recovery plan. Our business interruption insurance may not compensate us
adequately for losses that may occur. In addition, the failure to obtain the
data communications capacity required by us, as a result of human error,
natural disaster or other operational disruptions, could result in
interruptions in our service. The occurrence of any or all of these similar
events could damage our reputation and impair our business.
We plan to increase our inventory levels, and we may have to write down the
value of our inventory if buyer demand changes after we order products.
Although currently we rely primarily on our distributors to carry most of
the inventory available for purchase on Mercata.com, we anticipate that we will
carry an increasing amount of inventory and that the absolute dollar value of
sales derived from our own inventory will rise. We hold inventory because some
manufacturers do not have direct distribution channels in place, and may not be
willing to establish such channels. As a result, our success will depend, in
part, on our ability to predict accurately the rapidly changing trends in
preferences for products that we sell and to avoid overstocking unpopular
products. Predicting these trends is difficult. If demand for one or more of
these products falls short of our expectations, we may be required to take
significant inventory markdowns, which could reduce our net revenues and gross
margins. This risk may be greatest in the first calendar quarter of each year,
after we have increased significantly our inventory levels for the holiday
shopping season. In addition, to the extent that demand for our products
increases over time, we may be forced to increase inventory levels. Any
increase would subject us to additional inventory risks.
Because a key element of our strategy is to generate a high volume of traffic
on Mercata.com, our business could be harmed by capacity constraints.
A key element of our strategy is to generate a high volume of traffic on,
and purchases at, our Web site. Accordingly, the satisfactory performance,
reliability and availability of Mercata.com, transaction-processing systems and
network infrastructure are critical to our reputation, as well as our ability
to attract and retain customers and maintain a high level of customer service.
Our revenues depend upon the number of visitors who shop on our Mercata.com Web
site and the volume of orders that we can fulfill. Any system interruptions
that result in the unavailability of Mercata.com or reduced order fulfillment
would reduce the volume of goods that we sell and the attractiveness of our
product offerings. We have experienced periodic system interruptions in the
past, and we believe that system interruptions may continue to occur in the
future. For example, in January 2000, we had a system interruption which caused
our Web site to be unavailable for approximately 110 minutes. Any substantial
increase in the volume of traffic on Mercata.com or the number of orders placed
by customers will require that we expand and upgrade our technology,
transaction-processing systems and network infrastructure. We may not be able
to project accurately the rate or timing of increases, if any, in the use of
Mercata.com, or necessary expansions of and upgrades to our technology,
transaction-processing systems and network infrastructure to accommodate these
increases.
We may be sued for information retrieved from Mercata.com or from the
We-Commerce Network.
We may be subject to claims for defamation, negligence, copyright or
trademark infringement, personal injury or other legal theories relating to the
information we publish on Mercata.com or that participants in the We-Commerce
Network might publish on their Web sites. These types of claims
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have been brought, sometimes successfully, against Web site operators and
providers of online services. We could also be subject to claims based upon the
content that is accessible from our Web site through links to other Web sites
or through content and materials that may be posted by users on bulletin boards
or in chat rooms operated by us or by third parties. Our insurance, which
covers commercial general liability and advertising injuries, may not
adequately protect us against these types of claims.
International expansion could impose substantial burdens on our resources and
divert management's attention from domestic operations
We intend to explore opportunities for expanding our business into
international markets. International expansion of our operations could impose
substantial burdens on our resources, divert management's attention from
domestic operations, and otherwise harm our business. This expansion into
international markets will require extensive management attention and
resources. In addition, we may need to rely extensively on third parties in
foreign countries to help conduct our international operations, coordinate with
foreign Web sites and conduct sales and marketing efforts. Our success in
international markets will depend to a large degree on the success of these
third parties, over whom we may have little control, and on their willingness
to dedicate sufficient resources to our relationships. Furthermore,
international operations are subject to several risks, including:
. local distribution monopolies;
. difficulties and costs of staffing and managing foreign offices;
. the impact of recessions in economies outside the United States;
. changes in regulatory requirements;
. export restrictions;
. greater uncertainty regarding the protection of intellectual property
rights;
. adverse tax consequences;
. political and economic instability;
. tariffs and other trade barriers; and
. fluctuations in currency exchange rates.
Our failure to address these risks adequately could harm our business.
Risks Related To The Internet Industry
Our long-term success depends on the development of the electronic commerce
market, which is uncertain.
Our future sales depend substantially upon the widespread acceptance and use
of the Internet as an effective medium of commerce by consumers. Demand for
recently introduced products and services such as ours over the Internet is
subject to a high level of uncertainty. We cannot be certain our sales will
grow at the same rate as forecasted for other segments of the Internet. The
development of the Internet as a viable commercial marketplace is subject to a
number of risks, including whether potential customers are willing to shift
their purchasing from traditional vendors to online vendors and whether
communication services are adequate to promote the acceptance of the Internet
as an effective commerce medium. In addition, the increased use of the Internet
as a medium for commerce raises concerns about Internet security, reliability,
pricing, accessibility and quality of service. If use of the Internet does not
continue to grow, or grows at a slower rate than we
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anticipate, or if the necessary Internet infrastructure or complementary
services are not developed to support effectively the growth that may occur,
our business could be harmed.
If we become subject to additional burdens associated with government
regulation, our sales may decline and our business may be negatively affected.
Any new legislation or regulation could hinder the growth of the Internet
and other online services generally and decrease the acceptance of the Internet
and other online services as media of commerce. Laws and regulations directly
applicable to Internet communications, commerce and advertising are becoming
more prevalent. Laws and regulations may be adopted covering issues such as
user privacy, pricing, content, taxation and quality of products and services.
Federal, state and foreign governments might attempt to regulate our activities
or levy sales or other taxes relating to our activities. The laws governing the
Internet are largely unsettled, even in areas where legislation has been
enacted. It may take years to determine whether and how existing laws such as
those governing taxation apply to the Internet. In addition, the growth and
development of the market for e-commerce may prompt calls for more stringent
consumer protection and privacy laws, both in the United States and abroad,
which may impose additional burdens on companies conducting business online.
For example, the Federal Trade Commission and state agencies have been
investigating various Internet companies regarding their use of personal
information of Internet users. In addition, the European Union Directive on the
Protection of Personal Data may affect our ability to expand into Europe if we
or participants in the We-Commerce Network do not afford adequate privacy to
users of our sites. We could incur additional expenses or otherwise lose our
ability to grow our database if new regulations regarding the use of personal
information of Internet users are introduced, or if our uses of this
information are investigated. We do not currently have insurance to cover these
types of losses. The adoption or modification of laws or regulations relating
to the Internet and other online services could cause our sales to decline and
negatively affect our business.
All of our services are subject to federal and state consumer protection
laws and regulations prohibiting unfair and deceptive trade practices. We are
also subject to related "plain language" statutes in place in many
jurisdictions, which require the use of simple, easy-to-read terms and
conditions in contracts with consumers. If we fail to comply with these laws
and regulations, our business may suffer.
Risks Related To This Offering
We may apply the net proceeds of this offering to uses that do not improve our
results of operations or increase our market value.
Our management will have considerable discretion in the application of the
net proceeds of this offering, and you will not have the opportunity, as part
of your initial investment decision, to assess whether the net proceeds are
being used appropriately. The net proceeds of this offering may be used for
corporate purposes that do not improve our results of operations or our market
value. Pending application of the net proceeds, they may be placed in
investments that do not produce income or that lose value. See "Use of
Proceeds".
Executive officers, directors and entities affiliated with them will continue
to have substantial control over us after the offering, which could delay or
prevent a change in our corporate control favored by our other stockholders.
Executive officers, directors and entities affiliated with them, if acting
together, would be able to influence significantly all matters requiring
approval by our stockholders, including the election of directors and the
approval of mergers or other business combination transactions. These
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stockholders will beneficially own, in the aggregate, approximately % of our
common stock following the completion of this offering, % if the
overallotment option is exercised in full. In particular, Vulcan Ventures
Incorporated will control approximately % of our common stock after this
offering, % if the overallotment option is exercised in full. The interests
of these stockholders may differ from the interests of other stockholders. As a
result, these stockholders could approve or cause us to take actions of which
you disapprove or that are contrary to your interests and those of other
investors.
It may be difficult for a third party to acquire us even if doing so would be
beneficial to our stockholders.
Provisions of our Certificate of Incorporation, our Bylaws, Delaware law and
Washington law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. See "Description of
Capital Stock -- Antitakeover Effects of Charter Documents, Delaware Law and
Washington Law" and "Management-Board Composition".
There has been no prior market for our common stock, our stock price may
experience extreme price and volume fluctuations and any volatility in our
stock price could result in claims against us.
Prior to this offering, investors could not buy or sell our common stock
publicly. An active public market for our common stock may not develop or be
sustained after the offering. The initial public offering price will be
determined by negotiations between us and the representatives of the
underwriters. The market price of our common stock may decline below the
initial public offering price after this offering.
Fluctuations in market price and volume are particularly common among
securities of e-commerce and other Internet companies. The market price of our
common stock may fluctuate significantly in response to the following factors,
many of which are beyond our control:
. variations in quarterly operating results;
. changes in market valuations of Internet and other e-commerce companies;
. our announcements relating to significant contracts, acquisitions,
strategic partnerships, joint ventures or capital commitments;
. additions or departures of key personnel;
. future sales of common stock; and
. changes in financial estimates by securities analysts.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market price of their
common stock. We may be the target of similar litigation. Securities litigation
could result in substantial costs and divert management's time and attention.
Substantial future sales of our common stock in the public market may depress
our stock price.
Sales of a substantial number of shares of our common stock after this
offering could cause our stock price to fall. In addition, the sale of these
shares could impair our ability to raise capital through the sale of additional
stock. Our current stockholders hold a substantial number of shares, which they
will be able to sell in the public market in the near future. All of the shares
sold in this offering will be
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freely tradable. The 31,927,951 other shares outstanding, based on the number
of shares outstanding as of March 1, 2000, will be restricted securities as
defined in Rule 144 of the Securities Act of 1933. Approximately 28,075,701 of
those shares will be freely tradable beginning 180 days after the effective
date of this offering, and the remainder of these will become freely tradable
at various times thereafter.
The purchasers in this offering will immediately experience substantial
dilution in net tangible book value.
The initial public offering price is expected to be substantially higher
than the book value per share of our outstanding common stock immediately after
the offering. Accordingly, if you purchase common stock in the offering, you
will incur immediate dilution of approximately $ in the book value per share
of our common stock from the price you pay for our common stock, based upon an
assumed initial public offering price of $ . In addition, we have issued
options to acquire common stock at prices significantly below the assumed
initial public offering price. To the extent that these outstanding options are
ultimately exercised, you will experience further dilution.
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that relate to future
events or our future financial performance, which involve risks and
uncertainties. We use words such as "may", "will", "should", "expects",
"plans", "anticipates", "believes", "estimates", "potential" or "continue" and
similar expressions to identify forward-looking statements. These statements
are only predictions. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those discussed under "Risk Factors" and elsewhere in this
prospectus.
USE OF PROCEEDS
The net proceeds we will receive from the sale of shares of our common stock
in this offering are estimated to be $ million, or $ million if the
underwriters exercise their overallotment option in full, assuming an offering
price of $ per share and after deducting underwriting discounts and
commissions and estimated offering expenses we will pay.
The principal purposes of this offering are to increase our working capital,
to create a public market for our common stock, to facilitate our future access
to the public capital markets and to increase our visibility in the e-commerce
marketplace. We expect to use the net proceeds from this offering principally
for working capital and for general corporate purposes, including marketing and
the expansion of the We-Commerce Network. In addition, we may use a portion of
the net proceeds to develop further our demand aggregation service, to acquire
or develop complementary products, services, technologies or businesses or to
make strategic investments. We currently have no present commitments or
agreements with respect to any such acquisitions or investments. Pending any of
these uses, we intend to invest the net proceeds in short-term, investment-
grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We
currently intend to retain all available funds and any future earnings for use
in the operations and expansion of our business and do not anticipate paying
any cash dividends in the foreseeable future. Payments of future dividends, if
any, will be at the discretion of our Board of Directors and will depend on our
results of operations, financial condition, contractual and legal restrictions
and other factors the Board of Directors deems relevant.
19
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
. on an actual basis;
. on a pro forma basis to reflect the issuance of 2,522,250 shares of
Series C preferred stock and the issuance in March 2000 of a $10.0
million convertible note payable and the automatic conversion of all
shares of our preferred stock outstanding as of March 1, 2000 into
27,722,250 shares of common stock upon the closing of this offering; and
. on an as adjusted basis to give effect to the pro forma adjustments and
the receipt of the estimated net proceeds from the sale of shares of our
common stock at an assumed initial public offering price of $ per
share, after deducting underwriting discounts and commissions and
estimated offering expenses payable by us.
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands, except share
data)
<S> <C> <C> <C>
Convertible note payable...................... $ -- $10,000 $
Stockholders' equity:
Convertible preferred stock, $.001 par value;
30,000,000 shares authorized:
Series A preferred stock, 14,000,000 shares
designated; issued and outstanding --
14,000,000 shares actual, no shares pro
forma and as adjusted....................... 14 --
Series B preferred stock, 12,000,000 shares
designated; issued and outstanding --
11,200,000 shares actual, no shares pro
forma and as adjusted....................... 11 --
Series C preferred stock, 4,000,000 shares
designated; issued and outstanding -- no
shares actual, no shares pro forma and as
adjusted.................................... -- --
Common stock, $.001 par value, 40,000,000
shares authorized; issued and outstanding --
1,757,882 shares actual; 29,480,132 shares
pro forma; and shares as
adjusted..................................... 2 29
Additional paid-in capital.................... 53,076 83,074
Deferred stock-based compensation............. (2,840) (2,840)
Accumulated deficit........................... (38,028) (38,028)
-------- ------- ----
Total stockholders' equity.................. 12,235 42,235
-------- ------- ----
Total capitalization...................... $ 12,235 $52,235 $
======== ======= ====
</TABLE>
The outstanding share information set forth above is as of December 31,
1999 and excludes:
. 2,560,094 shares of common stock issuable upon exercise of outstanding
stock options as of March 1, 2000 at a weighted average exercise price
of $0.54 per share;
. 1,664,205 shares of common stock available for future grant or issuance
pursuant to our 1999 Equity Incentive Plan as of March 1, 2000, which
shares will be unavailable for future grant or issuance upon the closing
of the offering; and
. 4,750,000 shares of common stock available for future grant or issuance
after the closing of the offering pursuant to our 2000 Equity Incentive
Plan and our 2000 Employee Stock Purchase Plan.
20
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $42.2 million or $1.43 per share. Pro forma net tangible book
value per share represents the amount of our total tangible assets reduced by
the amount of our total liabilities and divided by the total number of shares
of common stock outstanding after giving effect to the issuance of
2,522,250 shares of Series C preferred stock and the issuance in March 2000 of
a $10.0 million convertible note payable and the automatic conversion of all
shares of our preferred stock outstanding as of March 1, 2000 into common
stock. Dilution in pro forma net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering and the pro forma net tangible book value per share of
common stock immediately after the completion of this offering. After giving
effect to the sale of the shares of common stock offered by us at an assumed
initial public offering price of $ per share, and after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us, our pro forma net tangible book value at December 31, 1999 would have
been approximately $ million, or $ per share of common stock. This
represents an immediate increase in pro forma net tangible book value of $
per share to existing stockholders and an immediate dilution of $ per share
to new investors of common stock. The following table illustrates this dilution
on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $
Pro forma net tangible book value per share as of
December 31, 1999................................................ $1.43
Increase per share attributable to new investors..................
-----
Pro forma net tangible book value per share after the offering.....
-----
Dilution per share to new investors................................ $
=====
</TABLE>
The following table summarizes, on a pro forma basis, to give effect to the
issuance of 2,522,250 shares of Series C preferred stock and the issuance in
March 2000 of a $10.0 million convertible note payable and the automatic
conversion of all shares of our preferred stock outstanding as of March 1, 2000
into common stock, as of December 31, 1999, the number of shares of common
stock purchased from us, the total consideration paid to us and the average
price per share paid by existing stockholders and by new investors purchasing
shares of common stock in this offering. The information for new investors is
based upon an assumed initial public offering price of $ per share, before
deducting the underwriting discounts and commissions and estimated offering
expenses payable by us.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price Per
Number Percent Amount Percent Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 29,480,132 % $79,875,783 % $2.71
New investors..................
---------- ----- ----------- ------ -----
Total......................... 100.0% $100.0%
========== ===== =========== ====== =====
</TABLE>
This information is as of December 31, 1999 and excludes:
. 2,560,094 shares of common stock issuable upon exercise of outstanding
stock options as of March 1, 2000 at a weighted average exercise price
of $0.54 per share;
. 1,664,205 shares of common stock available for future grant or issuance
pursuant to our 1999 Equity Incentive Plan as of March 1, 2000, which
shares will be unavailable for future grant or issuance upon the closing
of the offering; and
. 4,750,000 shares of common stock available for future grant or issuance
after the closing of the offering pursuant to our 2000 Equity Incentive
Plan and our 2000 Employee Stock Purchase Plan.
To the extent that these options are exercised, new investors will
experience further dilution.
21
<PAGE>
SELECTED FINANCIAL INFORMATION
(in thousands, except per share data)
You should read the following selected financial information in conjunction
with our financial statements and the related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The statement of operations data set
forth below for the period from September 23, 1998 (inception) to December 31,
1998 and the year ended December 31, 1999, and balance sheet information as of
December 31, 1998 and 1999 have been derived from our audited financial
statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Period from
September 23, 1998 Year Ended
(inception) to December 31,
December 31, 1998 1999
------------------ ------------
<S> <C> <C>
Statement of Operations Data:
Net revenues................................. $ -- $ 6,308
Cost of revenues............................. -- 5,775
------- --------
Gross profit................................. -- 533
Operating expenses:
Sales and marketing......................... 498 29,683
Technology and development.................. 664 3,915
General and administrative.................. 761 3,494
------- --------
Total operating expenses................... 1,923 37,092
------- --------
Operating loss............................... (1,923) (36,559)
Interest income (expense), net............... (12) 467
------- --------
Net loss..................................... $(1,935) $(36,092)
======= ========
Basic and diluted net loss per common share.. $ (0.48) $ (21.33)
======= ========
Pro forma basic and diluted net loss per
common share................................ $ -- $ (2.25)
======= ========
Weighted average shares used to compute basic
and diluted net loss per common share....... 4,000 1,692
Weighted average shares used to compute pro
forma basic and diluted net loss per common
share....................................... -- 16,044
</TABLE>
See Note 1 to the financial statements for an explanation of the
determination of the number of shares and share equivalents used in computing
per share and pro forma per share amounts.
The following table presents selected balance sheet data as of December 31,
1998 and 1999 on an actual basis. The selected balance sheet data as of
December 31, 1999 is also presented on a pro forma basis to reflect the
issuance of 2,522,250 shares of Series C preferred stock and the issuance in
March 2000 of a $10.0 million convertible note payable, and the automatic
conversion of all our preferred stock outstanding as of March 1, 2000 into
common stock upon the closing of this offering, and on an as adjusted basis to
give effect to the pro forma adjustments and the receipt of the estimated net
proceeds from the sale of shares of our common stock in this offering at an
assumed initial public offering price of $ per share, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by us.
<TABLE>
<CAPTION>
December 31, 1999
---------------------------
December 31, Pro Pro Forma
1998 Actual Forma As Adjusted
------------ ------- ------- -----------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........... $ 813 $13,874 $53,874 $
Convertible note payable............ -- -- 10,000
Working capital (deficit)........... (2,418) 8,309 38,309
Total assets........................ 1,859 22,793 62,793
Total stockholders' equity
(deficit).......................... (1,535) 12,235 42,235
</TABLE>
22
<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 to those statements included elsewhere in this
prospectus.
Overview
We are a provider of Internet-based demand aggregation services that empower
buyers with common purchasing interests to achieve discounts on high-quality,
brand-name products and services. On Mercata.com, buyers can participate in
group buying through PowerBuy group purchases and can also purchase products at
fixed prices. For online businesses, we also offer an e-commerce solution,
known as the We-Commerce Network, that enables merchant, portal, community and
content Web sites to offer merchandise for sale using our proprietary business
methods and technology.
We were incorporated in September 1998 and began offering products for sale
on our Web site in May 1999. For the period from inception through April 1999,
we had no revenues and our operating activities related primarily to developing
our proprietary business methods, technology and infrastructure. From the
launch of our Web site in May 1999 through December 31, 1999, we continued to
build our infrastructure and also focused on customer acquisition and
retention, the expansion of vendor relationships, the establishment of our
brands, the expansion of our fulfillment and customer service operations and
the development of the We-Commerce Network. Our operating expenses have
increased significantly since our inception due to costs associated with these
activities.
To date, we have derived substantially all of our revenues from selling
products on Mercata.com. We currently sell merchandise using two pricing
structures: PowerBuy group purchases and Group Values. PowerBuy group purchases
are limited-time buying opportunities in which the price of the featured
product or service dynamically decreases, based on parameters determined by the
seller, as more visitors join the buying group. Customers join a PowerBuy by
entering an offer at the current PowerBuy price or, alternatively, by making a
conditional offer at a price below the current price. At the conclusion of a
Powerbuy, all customers whose offers equal or exceed the final price of the
featured item are shipped the item and charged the final PowerBuy price.
PowerBuy group purchases have a fixed duration and generally lasts
approximately two to three days. Group Values are products that have fixed
prices and can be purchased at any time.
Due to the dynamic nature of the PowerBuy and the flexibility of our
proprietary PowerBuy management tools, we can optimize customer acquisition,
gross margins, net revenues or unit sales by adjusting the PowerBuy price to
meet predetermined goals. For example, we can maximize sales volume by reducing
the price during the PowerBuy to capture outstanding offers made below the
current price. Alternatively, we can maximize gross margin percentage by
limiting the level to which the PowerBuy price will drop. From time to time, we
sell merchandise below target margins and, on rare occasions, we sell products
below cost in order to acquire customers.
Group Value products typically have higher gross margin percentages than
PowerBuys, since a large portion of Group Value products have Minimum
Advertised Price (MAP) restrictions placed on them by manufacturers. Products
placed on PowerBuy generally do not have such restrictions.
In 1999, approximately 71% of all orders placed, in terms of total dollar
value, were generated through PowerBuy group purchases. During 1999, we filled
orders for approximately 72,000 customer accounts, and approximately 32% of all
orders placed, in terms of individual orders, came from repeat buyers.
23
<PAGE>
We primarily use two methods of distributing our products to our customers:
shipments made through distributors and shipments made through our third-party
fulfillment warehouse. In 1999, approximately 67% of our shipments, in terms of
net revenues, were fulfilled through distributors, and the remaining 33% were
fulfilled by our third-party warehouse. We do not incur any handling fees when
the products are sourced from a distributor, although we do incur shipping
costs. A nominal handling charge is incurred to store, pick, pack and ship
products from our third-party warehouse.
To date, revenues derived from the We-Commerce Network have come exclusively
from the sale of merchandise to customers who have bought products through the
We-Commerce Network's co-branded stores. In exchange for this additional
traffic to the We-Commerce Network, we pay the participants a percentage of net
revenues or promotional fees. We intend to extend PowerBuy functionality to a
variety of merchants, product manufacturers, and portal, content and community
Web sites and intend to implement a new revenue-generating service with these
We-Commerce Network participants by charging up-front activation charges and
service and transaction fees.
Since inception, we have incurred significant losses and, as of December 31,
1999, we had an accumulated deficit of approximately $38.0 million. We expect
to increase our operating expenses in order to enhance our brands, expand the
We-Commerce Network, increase our customer base, support our growing
infrastructure and introduce new products and services. Our revenues and gross
margins will need to increase significantly to cover these and other future
costs. We will need to generate and sustain substantially higher revenues in
order to become profitable.
In connection with the grant of certain employee stock options with exercise
prices less than the deemed fair value of the underlying common stock for
financial reporting purposes, we recorded aggregate deferred stock-based
compensation of $3.3 million for the year ended December 31, 1999. This
deferred stock-based compensation is being amortized over vesting periods of
the options.
Composition of Income Statement Line Items
Net Revenues
Net revenues consist of product sales to customers less allowances for sale
returns, and exclude promotional credits offered to first-time customers, such
as Mercata$ store credits. Promotional credits for first-time customers were
discontinued as of January 31, 2000.
Cost of Revenues
Cost of revenues consists primarily of the cost of merchandise sold to
customers, inbound freight, handling charges at our third-party warehouse and
expedited shipping costs, net of expedited shipping revenues. Cost of revenues
excludes costs of merchandise associated with promotional credits used for new
customer purchases, such as Mercata$ store credits. These costs are included in
sales and marketing expense.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
advertising, public relations and third-party fulfillment fees, as well as
payroll and related expenses for personnel engaged in marketing, sales and
related activities. These expenses also include promotional expenditures, such
as free ground shipping and the cost of merchandise associated with promotional
credits used for new customer purchases.
24
<PAGE>
Technology and Development. Technology and development expenses consist
primarily of payroll and related expenses for development, Website design and
network operations, as well as systems infrastructure costs.
General and Administrative. General and administrative expenses consist of
payroll and related expenses for executive, accounting and administrative
personnel, recruiting and professional fees, and other general corporate
expenses.
Interest Income (Expense), Net
Interest income (expense), net consists of interest income from earnings on
our cash and cash equivalents, offset by interest expense paid on short-term
debt instruments.
Income Taxes
We have had a net loss for each period since inception. As of December 31,
1999, we had approximately $35.8 million of net operating loss carryforwards
for federal income tax purposes, which expire in 2014. We have provided a full
valuation allowance on our net deferred tax assets, consisting primarily of net
operating loss carryforwards, because of uncertainty regarding their
realizability. See Note 9 of notes to financial statements.
Results of Operations
Period from September 23, 1998 (Inception) to December 31, 1998 and the Year
Ended December 31, 1999
Net Revenues
We did not begin to sell products on Mercata.com until May 1999, and
therefore we did not record any net revenues in 1998. Net revenues in 1999 were
$6.3 million.
Cost of Revenues
As we had no net revenues in 1998, there was no cost of revenues recorded in
that period. Cost of revenues in 1999 was $5.8 million.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased from $498,000 in
1998 to $29.7 million in 1999, primarily due to the launch of our Web site in
May 1999 and the implementation of our brand and Web site awareness campaigns
during the second half of 1999. Advertising expenses totaled $0 in 1998 and
approximately $21.5 million in 1999. The cost of merchandise associated with
promotional discount programs used for new customer purchases was $2.4 million
in 1999. Advertising expenses, which totaled $17.6 million during the fourth
quarter of 1999, increased as a result of increased offline advertising costs.
We intend to continue our aggressive branding and marketing campaigns in the
foreseeable future. We anticipate sales and marketing expenses will decrease as
a percentage of net revenues throughout 2000, with a significant percentage of
the total annual expenditures occurring during the fourth quarter.
Technology and Development. Technology and development expenses increased
from $664,000 in 1998 to $3.9 million in 1999. The increase in technology and
development expenses was attributable primarily to costs associated with
increasing staffing, building our Web site and expanding our systems
infrastructure. We believe that continued investment in technology and
25
<PAGE>
development is critical to attaining our strategic objectives and, as a result,
we expect a steady growth of these expenditures during 2000.
General and Administrative. General and administrative expenses increased
from $761,000 in 1998 to $3.5 million in 1999. The increase in general and
administrative expenses was due primarily to increased salaries and related
expenses associated with the hiring of personnel and increases in professional
fees and travel expenses. We expect general and administrative expenses to
decrease as a percentage of net revenues in 2000 as we continue to utilize
existing administrative infrastructure put in place during 1999.
Interest Income (Expense), Net
Interest income (expense), net was ($12,000) in 1998, and $467,000 in 1999.
The increase in interest income (expense), net was due to the sale of Series A
and B preferred stock in 1999, which significantly increased our average
balance of cash and cash equivalents.
Quarterly Results of Operations
The following table sets forth certain unaudited quarterly statement of
operations data for each of the last five quarters through December 31, 1999.
In the opinion of management, this information has been prepared substantially
on the same basis as the audited financial statements appearing elsewhere in
this prospectus, and all necessary adjustments, consisting only of normal
recurring adjustments, have been included in the amounts stated below to
present fairly the unaudited quarterly results. The quarterly data should be
read in conjunction with our audited financial statements and the notes to
those statements appearing elsewhere in this prospectus. The operating results
for any quarter are not necessarily good indications of future performance.
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------
December 31, March 31, June 30, September 30, December 31,
1998 1999 1999 1999 1999
------------ --------- -------- ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues............ $ -- $ -- $ 82 $ 617 $ 5,609
Cost of revenues........ -- -- 76 612 5,087
-------- -------- -------- -------- --------
Gross profit............ -- -- 6 5 522
Operating expenses:
Sales and marketing.... 498 427 1,516 5,284 22,456
Technology and
development........... 664 617 877 877 1,544
General and
administrative........ 761 464 950 741 1,339
-------- -------- -------- -------- --------
Total operating
expenses............. 1,923 1,508 3,343 6,902 25,339
Operating loss.......... (1,923) (1,508) (3,337) (6,897) (24,817)
Interest income
(expense), net......... (12) 4 94 25 344
-------- -------- -------- -------- --------
Net loss.............. $ (1,935) $ (1,504) $ (3,243) $ (6,872) $(24,473)
======== ======== ======== ======== ========
</TABLE>
Our net revenues have increased significantly in the quarters following the
launch of our Web site in May 1999. Total operating expenses have increased
over the most recent three quarters, reflecting increased spending on
developing, delivering, supporting and marketing our business and products.
Sales and marketing expenses, in particular, significantly increased in the
fourth quarter of 1999. As a result of our limited operating history and the
emerging nature of the markets in which we compete, we are unable to forecast
accurately our revenues. Our current and future expense level estimates are
based largely on our investment plans and estimates of future revenues and are
largely discretionary, due to the high advertising component.
26
<PAGE>
We expect our online retail business to be highly seasonal, reflecting the
general pattern associated with the retail industry of peak sales and earnings
during the fourth quarter. We believe that a substantial portion of our annual
sales will occur in the fourth quarter of each year. We expect to experience
lower quarterly sales during the first three quarters of each fiscal year
relative to the fourth quarter, as is typical in the retail industry. As a
result, we may continue to incur greater losses in these quarters. See "Risk
Factors -- Our quarterly operating results vary significantly and may cause our
stock price to fluctuate".
Liquidity and Capital Resources
We funded our operations in 1998 through a private placement of common stock
in exchange for $400,000 and a series of short-term notes, totaling $3.6
million, in favor of Paul G. Allen. In March of 1999, we completed a Series A
preferred stock financing in the amount of $14.7 million with Vulcan Ventures
Incorporated, at which time the short-term notes were retired. In September and
October of 1999, we raised an additional $35.0 million by issuing Series B
preferred stock.
Net cash used in operations in 1999 totaled $30.2 million, with the majority
of funds spent on marketing activities in the second half of the year.
Net cash used in investing activities during 1999 was $3.8 million, which is
attributable primarily to the purchase of computer-related equipment and
software used to operate the Mercata.com Web site. Currently, we have no
material commitments for future capital expenditures, although we expect to
make purchases of capital equipment to accommodate the expected growth of our
business and the related increase in traffic to Mercata.com.
Net cash provided by financing activities in 1999 totaled $47.0 million.
These funds were raised primarily through the sale of our Series A and Series B
preferred stock. In addition, in September 1999, we borrowed $2,000,000 under a
promissory note payable to a stockholder. The promissory note was payable on
demand and bore interest at the prime rate. The principal, plus accrued
interest of $9,945, was repaid in October 1999. We canceled the promissory note
in March 2000.
In March 2000, we raised $40.0 million through the sale of our Series C
preferred stock and the issuance of a $10.0 million convertible note.
We believe that the net proceeds of this offering, together with existing
cash and cash equivalents, will be sufficient to meet our operating and capital
requirements for at least the next 12 months. After that, we may need to raise
additional funds. We may seek to raise additional funds through additional
borrowings, public or private equity financings or from other sources. We
cannot assure you that additional financing will be available at all or, if
available, will be on terms acceptable to us.
Year 2000 Risk
Many currently-installed computer system and software products are coded to
accept or recognize only two digit entries in the date code field. These
systems may recognize a date using "00" as the year 1900 rather than the year
2000. As a result, computer systems or software used by many companies and
governmental agencies may need to be upgraded to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.
We expect most material Year 2000 problems to have arisen on or immediately
after January 1, 2000. As of March 1, 2000, we are not aware of any Year 2000
problems associated with our internal systems or software or with the software
and systems of our vendors, distributors or suppliers. It is possible, however,
that Year 2000 problems will occur in the future.
27
<PAGE>
Undetected Year 2000 problems in our systems may result in substantial
revisions or replacements. In the event that the fulfillment and operational
facilities that support our business, or our Web-hosting facilities, are not
Year 2000 compliant, we may be unable to deliver goods or services to our
customers and portions of our Web site may become inaccessible. In addition, we
cannot assure you that third-party software, hardware or services incorporated
into our material systems will not need to be revised or replaced, which could
be time-consuming and expensive. Our inability to fix or replace third-party
software, hardware or services on a timely basis could result in lost revenues,
increased operating costs and other business interruptions, any of which could
harm our business. Moreover, the failure to adequately address Year 2000
problems in our software, hardware or systems could result in claims of
mismanagement, misrepresentation or breach of contract and related litigation,
which could be costly and time-consuming to defend.
In addition, we cannot assure you that governmental agencies, utility
companies, Internet service providers and other third parties outside our
control will be Year 2000 compliant. The failure by these parties to be Year
2000 compliant could result in a systemic failure beyond our control,
including, for example, a prolonged Internet, telecommunications or electrical
failure, which could prevent us from delivering our services to our customers,
prevent customers from accessing our services or decrease the use of the
Internet any of which would harm our business.
If our present efforts to address potential Year 2000 problems are not
successful, or if distributors, suppliers and other third parties with which we
conduct business do not successfully address such issues, our customers could
seek alternate suppliers of our products and services. Any material Year 2000
problem could require us to incur significant unanticipated expenses to remedy
the problem and could divert our management's time and attention, either of
which could harm our business.
Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities", in June 1998. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
If certain conditions are met, a derivative may be specifically designated as a
hedge. The accounting for changes in the fair value of a derivative depends on
the intended use of the derivative and the resulting designation. SFAS No. 133,
as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133", is
effective for all fiscal quarters of fiscal years beginning after June 15,
2000. The adoption of this statement is not expected to have a material impact
on our financial statements.
In December 1999, the United States Securities and Exchange Commission (SEC)
released Staff Accounting Bulletin (SAB) No. 101 "Revenue Recognition in
Financial Statements", which must be applied in our first fiscal quarter of
2000. SAB No. 101 provides guidance on revenue recognition and the SEC staff's
views on the application of accounting principles to selected revenue
recognition issues. We do not expect that the adoption of SAB No. 101 will have
a material effect on our financial statements.
In October 1999, the SEC identified a list of issues that have arisen in
Internet businesses which the SEC believes should be addressed by the Emerging
Issues Task Force (EITF) of the FASB or other standard setting bodies. While
the EITF is in the process of addressing such issues, many of the identified
issues have not yet been resolved. Future resolution of all of the issues
identified by the SEC may affect our financial statements. We are not able to
determine the impact on our financial statements, if any, of such future rule
making.
28
<PAGE>
Market Risk
We currently market our products in the United States and Canada. As all
sales are currently made in U.S. dollars, we do not believe we are exposed to
currency risk with respect to our sales. As of December 31, 1999, we had cash
and cash equivalents of $13.9 million consisting of cash and highly liquid,
short-term investments. Our short-term investments will decline by an
immaterial amount if market interest rates increase, and therefore, our
exposure to interest rate changes presently is not significant. Decline of
interest rates over time, on the other hand, will reduce our interest income
from our short-term investments.
29
<PAGE>
BUSINESS
Mercata(TM)
We are a provider of Internet-based demand aggregation services. Our
business model empowers buyers with common purchasing interests to achieve
discounts on high-quality, brand-name products and services. Demand aggregation
operates on two basic principles: (1) sellers are more likely to offer
discounts to buyers when merchandise is purchased in volume and (2) buyers are
more likely to purchase merchandise as prices decrease. We call our Internet-
based form of demand aggregation "We-Commerce(TM)". On our Mercata.com Web
site, buyers participate in group buying through PowerBuy(TM) group purchases.
PowerBuys are limited-time buying opportunities in which the price of the
featured product or service dynamically decreases, based on parameters
determined by the seller, as more visitors join the buying group.
Through the use of our proprietary business methods and technology,
individual buyers are able to combine their purchasing power to receive volume
pricing benefits on featured merchandise. Using this same technology, a seller
may gain access to actual buyer demand and price sensitivity data, enabling the
seller to adjust prices during a PowerBuy in order to achieve sales objectives,
such as increasing units sold, revenues, gross profit dollars or gross margin
percentage.
For online businesses, we offer an e-commerce solution through the We-
Commerce Network. Currently, the We-Commerce Network has two principal types of
participants:
. merchants that desire to sell their products and services on their Web
sites using a dynamic pricing mechanism and extend the reach of their
merchandise offerings to other Web sites; and
. portal, community and content Web sites that desire to enhance their e-
commerce capabilities by providing users a novel buying experience.
Within this network of online businesses, PowerBuy group purchases can be
conducted simultaneously on multiple Web sites, thus potentially increasing the
number of individual buyers within any given PowerBuy. To date, participants in
the We-Commerce Network include DealTime.com, Inc., Football Northwest LLC
(Seahawks.com), Go2Net, Inc., Mercata.com, the Microsoft Network LLC (MSN),
mybytes.com (a division of Youthstream Media Networks, Inc.), Online Office
Supplies Company and SAVIshopper.com, Inc.
We were incorporated in September 1998 and began to offer products for sale
on Mercata.com in May 1999. In the fiscal year ended December 31, 1999, we
generated net revenues of $6.3 million and received orders from over 72,000
customer accounts.
Industry Overview
Growth of the Internet
The Internet has emerged as a significant interactive medium for conducting
business. International Data Corporation estimates that the number of users
worldwide will increase from 196 million in 1999 to 502 million in 2003. IDC
also estimates that business-to-consumer e-commerce will rise from $31.2
billion in 1999 to $171 billion in 2003, and business-to-business e-commerce
will rise from $64.6 billion in 1999 to $974 billion in 2003, representing the
widespread commercial adoption of the Internet by both consumers and
businesses.
The Internet possesses a number of unique and commercially powerful
characteristics that differentiate it from traditional media: users communicate
without geographic limitation, have access to dynamic and interactive content
on a real-time basis and transact business virtually instantaneously at little
or no incremental cost. The Internet has created a dynamic and attractive
medium for commerce, enabling real-time communication between buyers and
sellers, greater
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access to comparative purchasing data and the ability to shop in ways perceived
as more convenient. As the Internet has become more accessible and widely used
for transactions, new and diverse business models for online commerce have
emerged and are gaining rapid market acceptance.
Limitations of Traditional Retail Formats and Pricing Methods
Competition among retailers often is based principally on product selection
and price. In order to offer the broadest selection at the lowest price,
retailers must have purchasing economies of scale and effective inventory
management; however, the process of forecasting consumer demand and predicting
inventory needs accurately can be inefficient and costly for a traditional
retailer. We believe traditional retail pricing methods, where sellers
typically market products to consumers at fixed retail prices, have significant
disadvantages for both sellers and consumers. For example, sellers are unable
to take fully into account the price sensitivity of potential buyers before
setting prices. In addition, sellers who later reduce prices to clear excess
inventory risk disruption of their existing distribution channels. Individual
buyers, on the other hand, often are required to pay more for fixed-price
products because they lack sufficient bargaining power to negotiate more
favorable pricing terms.
The membership warehouse club and traditional buyers' cooperative business
models address some of the problems associated with traditional retail formats
and pricing methods. Membership warehouse clubs are based, in part, on the
concept that offering consumers and small businesses low prices on a limited
selection of nationally branded and private label products in a wide range of
merchandise categories will produce high sales volumes and rapid inventory
turnover. We believe this turnover, when combined with the operating
efficiencies achieved by volume purchasing, efficient distribution and reduced
handling of merchandise, enables membership warehouse clubs to maintain their
profitability while offering low prices to consumers. From the buyers'
perspective, however, this format can be perceived as an inconvenient
alternative because individual purchasers often must buy in large quantities in
order to enjoy significant discounts. Traditional buyers' cooperatives
aggregate buyers to purchase products and services in bulk, typically resulting
in lower per unit costs. However, the range of products and services that could
be purchased through cooperatives historically has been limited, and the
logistics of assembling large groups of buyers with similar interests has
hindered the wide-spread adoption of this group buying model for routine
commercial transactions.
Convergence of the Internet With Traditional Retail Formats and Pricing Methods
With the emergence of the Internet, some companies have adapted traditional
pricing methods to online commerce, while others have created entirely new
selling formats designed to take advantage of the unique attributes of the
Internet. For example, Internet-based auctions are not limited by geography and
the logistical challenge of bringing buyers and sellers together. New
electronic commerce formats have been employed by other online businesses to
allow buyers to participate in "name your price" transactions where sellers can
accept or reject buyers' bids on an individual basis. The interactive, real-
time and far-reaching nature of the Internet has allowed these models to
achieve rapid acceptance. Nevertheless, we believe these retail formats and
pricing methods have not recognized the commercial potential of aggregating
buyer demand on the Internet. We believe that the convergence of the Internet
and group buying methods represents a significant opportunity to create a
commercial format that provides benefits to both buyers and sellers.
The Mercata Business Model
We have developed a novel Internet-based group buying service, based upon a
demand aggregation business model, that empowers buyers with common purchasing
interests to achieve
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discounts on high-quality, brand-name products and services. Demand aggregation
operates on two basic principles: (1) sellers are more likely to offer
discounts to buyers when merchandise is purchased in volume and (2) buyers are
more likely to purchase merchandise as prices decrease. Whereas the traditional
retail approach requires sellers to hold inventory, stock products and set
prices in advance, our technology provides them access to actual buyer demand
data in order to reduce the risk associated with forecasting inventory needs
and buyer price sensitivity. Our approach also allows sellers to offer
increasing discounts to buyers during the course of a group buying opportunity.
We call our Internet-based form of demand aggregation "We-Commerce".
We offer buyers the opportunity to participate in group buying through
PowerBuy group purchases. PowerBuys are limited-time buying opportunities in
which the price of the featured product or service dynamically decreases, based
on parameters determined by the seller, as more visitors join the buying group.
Buyers can participate in PowerBuy group purchase opportunities on Mercata.com
and throughout the We-Commerce Network. The We-Commerce Network is an
e-commerce solution for online businesses designed to enable merchant, portal,
community and content Web sites to offer merchandise for sale using our
proprietary business methods and technology.
Our business model delivers value to both buyers and sellers by matching
buyers' demands with sellers' objectives. We believe that the principal
advantages of our model include:
Cost Savings and Empowerment for Buyers. By bringing together buyers with
similar purchasing interests, we enable them to aggregate their purchasing
power to receive volume pricing benefits. Through PowerBuy group purchases, in
which an increasing number of buyers can influence prices dynamically, we
deliver cost savings to individual buyers on high-quality, brand-name products
and services, without requiring them to make purchases in bulk. We believe our
model empowers buyers and offers them a rewarding and exciting buying
experience.
Interactive Buyer Community and Information Sharing. Visitors to Mercata.com
and to other We-Commerce Network participants' Web sites communicate through
PowerTalk message boards associated with each PowerBuy group purchase and
through our Share the Power(TM) e-mail referral features. On the PowerTalk
message boards, visitors share information relevant to specific products, meet
others with common purchasing interests and potentially influence group buying
decisions. Through our Share the Power e-mail referral features, visitors to
Mercata.com send messages to others who may be interested in an offered product
or our group buying experience. The PowerTalk and Share the Power features are
important customer acquisition tools because buyers are motivated to encourage
participation by others in group buying opportunities in order to receive
greater pricing benefits.
Dynamic Yield Management for Sellers. Our proprietary business methods and
technology are designed to provide sellers with information on buyers' product
preferences and price sensitivities. Our group buying model provides a seller
access to information on all offers made by buyers for products offered by the
seller, including those below current PowerBuy prices. Based on the unique
demand profile for specific products, prices may be adjusted dynamically to
optimize a PowerBuy to meet sellers' goals. For example, if the number of
prospective buyers who have made offers below the current PowerBuy price is
large, the price may be reduced in order to maximize customer acquisition,
sales volume or absolute gross profit dollars. Alternatively, sellers may
choose to optimize gross margin percentage by limiting the level to which the
PowerBuy price can drop.
Novel Distribution Channel. Our retail format creates a new channel for
sellers to distribute efficiently large volumes of products, to liquidate
products and to test market new products. Using our channel to sell large
volumes of products, sellers can adjust pricing in real-time to maximize sales
volume or other factors. Using our channel to liquidate products, sellers can
avoid disrupting their
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existing distribution channels. Using our channel to test new products, sellers
can gather real-time data on buyer responses to changes in price. In addition,
sellers are able to obtain the preference information and related data of
participants in a PowerBuy, regardless of whether their offers result in sales.
Our Strategy
Our goal is to be the world's leading provider of Internet-based demand
aggregation services. Key elements of our strategy are to:
Continue to Build our Mercata.com Customer Base. We intend to increase the
number of buyers who purchase products and services on Mercata.com. To
accomplish this goal, we plan to provide buyers with significant cost savings,
broad selection, responsive customer service, reliable fulfillment and an
enjoyable buying experience. In addition, we intend to establish, maintain and
strengthen relationships with new and existing manufacturers and distributors
to increase the breadth and depth of products and services we offer to our
customers. We also will continue to advertise the Mercata brands aggressively
through both offline and online media and to focus on building strong, lasting
customer relationships in order to drive repeat purchases and high average
order sizes.
Continue to Build the We-Commerce Network. We intend to expand the We-
Commerce Network to include a larger number of merchant, portal, community and
content Web sites. We plan to offer these businesses group buying solutions
using We-Commerce business methods and technology to offer products and
services directly to their visitors. By assembling this collection of online
businesses, we expect that our ability to aggregate buyers within any given
PowerBuy will increase.
Penetrate the Business-to-Business Market. We intend to take advantage of
our demand aggregation expertise, our experience in the business-to-consumer
market and the existing awareness of our brands to penetrate the business-to-
business market. We believe the business-to-business market is well-suited to
take advantage of our demand aggregation services, and could represent
substantial gross sales and transaction revenues for us. We will explore
opportunities to work cooperatively with existing online and offline companies
that focus on providing products and services to small businesses. We intend to
expand our presence in this market through targeted sales and marketing
efforts, the expansion of the We-Commerce Network and enhanced service
offerings.
Continue to Expand Technology and Broaden Communication Channels. We intend
to continue to expand our technology to add functions and features to
Mercata.com and the We-Commerce Network. We also intend to take advantage of
new means of electronic communication and distribution to bring increasingly
larger buying groups together quickly and easily. We currently are developing
software to enable wireless communication with our customers, and we also plan
to extend our business methods and technology to position ourselves for the
migration of e-commerce to broadband environments. We believe the use of
higher-speed wired and wireless technologies, including interactive cable
television, digital subscriber line (DSL), personal digital assistant (PDA) and
satellite and cellular technologies will further enhance our customer group
buying experience.
The Mercata.com Experience
We believe we provide a rewarding and exciting customer buying experience at
Mercata.com. We offer over 300 brands across the following product categories:
appliances, baby products, electronics, gifts and gadgets, home and kitchen
items, lawn and garden products, luggage, sporting goods, tools, and watches
and jewelry. Mercata.com enables users to navigate easily and purchase from a
wide selection of items -- many of which are featured as PowerBuy group
purchases.
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Mercata.com offers visitors helpful features such as search functions, buyer's
guides, customer message boards and the ability to browse and shop by consumer
brands.
Browsing. Mercata.com offers visitors an easy-to-use format intended to
enhance the product search, selection and discovery process. Visitors have the
ability to search by brands, pre-defined categories, keywords, and PowerBuy
closing dates. In addition to the search engines, at the top of every shopping
page the dynamically generated "Powerbuy Ticker" prominently displays high-
profile PowerBuys, their current PowerBuy prices, and the amount the price has
dropped since the start of the PowerBuy.
Product Research. In our Smart Shopper area visitors can learn details
regarding key product features and specifications, obtain answers to frequently
asked questions, view lists of glossary terms and more. Visitors may select and
compare up to four different products that currently are offered on Mercata.com
based on price and other specifications. Visitors may also view rebates by
product brand, print coupons or coupon summaries and view the brands currently
offered on our Web site.
PowerBuy Group Purchases. Customers join a PowerBuy by entering an offer at
the current PowerBuy price, or, alternatively, by making a conditional offer at
a price below the current price. At the conclusion of the PowerBuy, all
customers whose offers equal or exceed the final price of the PowerBuy are
shipped the product and charged the final PowerBuy price. PowerBuy group
purchases have a fixed duration and generally last approximately two to three
days.
Interactive Community Features. The use of our Share the Power e-mail
referral features is an important part of our cost-effective, word-of-mouth
customer acquisition strategy. Our registered users can send Share the Power e-
mails to potential buyers with pre-scripted messages detailing specific
PowerBuys. In addition, users may also send e-mail messages containing general
introductory information regarding Mercata. If the recipients of these general
introductory e-mails make a purchase at Mercata.com, the sender is given a
Mercata$ store credit. Users also can encourage others to participate in
specific PowerBuy group purchases by posting messages on our PowerTalk message
boards. Users are motivated to use these features because an increasing number
of buyers in each PowerBuy generally lowers the price of the featured item.
Mercata$ store credits. Visitors to our Web site receive Mercata$ store
credits on select product purchases and by referring others to Mercata.com
through our Share the Power e-mail referral program. Mercata$ store credits can
be redeemed to receive a discount of up to 50% off future purchases.
Group Value Products. Group Value products have fixed prices and can be
purchased at any time. These products expand our selection and offer customers
the opportunity to purchase products immediately.
Product Requests. Visitors can notify us of products and brands they are
interested in purchasing through the Product Request feature on Mercata.com. We
actively review these requests and attempt to respond to these suggestions by
sourcing products, as appropriate, and offering them for sale on our Web site.
Customer Service. Customers can visit Mercata.com to manage their own
personal account information, including credit card, shipping and profile data.
Customers can also use our Web site to track the progress of PowerBuy group
purchases and the status of orders, review their account history, view details
on all past transactions and track Mercata$ store credits that have been earned
and spent. In addition, we provide a toll-free number and e-mail access to
allow customers to contact our customer support and service personnel.
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The We-Commerce Network
In addition to Mercata.com, we offer demand aggregation services to online
businesses to enable them to offer We-Commerce business methods and technology
to their customers. The We-Commerce Network currently consists of merchant,
portal, community and content Web sites, including DealTime.com, Inc., Football
Northwest LLC (Seahawks.com), Go2Net, Inc. Mercata.com, the Microsoft Network
LLC (MSN), mybytes.com (a division of Youthstream Media Networks Inc.), Online
Office Supplies Company and SAVIshopper, Inc. We are dedicating significant
resources to expand the network and expect to add other participants, including
selected manufacturers and other online merchants. By assembling this
collection of online businesses, we expect our ability to aggregate buyers
within any given PowerBuy will increase. Through the We-Commerce Network, we
are able to extend further our proprietary business methods and technology and
accelerate the growth of group buying on the Internet.
We offer merchants the ability to provide PowerBuy group purchases to their
customers. We will create and manage PowerBuy group purchases for these
merchants as a service and expect to earn account set-up, management and
transaction fees based on the volume of sales derived from these PowerBuy group
purchases. We believe online merchants will benefit from the addition of a
novel pricing format and from an efficient direct channel to large groups of
buyers.
As a participant in the We-Commerce Network, portal, community and content
Web sites can offer their visitors the ability to participate in a variety of
PowerBuy group purchases in either co-branded or private label formats. This
feature is designed to encourage repeat visits and increase the likelihood that
visitors will spend more time on their sites. In the future, Internet portals
may also receive fees from other We-Commerce Network participants for directing
visitor traffic to such participants' PowerBuy merchandise.
Product Merchandising and Sourcing
Our merchandising strategy is to provide a broad assortment of high-quality,
brand-name products at competitive prices. Top selling brands in our highest
revenue generating product categories include Bushnell, Graco, Krups,
Leatherman, Makita, Phillips and Sharp. To encourage product purchases, we
feature various promotions on a rotating basis and regularly update our
PowerBuy specials. The primary factors that we consider when deciding to offer
a product as a PowerBuy are buyer demand, the need to move large volumes of
product quickly, our agreements with manufacturers and distributors of the
product, the desire of a particular supplier to test price sensitivity, and the
price at which we can purchase the product. We create and maintain Web pages
that are designed to highlight certain product brands we sell in our different
departments. We believe this strategy provides us with an excellent opportunity
to cross-sell a brand across our departments and promote impulse purchases by
customers.
We believe that the breadth and depth of our product selection, together
with the flexibility of our PowerBuy pricing mechanism and our range of
shopping services, enable us to pursue an effective merchandising strategy.
Mercata.com features a large selection of products in the following categories:
appliances, baby products, electronics, gifts and gadgets, home and kitchen
items, lawn and garden products, luggage, sporting goods, tools, and watches
and jewelry. In cooperation with our product vendors, we have developed
detailed and helpful descriptions and comparative charts for many of the
products offered. Unlike store-based retail formats, Mercata.com provides us
significant flexibility with regard to the organization and presentation of our
product selection. In addition, our online format enables us to adjust our
product mix dynamically to respond to changing customer demand.
We source products through our direct relationships with distributors and
manufacturers. Our in-house merchandise buyers are responsible for identifying
new products to offer, establishing new
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supplier relationships, managing existing supplier relationships, negotiating
product costs and setting product prices. These buyers also analyze current
buying trends by maintaining close relationships with our suppliers, monitoring
sales at competing Web sites and studying Mercata.com traffic data. As an
authorized reseller of substantially all of the products currently offered on
Mercata.com, we have access to manufacturer information relating to warranties,
return policies and other technical or product-specific data and, more
importantly, we can offer products to which other unauthorized resellers may
not have access.
Marketing and Promotion
We rely on offline and online marketing programs and promotional activities
to generate market awareness and build our brands. Our offline efforts include
traditional media, such as print, radio, outdoor and television advertising.
For example, we launched our "Down is Good" television and radio advertising
campaign in 12 cities in November 1999. In addition, we participate in public
relations activities and attend industry trade shows and conferences to raise
awareness of our brands. To augment our offline efforts, we advertise
Mercata.com on third-party Web sites and have established e-mail direct
marketing and online affiliate programs. We also rely on our customer and
manufacturer relationships to drive traffic to Mercata.com. We believe many of
our customers actively encourage others to come to our Web site and to
participate in PowerBuy group purchases. Registered users of Mercata.com can
reach out to other potential customers through Share the Power e-mails located
on each PowerBuy product page. They also may benefit from Share the Power
promotions where they earn product discounts when they refer customers to
Mercata.com. We benefit significantly from this word-of-mouth marketing and
expect to continue to promote our brands and our service indirectly through our
customers. In addition, we rely on links from manufacturers to Mercata.com and
referrals from our We-Commerce Network participants to drive traffic to our Web
site.
Operations, Fulfillment and Shipping
We obtain the products we sell on Mercata.com through our relationships with
over 300 manufacturers and distributors. We requisition these products on a
purchase order basis. We currently use two primary methods of distributing
products to our customers:
Via Distributors. We have relationships with seven distributors who reserve
inventory to be made available for sale on Mercata.com. We submit completed
order information to these suppliers, and they ship the product directly to the
customer using our Mercata packing slip. In 1999, approximately 67% of our net
revenues resulted from sales of products shipped using this method.
Via Our Third-Party Warehouse. We also purchase inventory that we hold at a
third-party distribution center for processing, packaging and shipping to
customers. Because we own the products held in our third-party warehouse, we
are subject to inventory risk on products distributed using this method.
Because some manufacturers do not have direct distribution capabilities, having
our third-party warehouse allows us to offer a broader range of products on
Mercata.com. In 1999, approximately 33% of our net revenues resulted from sales
of products shipped using this method.
The shipment of products directly from our distributors to our customers
reduces the level of inventory we are required to carry. Products purchased on
Mercata.com generally are shipped to customers within two business days of
acceptance of the final order. In 1999, over 90% of products ordered were
shipped within one business day and approximately 95% were shipped within
two business days. Because we reserve or purchase merchandise inventory in
advance, and because we can close a PowerBuy if a product sells out early,
generally 1% of customer orders are on back order status at any given time.
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We use technology, whenever feasible, to optimize the exchange of
information between Mercata and our fulfillment partners, so that we can
properly set customer expectations about product availability and delivery
dates. Our operations team works with our partners and third-party warehouse to
manage and monitor order accuracy, fulfillment rate, shipment speed and overall
delivery reliability and timeliness. We measure product availability and
performance through daily reports and periodic on-site visits with partners and
our fulfillment warehouse.
To date, we have offered free ground shipping to customers within the
continental United States and Canada via United Parcel Service (UPS) and the
United States Postal Service. Expedited shipping is available to customers via
UPS for an additional charge. We also offer our customers "white glove"
delivery on large and heavy items, such as big screen televisions, through our
agreement with Residential Delivery Services. This service provides scheduled
home or office delivery of the product, and removal of packaging materials.
Customer Service and Support
We believe that a high level of customer service and support is critical to
retaining and expanding our customer base. Mercata.com is designed to answer
many questions customers might have in selecting, ordering or returning
products. In addition, we currently offer e-mail and toll-free telephone
service and support to our customers. Our customer service center is open
Monday -- Friday, 6:00 a.m. to 10:00 p.m. (Pacific Time) and Saturday --
Sunday, 9:00 a.m. to 3:00 p.m. (Pacific Time) to provide assistance via e-mail
or telephone. We strive to answer all customer inquiries within 24 hours.
Mercata.com also contains a customer service page that outlines store policies
and provides answers to frequently asked questions. In addition, we currently
are implementing "live chat" technology on Mercata.com which will allow
customers to contact a customer service representative via an interactive
computer chat system. We manage our customer service center to provide prompt
and responsive customer communications and augment our customer service
personnel with customer and e-mail management systems from third-party vendors.
Our customer service representatives are trained to answer questions about
products and orders, assist customers in finding desired products and handle
any product returns. We accept returns within thirty days after a product has
shipped. After thirty days, customers are encouraged to utilize their
manufacturer's warranty for any product specific issues.
Technology
Our proprietary We-Commerce business methods and technology are a
significant component of Mercata.com and the We-Commerce Network. We have built
a suite of server-based software components and PowerBuy management and pricing
tools that allow us to set up, initiate, monitor and manage PowerBuys for
varying products and services and for different durations. The We-Commerce
software also enables inventory checks with our third-party distribution
facility to determine the availability of products.
To support our We-Commerce systems, we have licensed a broad array of
software from third-party vendors. Our system hardware is hosted at Exodus
Communications, Inc., a third-party data center in Tukwila, Washington, which
provides redundant communications lines and emergency power backup. We have
also implemented load-balancing systems to provide for high levels of
availability. System security is managed by both internal staff as well as
security staff at our third-party data center.
Currently we are developing software to enable buyers to browse and make
purchases on Mercata.com using advanced cellular phones and wireless handheld
PDAs and are also designing systems to send notifications to wireless devices
about PowerBuy product offerings. We anticipate that these and other
communications technologies will be implemented in the future to further
increase the accessibility and functionality of Mercata.com and the We-Commerce
Network.
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Competition
The online commerce market is new, rapidly evolving and intensely
competitive. We expect competition to intensify in the future because current
and new competitors can enter our market and launch new Web sites or services
at a relatively low cost. For example, Yahoo! Inc. recently announced that it
will be entering the group buying market in the second half of 2000 and America
Online, Inc. announced it will do so in the first quarter of 2000. Increased
competition is likely to result in price reductions, reduced gross margins and
loss of market share, any of which could seriously harm our net sales and
results of operations.
We currently or potentially compete with a variety of other companies,
including:
. other group buying services such as Accompany, Inc. and Letsbuyit.com,
NV;
. Internet portals such as America Online, Inc. and Yahoo! Inc.
. online retailers such as 800.com, Inc., Amazon.com, Inc., Buy.com, Inc.
and Priceline.com;
. providers of e-commerce services or functionality such as Fairmarket,
Inc., Freemarkets, Inc., MySimon Inc. and Inktomi Corporation;
. business-to-business sellers such as Onvia.com, Inc. and Staples, Inc.;
and
. traditional brick and mortar retailers such as Circuit City Stores,
Inc., Costco Wholesale Corporation and Wal-Mart Stores, Inc.
We believe Mercata.com competes in the online retail marketplace primarily
on the basis of price, recognition of the brands we offer, the breadth of our
product offerings, the amount of product information provided to customers and
convenience of shopping experience. Particularly with online retailers, we
compete on the basis of speed and accessibility of our Web site, quality of
site content, customer service and reliability, speed of order shipment and
price.
Many of our online and traditional store-based competitors have longer
operating histories, larger customer or user bases, greater brand recognition
and significantly greater financial, marketing and other resources than we.
Many of these competitors also can devote substantially more resources to Web
site and systems development and may be better able to leverage customer bases
and supplier and other relationships. In addition, large well-established or
well-financed entities may join with online competitors or other companies, as
the use of the Internet and other online services increases.
Our competitors may be able to secure products from vendors on more
favorable terms, fulfill customer orders more efficiently, adopt more
aggressive pricing or inventory availability policies and attract more clients
for their e-commerce services than we. Traditional store-based retailers also
enable customers to see and feel products in a manner that is not possible over
the Internet. Our online competitors may also adopt new technologies or methods
that have greater performance and features than ours. We also may face
additional competition as we expand our product and service offerings into new
categories. Additionally, new technologies and the expansion of existing
technologies, such as price comparison programs, may increase competition.
Dealing with these competitors may require significant additional expenditures
and could affect our business results of operations and financial condition. We
cannot be sure that we will be able to compete successfully against these
competitors.
Intellectual Property
We currently have 11 United States and international patent applications. We
are in the process of filing one additional patent application, with ongoing
efforts to identify and protect new inventions.
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Our pending patent applications relate to our novel demand aggregation business
methods and technology. Some of the patent applications also cover various
aspects of our PowerBuy management and pricing tools, and the expansion of
demand aggregation through the We-Commerce Network.
While we believe that our pending patents ultimately will help to protect
our business, we cannot assure you that any of these pending patents will
issue, that any issued patents will protect our intellectual property or that
any issued patents will not be challenged by third parties. In addition, other
parties may independently develop similar or competing business methods or
technologies not covered by any patents that may issue to us.
We currently are aware of several group buying Web sites that appear to use
a group buying business model. It is possible that we may enter into
arrangements with the operators of these sites to license our proprietary
business methods and technologies to them.
We seek to protect our copyrights, service marks, trademarks, trade dress
and trade secrets through a combination of laws and contractual restrictions,
such as confidentiality agreements. For example, we attempt to register our
core trademarks and service marks in the United States and internationally.
However, effective trademark, service mark, copyright and trade secret
protection may not be available.
We currently own over 50 Internet domain names, including "Mercata.com".
Domain names generally are regulated by Internet regulatory bodies. The
relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is unclear. We may be unable to
prevent third parties from acquiring domain names that infringe or otherwise
decrease the value of our trademarks and other proprietary rights.
Government Regulation
Due to the increasing popularity and use of the Internet, a number of laws
and regulations may be adopted with respect to the Internet covering issues
such as user privacy, freedom of expression, pricing, content and quality of
products and services, taxation, financial reporting, advertising, intellectual
property rights and information security. The nature of these laws and
regulations and the manner in which they may be interpreted and enforced cannot
be fully determined and, therefore, these laws and regulations could subject us
to potential liability, which in turn could harm our business. The adoption of
any such laws or regulations might also decrease the rate of growth of Internet
use, which in turn could decrease the demand for our products and services, or
increase the cost of doing business, or otherwise harm our business. In
addition, applicability to the Internet of existing laws governing issues such
as property ownership, copyrights and other intellectual property issues,
taxation, libel, obscenity and personal privacy is uncertain. The vast majority
of these laws were adopted prior to the advent of the Internet and related
technologies and, as a result, do not contemplate or address the unique issues
of electronic commerce.
All of our services are subject to federal and state consumer protection
laws and regulations prohibiting unfair and deceptive trade practices. We are
also subject to related "plain language" statutes in place in many
jurisdictions, which require the use of simple, easy-to-read terms and
conditions in contracts with consumers.
We intend to explore opportunities for expanding our business into
international markets. It is possible, however, that our group buying business
model will not be readily adaptable to regulatory environments of certain
foreign jurisdictions. In addition, there are various other risks associated
with international expansion. They include local distribution monopolies,
language barriers, unexpected changes in regulatory requirements, trade
barriers, problems in staffing and operating foreign
39
<PAGE>
operations, changes in currency exchange rates, difficulties in enforcing
contracts and other legal rights and economic and political instability.
In addition, because our products and services are accessible throughout the
United States, other jurisdictions may claim that we are required to qualify to
do business as a foreign corporation in a particular state. We are qualified to
do business in Washington State and Pennsylvania. Our failure to qualify in a
jurisdiction where we are required to do so could subject us to taxes and
penalties for the failure to qualify and could result in our inability to
enforce contracts in those jurisdictions. Any new law or regulation relating to
the qualification to do business, or the application of laws or regulations
from jurisdictions whose laws do not currently apply to our business, could
harm our business, financial condition or results of operations.
Employees
As of December 31, 1999, we had 104 employees, including 13 in customer
service, 12 in customer acquisition and retention, 33 in engineering, program
management and Web site design, five in operations, 24 in merchandising and 17
in executive management and administration. We devote, and will continue to
devote, substantial resources to attract high-quality employees; however, in
light of the tight labor market in which we operate, we cannot assure you we
will be successful in doing so. None of our employees is represented by a labor
union. We have not experienced any work stoppages and consider our employee
relations to be good.
Facilities
Our corporate offices are located in Bellevue, Washington, where we lease
approximately 21,206 square feet under a lease and multiple subleases. We
currently are in the process of relocating our corporate offices. Under several
lease and sublease arrangements, we have the right to occupy up to 72,150
square feet of office space in Bellevue beginning in March 2000. The terms for
these leases and subleases range from two to approximately five years. When we
occupy all of this additional space, we anticipate our total annual lease
payments will be approximately $2.0 million. We expect that these facilities
will be adequate for our needs for the next 12 months.
Legal Proceedings
From time to time, we may be involved in litigation relating to claims
arising out of our ordinary course of business. As of March 1, 2000, there are
no claims or actions pending or threatened against us, the ultimate disposition
of which would have a materially adverse effect on us.
40
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth information regarding our executive officers,
directors and key employees as of March 1, 2000:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Executive Officers:
Tom Van Horn................. 37 Founder, Chief Executive Officer, President
and Director
Scott Scharfman.............. 37 Chief Financial Officer
Warren Meyer................. 37 Executive Vice President of the We-Commerce
Network
Terry Miller................. 44 Senior Vice President, Customer Acquisition
and Retention
Jon Engman................... 35 Vice President, Finance and Administration,
Treasurer and Secretary
Leslie Wallis................ 37 Vice President and General Counsel
Directors:
William Savoy................ 35 Director and Chairman of the Board
Diane Daggatt................ 39 Director
Bert Kolde................... 45 Director
Linda Fayne Levinson (1)(2).. 58 Director
Samir Master (1)(2).......... 31 Director
Dan Nova (1)(2).............. 38 Director
Key Employees:
Linda Perkins................ 48 Vice President, Merchandising
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Tom Van Horn is the founder of Mercata and has been our Chief Executive
Officer, President and a director since our inception. From January 1998 to
September 1998, Mr. Van Horn served as President and Chief Executive Officer of
SuperCede, Inc., a creator of Java programming tools. From December 1996 to
January 1998, he was the President and Chief Executive Officer of InfoModelers,
Inc., a developer of database and data warehouse design software. From 1994
through 1996, Mr. Van Horn served as a Vice President at Attachmate
Corporation, a software development company. Prior to that time, Mr. Van Horn
was a senior management consultant with McKinsey and Company, a management
consulting firm. Mr. Van Horn has served on the board of directors of the
Washington Software Alliance and recently was named to Washington State
Governor Gary Locke's Council on the Internet. Mr. Van Horn holds an M.B.A.
from the Wharton School of Finance and Economics, an M.A. in International
Studies from the University of Pennsylvania and a B.S.E., cum laude, in
Mechanical and Aerospace Engineering from Princeton University.
Scott Scharfman has served as our Chief Financial Officer since February
2000. From October 1998 to February 2000, Mr. Scharfman was a Senior Managing
Director in the Equity Capital Markets Department of Bear, Stearns & Co. Inc.,
an investment banking firm. From October 1996 to October 1998, he was a
Managing Director, and from February 1994 to October 1996, an Associate
Director, in the Equity Capital Markets Department of Bear, Stearns & Co. Inc.
Mr. Scharfman holds an A.B. degree, cum laude, from Princeton University.
Warren Meyer has served as our Executive Vice President of the We-Commerce
Network since February 2000. From December 1998 to February 2000, he was Vice
President of Marketing and E-Business for the Air Transport and Regional
Airline market segment of Honeywell Inc. (formerly AlliedSignal), a maker of
aerospace equipment and components. From April 1997 to December 1998, he was
Senior Vice-President of Marketing for the Fisher-Rosemount Flow group, a
division of Emerson Electric Co., which manufactures instrumentation devices
and solutions. From December
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<PAGE>
1994 through March 1997, he served as Vice-President of Corporate Strategic
Planning for Emerson Electric. Prior to that time, Mr. Meyer was a senior
management consultant with McKinsey and Company. Mr. Meyer holds an M.B.A. with
High Distinction from the Harvard Business School and a B.S.E., magna cum
laude, from Princeton University in Mechanical and Aerospace Engineering.
Terry Miller has served as our Senior Vice President, Customer Acquisition
and Retention since October 1999, and served as our Vice President of Customer
Satisfaction from our inception to October 1999. From October 1997 through July
1998, Mr. Miller was the Vice President of Sales at SuperCede. From March 1996
to October 1997, Mr. Miller served as the Vice President of Direct Sales at
click2learn.com, Inc. (formerly known as Asymetrix Learning Systems, Inc.), a
training and education software company. From 1993 to February 1996, he was the
Vice President of Sales for Softbank Services Group, a provider of
telemarketing, order processing and fulfillment services. Mr. Miller holds a
B.A. in Journalism from the University of Minnesota.
Jon Engman has served as our Vice President, Finance and Administration,
Treasurer and Secretary since our inception. From July 1997 to September 1998,
Mr. Engman served as Vice President of Finance & Operations for SuperCede. From
October 1996 through June 1997, he was Corporate Controller for
click2learn.com. From April 1990 through September 1996, Mr. Engman held
several finance positions, including Corporate Controller, for AVT Corporation,
a voicemail software company. Mr. Engman holds a B.A., cum laude, in Business
Administration from the University of Washington.
Leslie Wallis has served as our Vice President and General Counsel since
October 1999, and as our General Counsel since November 1998. From January 1998
to November 1998, she was a partner at the law firm of Stoel Rives LLP. Ms.
Wallis was an associate attorney at Stoel Rives LLP from 1992 through 1997. Ms.
Wallis holds a B.A. in Business Administration from Texas Tech University, a
J.D., summa cum laude, from Texas Tech University School of Law and is a
Certified Public Accountant.
William Savoy has been a director of Mercata since our inception, and he
became Chairman of the Board in February 2000. Since 1990, Mr. Savoy has served
as President of Vulcan Northwest Inc., managing the personal finances of Paul
Allen, and Vice President of Vulcan Ventures Incorporated, a venture capital
fund wholly owned by Paul Allen. Mr. Savoy serves on the advisory board of
DreamWorks SKG and also serves as director for several private companies and
the following public companies: Charter Communications, Inc., drugstore.com,
Inc., Go2Net, Inc., Harbinger Corporation, High Speed Access Corporation,
Metricom, Inc., Telescan Inc., Ticketmaster Online-CitySearch, Inc., USA
Networks, Inc. and Value America, Inc. Mr. Savoy holds a B.S. in Computer
Science, Accounting and Finance from Atlantic Union College.
Diane Daggatt has been a director of Mercata since September 1999. Since
July 1998, Ms. Daggatt has served as an investment analyst for Vulcan Ventures.
From May 1996 through June 1998, she was a Vice President and Equity Research
Analyst for Dain Rauscher Wessels, an investment banking firm. From September
1994 through May 1996, Ms. Daggatt served as an institutional consumer analyst
for Pacific Crest Securities, an investment banking firm. Ms. Daggatt serves as
a director for several private companies and the following public companies:
Fatbrain.com, Inc. and Go2Net, Inc. Ms. Daggatt holds a B.A. in Business
Administration from Washington State University and is a Chartered Financial
Analyst.
Bert Kolde has been a director of Mercata since our inception. Mr. Kolde has
served as Vice Chairman: of Rose City Radio Corporation, a company that invests
in Pacific Northwest radio stations and networks, since 1999; of First & Goal
Inc., a company that manages the development, construction and operation of a
stadium in Seattle, since 1997; of Football Northwest, Inc., a
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<PAGE>
company that owns the Seattle Seahawks National Football League team, since
1996; of Oregon Arena Corporation, a company that owns Paul Allen's interest in
the Rose Garden Arena, since 1991; and of Trail Blazers, Inc., a company that
owns the Portland Trail Blazers National Basketball Association team, since
1988. He also has served as Vice President of Vulcan Ventures since 1994. Mr.
Kolde currently serves as a director for the following public companies:
MetaCreations Corporation, Beyond.com, CyberSource Corporation, Edison Schools,
Inc., and click2learn.com. Mr. Kolde holds a B.A. in Business Administration
from Washington State University and an M.B.A. from the University of
Washington.
Linda Fayne Levinson has been a director of Mercata since November 1999.
Since April 1997, Ms. Levinson has served as a Partner of Global Retail
Partners, L.P., a private equity investment fund. From 1994 to 1997, she served
as the President of Fayne Levinson Associates, a senior management consulting
firm. Earlier in her career, Ms. Levinson was a Senior Vice President of
American Express Travel Related Services Company, a consumer finance company,
and a Partner at McKinsey and Company. Ms. Levinson is a director for the
following public companies: NCR Corporation, Administaff, Inc., Jacobs
Engineering Group Inc., GoTo.com, Inc., Exactis.com, Inc. and CyberSource
Corporation. Ms. Levinson received an A.B. from Barnard College, an M.A. from
Harvard University and an M.B.A. from New York University.
Samir Master has been a director of Mercata since February 2000. Since June
1999, Dr. Master has served as a Senior Partner of Europ@Web, a global internet
investment group. From December 1996 to December 1998, Dr. Master was a
Managing Director at Comdisco Ventures, a debt and equity venture capital fund
based in Menlo Park, California. From February 1996 to November 1996, he was a
strategy consultant with the Managed Care practice of Price Waterhouse, LLC.
Dr. Master holds a B.S.M. from Northwestern University in Evanston, Illinois,
an M.D. from Northwestern Medical School and an M.B.A. from the J.L. Kellogg
Graduate School of Management at Northwestern University. He trained in
Internal Medicine at the University of Washington, and in Dermatology at the
University of Michigan.
Dan Nova has been a director of Mercata since October 1999. Since 1996, Mr.
Nova has served as a general partner of the general partner of Highland Capital
Partners II, III and IV Limited Partnerships, a series of venture capital
partnerships. Mr. Nova has also served as a managing member of the general
partner of Highland Entrepreneurs' Fund III Limited Partnership, a venture
capital partnership. From January 1995 to July 1996, Mr. Nova served as a
general partner of CMG@Ventures, L.P., a venture capital firm. Mr. Nova serves
as a director for the following public companies: eToys Inc., BeFree, Inc.,
MapQuest.com, Inc., AskJeeves, Inc. and Lycos, Inc. Mr. Nova holds a B.S. in
Computer Science and Marketing with honors from Boston College and an M.B.A.
from Harvard Business School.
Linda Perkins has served as our Vice President, Merchandising since November
1998. From April 1996 to November 1998, Ms. Perkins was an Independent Sales
Representative for Creative Resources, a partnership representing several major
manufacturers. From November 1995 through March 1996, she was President of
CASEL, a subsidiary of Costco Wholesale Corporation that focused on purchasing
gemstones and jewelry. From 1990 to November 1995, she was Vice President,
Consumer Electronics and Office Products for Costco Wholesale Corporation, a
membership warehouse club.
Voting Agreement
As part of our Series B and Series C preferred stock financings, the
purchasers of our preferred stock executed a Voting Agreement, pursuant to
which they agreed to vote their shares of stock to elect to our Board of
Directors as follows: one representative of Global Retail Partners Funding,
Inc., two representatives of Vulcan Ventures, one representative of Highland
Capital Partners IV Limited Partnership, one representative of the holders of a
majority of our common stock and our Chief
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<PAGE>
Executive Officer. Currently, Ms. Levinson is the representative of Global
Retail Partners Funding, Inc., Mr. Kolde and Ms. Daggatt are the
representatives of Vulcan Ventures, Mr. Nova is the representative of Highland
Capital Partners IV Limited Partnership, Mr. Savoy is the representative of the
holders of our common stock and Mr. Van Horn is the Chief Executive Officer.
The Voting Agreement will terminate upon the closing of this offering.
Board Composition
We currently have seven directors. Subject to stockholder approval,
following this offering, the Board will consist of seven directors divided into
three classes, with each class serving for a term of three years. At each
annual meeting of stockholders, directors will be elected by the holders of
common stock to succeed the directors whose terms are expiring. Ms. Daggatt,
Dr. Master and Ms. Levinson will be Class I Directors whose terms will expire
in 2001. Mr. Kolde and Mr. Nova will be Class II Directors whose terms will
expire in 2002 and Mr. Savoy and Mr. Van Horn will be Class III Directors whose
terms will expire in 2003. See "Description of Capital Stock--Antitakeover
Effects of Charter Documents, Delaware Law and Washington Law" for a discussion
of other antitakeover provisions found in our Certificate of Incorporation.
Board Committees
Our Board of Directors has an Audit Committee, a Compensation Committee and
an Option Committee. The Audit Committee meets with our independent auditors at
least annually to review the results of the annual audit. The Audit Committee
also studies, reviews and evaluates our accounting, auditing and reporting
practices, including audit and control functions; serves as a focal point for
communication between non-committee directors, the independent accountants and
our management; and monitors transactions between us and our employees,
officers and members of the Board, or any of their affiliates. The Compensation
Committee sets, reviews and approves the compensation levels of and policies
for officers and employees; proposes the adoption, amendment and termination of
employee benefit plans; prepares a report of our compensation policies for our
proxy or information statements; and establishes guidelines for administration
of our 1999 Equity Incentive Plan, our 2000 Equity Incentive Plan and our 2000
Employee Stock Purchase Plan. The Option Committee proposes adoption, amendment
and termination of our equity incentive plans to the Board and grants options
to employees, other than executive officers, under such plans. The Audit and
Compensation Committees are each composed of three independent directors,
Ms. Levinson, Dr. Master and Mr. Nova, and the Option Committee is composed of
one director, Mr. Van Horn.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between our Board of Directors or
Compensation Committee and the Board of Directors or Compensation Committee of
any other company, nor has such an interlocking relationship existed in the
past.
Board Compensation
We do not currently provide our directors with cash compensation for their
services as members of the Board of Directors, although members are reimbursed
for reasonable expenses incurred in connection with attendance at Board and
committee meetings. Directors are eligible to participate in our stock plans,
and after the closing of this offering, each non-employee director will receive
an option to purchase 40,000 shares of our common stock as compensation for his
or her services. Current non-employee directors will each receive this grant
upon the closing of this offering, and each future non-employee director will
receive this grant at the time he or she first becomes a
44
<PAGE>
director. In addition, beginning upon the closing of this offering, each non-
employee director who serves on a committee of the Board during the following
year will receive an option to purchase an additional 5,000 shares for each
committee seat the director holds. See "Employee Benefit Plans -- 2000 Equity
Incentive Plan".
Executive Compensation
The following table sets forth information concerning compensation for
services rendered to us in the fiscal year ended December 31, 1999, by our
Chief Executive Officer and our four other most highly-compensated executive
officers who earned more than $100,000 during the fiscal year ended December
31, 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
-------------------- ------------
Securities All Other
Underlying Compensation
Name and Principal Position Salary ($) Bonus ($) Options ($)
--------------------------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Tom Van Horn
Chief Executive Officer and
President.................. 258,396 15,000 1,000,000 1,801(2)
Dennis Shepard
Chief Operating Officer
(1)........................ 194,615 -- 600,000 4,570(3)
Terry Miller
Senior Vice President,
Customer Acquisition
and Retention.............. 143,278 47,176 200,000 1,673(4)
Jon Engman
Vice President, Finance and
Administration, Treasurer
and Secretary.............. 113,594 15,544 200,000 1,801(2)
Leslie Wallis
Vice President and General
Counsel.................... 98,875 8,036 120,000 1,801(2)
</TABLE>
- --------
(1) Mr. Shepard resigned as our Chief Operating Officer effective February 28,
2000. In February 2000, Mr. Shepard exercised options to purchase 150,000
shares of common stock, the vesting of options to purchase 37,500 shares of
common stock was accelerated, and his remaining 412,500 unvested options
were canceled.
(2) Includes $60 in term life insurance premiums and $1,741 in expenses related
to personal entertainment, including club memberships.
(3) Includes $174 in term life insurance premiums, $2,961 in relocation
expenses and $1,435 in expenses related to personal entertainment,
including club memberships.
(4) Includes $83 in term life insurance premiums and $1,589 in expenses related
to personal entertainment, including club memberships.
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<PAGE>
Option Grants in the Last Fiscal Year
The following table sets forth information with respect to stock options
granted to each of the executive officers listed in the Summary Compensation
Table in 1999, including the potential realizable value over the 10-year term
of the options, based on assumed rates of stock appreciation of 5% and 10%
compounded annually.
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------
Potential
Realizable Value
at Assumed
Annual Rates of
Number of Percent of Exercise Stock Price
Securities Total Price Appreciation for
Underlying Options Per Option Term ($)
Options Granted in Share Expiration ----------------
Name Granted(#) 1999 (%) ($) Date 5% 10%
---- ---------- ---------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Tom Van Horn........ 1,000,000 22.0% $0.10 1/31/2009 $62,890 $159,374
Dennis Shepard (1).. 600,000 13.2 0.10 3/5/2009 37,734 95,625
Terry Miller........ 160,000 3.5 0.10 1/31/2009 10,062 25,500
40,000 0.9 1.00 11/23/2009 25,156 63,750
Jon Engman.......... 200,000 4.4 0.10 1/31/2009 12,578 31,875
Leslie Wallis....... 60,000 1.3 0.10 1/31/2009 3,773 9,562
40,000 0.9 0.10 4/27/2009 2,516 6,375
20,000 0.4 1.00 11/22/2009 12,578 31,875
</TABLE>
- --------
(1) Mr. Shepard resigned as our Chief Operating Officer effective February 28,
2000. In February 2000, Mr. Shepard exercised options to purchase 150,000
shares of common stock, the vesting of options to purchase 37,500 shares of
common stock was accelerated, and his remaining 412,500 unvested options
were canceled.
Each of the options set forth above was granted pursuant to our 1999 Equity
Incentive Plan and is subject to the terms of that plan. The options were
granted at an exercise price equal to the fair market value of our common stock
as determined by our Board of Directors on the date of grant. With the
exception of the options held by Mr. Shepard, the options are fully exercisable
and the shares purchasable upon exercise of such options are subject to
repurchase by Mercata at the original exercise price paid per share if the
optionee terminates his or her employment or attempts to transfer the shares
before the shares have vested. In this context, "vested" means that the shares
subject to, or issued upon exercise of, options are no longer subject to
repurchase by Mercata. The grant to Mr. Van Horn vests over thirty-nine months
at a rate of 9/48 of the shares subject to the option on October 3, 1998, and
1/48 of the shares subject to the option per month thereafter. The grant to
Mr. Engman and the first grant to Mr. Miller vest over thirty-six months at a
rate of 1/4 of the shares subject to the option on October 3, 1998, and 1/48 of
the shares subject to the option per month thereafter. The remaining grants
vest over forty-eight months at the rate of 1/4 of the shares subject to the
option on the first anniversary of the vesting commencement date specified in
the grant and 1/48 of the shares subject to the option per month thereafter.
In 1999, we granted options to purchase up to a total of 4,547,600 shares to
employees, directors and consultants under our 1999 Equity Incentive Plan at
exercise prices equal to the fair market value of our common stock on the dates
of grant, as determined in good faith by our Board of Directors.
The potential realizable value is calculated assuming that the aggregate
exercise price on the date of grant appreciates at the indicated rate for the
entire term of the option and that the option is exercised and sold on the last
day of its term at the appreciated price. All options listed have a term of 10
years. Stock price appreciation rates of 5% and 10% are assumed pursuant to the
rules of the Securities and Exchange Commission. We can give no assurance that
the actual stock price will appreciate over the 10-year option term at the
assumed 5% and 10% levels or at any other defined level. Actual gains, if any,
on stock option exercises will be dependent upon the future performance
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<PAGE>
of our common stock. Unless the market price of the common stock appreciates
over the option term, no value will be realized from the option grants made to
the above officers.
Aggregated Option Exercises in Last Fiscal Year
The following table sets forth the number of shares acquired the by the
officers listed in the Summary Compensation Table through the exercise of
options in 1999 and the value realized on those exercises. The value realized
is based on the fair market value of our common stock on the date of exercise,
as determined by the Board of Directors, less the exercise price payable for
the shares.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Number of Options at Fiscal Year- the-Money Options at
Shares Value End Fiscal Year-End ($)(2)
Acquired on Realized ------------------------- -------------------------
Name Exercise (1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Tom Van Horn............ 475,000 $427,500 4,167 520,833 $ $
Dennis Shepard (3)...... 0 0 0 600,000
Terry Miller............ 40,000 36,000 46,667 113,333
Jon Engman.............. 30,000 27,000 78,333 91,667
Leslie Wallis........... 15,000 13,500 1,250 103,750
</TABLE>
- --------
(1) Equal to the fair market value of the purchased shares on the option
exercise date, less the exercise price paid for such shares.
(2) Based on the estimated public offering price of $ per share, minus
the per share exercise price, multiplied by the number of shares
underlying the option.
(3) Mr. Shepard resigned as our Chief Operating Officer effective February 28,
2000. In February 2000, Mr. Shepard exercised options to purchase 150,000
shares of common stock, the vesting of options to purchase 37,500 shares
of common stock was accelerated, and his remaining 412,500 unvested
options were canceled.
Employee Benefit Plans
1999 Equity Incentive Plan
Our 1999 Plan was adopted by our Board of Directors in February 1999 and
subsequently approved by our stockholders. Our 1999 Plan provides for the grant
of incentive stock options to employees and nonstatutory stock options, stock
appreciation rights, stock bonuses and rights to acquire restricted stock to
our employees, directors and consultants. A total of 7,400,000 shares of common
stock have been reserved for issuance under the 1999 Plan.
As of March 1, 2000, options to purchase 2,560,094 shares of common stock
were outstanding and 1,664,205 shares were available for future grant. Upon
completion of this offering, the 1999 plan will terminate, no further option
grants will be made under the 1999 Plan, and any shares reserved but not yet
issued under the 1999 Plan will not be carried over into the 2000 Plan.
Our Board of Directors administers the 1999 Plan and may determine the terms
of options granted, including the exercise price, the number of shares subject
to individual option awards and the vesting period of the options. The Board of
Directors has delegated responsibility for approving option grants to new, non-
officer employees to the Option Committee. These grants must be within
guidelines prescribed by the Board of Directors. Grants to executive officers,
directors, or subsequent option grants to existing employees however, require
approval of the Board of Directors or the Compensation Committee. The exercise
price of incentive stock option grants to employees cannot
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<PAGE>
be lower than 100% of the fair market value of the common stock on the date of
grant. In the case of incentive stock options granted to employees who are
holders of more than 10% of our voting power, the exercise price cannot be less
than 110% of the fair market value. The term of an incentive stock option
cannot exceed ten years, and the term of an incentive stock option granted to a
holder of more than 10% of our voting power cannot exceed five years.
Nonstatutory options granted to employees, consultants or directors must have
an exercise price of at least 50% of the fair market value on the date of
grant. Options and stock purchase rights granted under our 1999 Plan generally
become exercisable at the rate of 25% of the total number of shares subject to
the option twelve months after the date of grant, and approximately 2.1% of the
shares subject to the option each month thereafter. The Board of Directors may
amend, suspend or terminate the 1999 Plan at any time as long as the amendment
or termination does not impair the rights of plan participants with respect to
outstanding options under the 1999 Plan.
In February 2000, our Board of Directors authorized the amendment of certain
stock option agreements to allow optionholders to purchase shares issuable
under their option agreements before the shares have vested. All unvested
shares issued under this early exercise provision are subject to repurchase by
us at the original exercise price. All stock certificates representing
exercised but unvested shares are held in escrow until the shares have vested.
In the event we are acquired in a merger or asset purchase, the successor
corporation will assume or substitute an equivalent option for each outstanding
option under the 1999 Plan. In the event that the successor corporation refuses
to assume or issue an equivalent option for each outstanding option, all
outstanding options, stock appreciation rights, stock bonuses and rights to
acquire restricted stock will become fully vested. After the date on which our
stock is first listed (or approved for listing) on notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system, if
Mercata undergoes a change in control and the successor corporation terminates
an optionholder's status as an employee or consultant, other than for cause,
within one month before or thirteen months following the change in control,
then the optionholder's options will become fully vested.
2000 Equity Incentive Plan
Our 2000 Plan was adopted by our Board of Directors in March 2000. We intend
to submit the 2000 Plan to our stockholders for approval within 12 months of
the date of adoption. It will become effective upon the closing of this
offering. The 2000 Plan provides for the grant of incentive stock options to
employees and nonstatutory stock options, stock bonuses and stock purchase
rights to employees, directors and consultants. The 2000 Plan also provides for
nondiscretionary grants of nonstatutory options to non-employee directors.
Under this nondiscretionary grant mechanism, each non-employee director will
receive an option to purchase 40,000 shares of our common stock at the time he
or she first becomes a director. Our current directors will each receive this
initial grant upon the closing of this offering. The initial grant will vest
over four years in four equal annual installments. In addition, beginning upon
the closing of this offering, each non-employee director who will serve on a
committee of the Board during the following year will receive an option to
acquire an additional 5,000 shares for each committee seat the director holds.
Our current directors who serve on committees of the Board will each receive an
annual grant upon the closing of this offering. Each of these annual option
grants will vest in full one year from the date of grant. All options granted
to non-employee directors under this nondiscretionary grant mechanism will have
an exercise price equal to the fair market value of our common stock on the
date of grant.
A total of 4,500,000 shares of common stock have been reserved for issuance
under the 2000 Plan. No shares or options have been issued under the 2000 Plan
prior to this offering. An
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annual increase in the share reserve will be added on each January 1st
beginning in 2001, equal to the lesser of:
. 1,500,000 shares;
. 5% of the outstanding shares on that date; or
. a lesser amount determined by the Board of Directors.
Our Board of Directors or a committee thereof will administer the 2000 Plan
and will determine the terms of options granted, including the exercise price,
the number of shares subject to individual option awards and the vesting period
of options. The exercise price of incentive stock option grants cannot be lower
than 100% of the fair market value on the date of grant and, in the case of
incentive stock options granted to employees who are holders of more than 10%
of our voting power, not less than 110% of the fair market value. The exercise
price of options granted to non-employee directors will be 100% of the fair
market value on the date of grant. The exercise price of nonstatutory stock
options may not be less than 85% of the fair market value on the date of grant.
The term of an incentive stock option or a nonstatutory stock option cannot
exceed ten years, and the term of an incentive stock option granted to a holder
of more than 10% of our voting power cannot exceed five years. The terms of
stock bonus awards and restricted stock awards are determined by the Board or
committee thereof. Stock bonus awards and restricted stock awards may, but need
not, be subject to a share repurchase option in favor of Mercata in accordance
with a vesting schedule determined by the Board. Options and other awards
granted under our 2000 Plan become exercisable as determined by the Board.
If we are acquired in a merger or asset purchase, or if we dissolve or
liquidate or otherwise undergo a "change in control", the successor corporation
will assume or substitute an equivalent option for each outstanding option
under the 2000 Plan. If the successor corporation refuses to assume or issue an
equivalent option or other award for each outstanding option and award,
however, the options and awards will become fully vested and exercisable.
Following an assumption or substitution in connection with a merger or
acquisition, if the successor corporation terminates an optionholder's status
as an employee or consultant other than for cause within 12 months following
such merger or acquisition, then the optionholder's options will become fully
vested.
2000 Employee Stock Purchase Plan
Our 2000 Purchase Plan was adopted by our Board of Directors in February
2000. We intend to submit the 2000 Purchase Plan to our stockholders for
approval within 12 months of the date of adoption. It will become effective
upon the closing of this offering. The 2000 Purchase Plan provides our
employees with an opportunity to purchase our common stock through accumulated
payroll deductions. A total of 250,000 shares of common stock has been reserved
for issuance under the 2000 Purchase Plan, none of which has been issued prior
to this offering. An annual increase in the share reserve under the 2000
Purchase Plan will be added on each January 1st, beginning in 2001, equal to
the lesser of:
. 125,000 shares;
. 1% of the outstanding shares on that date; or
. a lesser amount determined by the Board of Directors.
The 2000 Purchase Plan will be administered by our Board of Directors or by
a committee appointed by the Board of Directors. The 2000 Purchase Plan will
permit eligible employees to purchase common stock through payroll deductions
of up to 15% of an employee's base compensation on each pay day during the
offering period. However, no employee may purchase more than $25,000 worth of
stock, determined at the fair market value of the shares at the time the
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<PAGE>
right is granted, in one calendar year. Employees employed by us on a given
enrollment date are eligible to participate during that offering period,
provided they remain employed by us for the duration of that offering period.
Unless the Board of Directors or its committee determines otherwise, the
2000 Purchase Plan will be implemented in a series of overlapping offering
periods, each approximately 24 months in duration. However, the first offering
period will be approximately 27 months in duration, beginning on the effective
date of this offering. Offering periods contain four consecutive, six-month
purchase periods, and will begin on the first trading day on or after February
1 and August 1 of each year and terminate on the last trading day in the period
twenty-four months later.
The first purchase period will commence on the date upon which the
registration statement, of which this prospectus is a part, is declared
effective by the Securities and Exchange Commission and terminate on the last
trading day in the period ending July 31, 2000. If we are acquired, and the
acquiring corporation refuses to assume all existing rights, offering and
purchase periods then in progress will be shortened and all rights
automatically exercised.
The price at which common stock will be purchased under the 2000 Purchase
Plan is equal to 85% of the fair market value of our common stock on the first
day of the applicable offering period or the last day of the applicable
purchase period, whichever is lower. Employees may end their participation in
the offering period at any time, and participation automatically ends on
termination of employment.
The Board of Directors may amend or terminate the 2000 Purchase Plan at any
time as long as the amendment or termination does not impair vesting rights of
plan participants. The 2000 Purchase Plan will terminate in January 2010,
unless terminated earlier in accordance with its provisions.
401(k) Plan
Our employees currently are eligible to participate in the 401(k) plan of
Vulcan Northwest Inc. ("The PGA Companies 401(k) Plan"). Pursuant to The PGA
Companies 401(k) Plan, employees may elect to reduce their current compensation
and have the amount of such reduction contributed to the plan. After the
closing of this offering, we intend to establish a tax-qualified employee
savings and retirement plan for which our employees will generally be eligible
(the "401(k) Plan"). We intend for the 401(k) Plan to qualify under Section 401
of the Internal Revenue Code of 1986, as amended, so that contributions to the
401(k) Plan, and income earned on plan contributions, are not taxable to
employees until withdrawn from the 401(k) Plan, and so that our contributions,
if any, will be deductible when made by us. To date, we have made no matching
contributions. In the future, however, we may make discretionary matching
contributions to the 401(k) Plan. Additionally, we may make annual
discretionary profit sharing contributions in amounts to be determined annually
by the Board of Directors.
Limitation of Liability and Indemnification Matters
Our Certificate of Incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:
. any breach of their duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
. any transaction from which the director derived an improper personal
benefit.
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Such limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our Certificate of Incorporation and Bylaws provide that we shall indemnify
our directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. Our Bylaws
also permit us to secure insurance on behalf of any officer, director, employee
or other agent for any liability arising out of his or her actions in such
capacity, regardless of whether the Bylaws would permit indemnification.
Upon the closing of this offering, we intend to enter into agreements to
indemnify our directors and certain officers, in addition to indemnification
provided for in our Certificate of Incorporation or Bylaws. These agreements,
among other things, will indemnify our directors and certain officers for
certain expenses, including attorneys' fees, judgments, fines and settlement
amounts incurred by any such person in any action or proceeding, including any
action by us, arising out of that person's services as our director or officer,
or that person's services provided to any other company or enterprise at our
request. We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and officers. We also intend
to maintain liability insurance for our officers and directors.
At present, we are not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent in which
indemnification would be required or permitted. We are not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification.
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RELATED PARTY TRANSACTIONS
Sales of Securities
Since our inception in September 1998, we have issued and sold securities to
the persons identified below who are our directors, executive officers, or
holders of more than 5% of our common stock. You may find more details about
shares held by these purchasers in the "Principal Stockholders" section of this
prospectus. Similarly, stock option grants to our directors and executive
officers are described in this prospectus under the captions "Management --
Board Compensation", "Management -- Executive Compensation" and "Principal
Stockholders".
Common Stock and Notes
On October 7, 1998, we issued 4,000,000 shares of our common stock to Paul
G. Allen, the sole stockholder of Vulcan Ventures Incorporated, at a price of
$0.10 per share for an aggregate purchase price of $400,000. Mr. Allen
subsequently assigned the shares to Vulcan Ventures in March 1999. As a result
of the transactions discussed below, Vulcan Ventures currently holds 1,000,000
shares of common stock.
From October 1998 to February 1999, we issued promissory notes to Mr. Allen
in the aggregate principal amount of $3,600,000. The notes each bore interest
at 6% per year and were payable upon demand at any time on or after December
31, 1999. Mr. Allen subsequently assigned the notes to Vulcan Ventures in March
1999 and, as a result of the conversions discussed below, the notes are no
longer outstanding.
Preferred Stock
In March 1999, we sold an aggregate of 14,000,000 shares of Series A
preferred stock to Vulcan Ventures at a price per share of $1.05 for an
aggregate purchase price of $14,700,000. In exchange for the Series A preferred
stock, Vulcan Ventures assigned to us 3,000,000 shares of our outstanding
common stock with an aggregate value of $300,000, canceled the $3,600,000 in
promissory notes originally issued to Mr. Allen and then assigned to Vulcan
Ventures, and paid us $10,800,000 in cash.
In September 1999 and October 1999, we sold an aggregate of 11,200,000
shares of Series B preferred stock at a price per share of $3.125 for an
aggregate purchase price of $35,000,000 to a group of private investors that
included the following directors and 5% stockholders:
<TABLE>
<CAPTION>
Shares of
Purchaser Series B Stock
--------- --------------
<S> <C>
Global Retail Partners, L.P. and all affiliated entities.... 2,240,000
Highland Capital Partners IV Limited Partnership and all
affiliated entities........................................ 5,600,000
Vulcan Ventures Incorporated................................ 1,888,000
Diane Daggatt............................................... 16,000
Bert Kolde.................................................. 16,000
</TABLE>
After the sale of our Series B preferred stock, Dan Nova, a general partner
of the general partner of Highland Capital Partners, and Linda Fayne Levinson,
a partner of Global Retail Partners, became members of our Board of Directors.
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In March 2000, we sold an aggregate of 2,522,250 shares of Series C
preferred stock at a price per share of $11.89 for an aggregate purchase price
of $30.0 million to a group of private investors that included the following
directors and 5% stockholders:
<TABLE>
<CAPTION>
Shares of
Purchaser Series C Stock
--------- --------------
<S> <C>
Global Retail Partners, L.P. and all affiliated entities.... 244,826
Highland Capital Partners IV Limited Partnership and all
affiliated entities........................................ 611,730
Vulcan Ventures Incorporated................................ 573,145
William D. Savoy............................................ 21,019
Diane Daggatt............................................... 2,102
Bert Kolde.................................................. 4,204
</TABLE>
In addition, Waelinvest, S.A., an existing stockholder, purchased a note that,
upon expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, will be converted into 840,750 shares of Series C
preferred stock. Upon conversion of the note, Waelinvest will be a 5%
stockholder and will hold an aggregate of 1,261,125 shares of Series C
preferred stock.
Pursuant to the sales of preferred stock described above, in September and
October 1999, we entered into an Investor Rights Agreement, a Co-Sale Agreement
and a Voting Agreement with the purchasers of our Series A and Series B
preferred stock, and we amended and restated these agreements in March 2000 to
include the purchasers of our Series C preferred stock. The purchasers listed
in the table above are parties to each of the agreements. Except for the
registration rights granted under the Amended and Restated Investor Rights
Agreement, all of the rights described below pursuant to the Amended and
Restated Investor Rights Agreement, the Amended and Restated Co-Sale Agreement
and the Amended and Restated Voting Agreement will terminate upon the closing
of this offering.
Under the Amended and Restated Investor Rights Agreement, we agreed to
provide financial information to purchasers of our preferred stock on an
ongoing basis, as well as registration rights with respect to their shares of
common stock, including common stock issuable upon conversion of their
preferred stock. For a complete description of the registration rights, see
"Description of Capital Stock -- Registration Rights". Also, pursuant to the
Amended and Restated Investor Rights Agreement, holders of at least 300,000
shares (including shares held by their affiliates) have a right of first
refusal to purchase a pro rata share of any securities that we propose to issue
except, among other things, shares that we issue pursuant to this registration
statement.
Pursuant to the Amended and Restated Co-Sale Agreement, all of the
purchasers of our preferred stock, other than Vulcan Ventures, have the right
to participate pro rata in sales of shares by Vulcan Ventures, except for sales
to affiliates of Vulcan Ventures, sales to the public and repurchases by
Mercata of shares held by Vulcan Ventures.
Under the Amended and Restated Voting Agreement, the purchasers of our
preferred stock agreed to vote their shares to elect directors to our Board of
Directors as follows: one representative of Global Retail Partners Funding,
Inc., two representatives of Vulcan Ventures, one representative of Highland
Capital Partners IV Limited Partnership, one representative of the holders of a
majority of our common stock and our Chief Executive Officer. See
"Management -- Voting Agreement".
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<PAGE>
Transactions with Related Parties
We have entered into a number of agreements and transactions with companies
affiliated with our directors and 5% stockholders. They include the following:
Vulcan Northwest. We sublease approximately 17,332 square feet of office
space from Vulcan Northwest at lease rates of approximately $37,000 per
month, which we believe approximates fair market rates. In addition, for
insurance purposes, we are named as an additional insured under an umbrella
policy covering the Paul G. Allen group of companies.
Vulcan Ventures. On September 10, 1999, we signed a promissory note in
favor of Vulcan Ventures pursuant to which we were able to borrow up to
$10.0 million at the prime interest rate as reported in the Wall Street
Journal. All funds borrowed by us were payable on demand. We have repaid
the outstanding balance in full. We canceled this note in March 2000.
Go2Net. In May of 1999, we entered into a Web linking agreement with
Go2Net involving a number of links and ad placements throughout Go2Net's
network of Web sites. The agreement required payments to Go2Net over a 9-
month period for a variety of specific placements and guaranteed minimum
impressions for us on Go2Net's network. In February 2000, we entered into
an addendum to the agreement, pursuant to which Go2Net joined the We-
Commerce Network of Web sites. This addendum requires no additional
payments by either party. In March 2000, we entered into a new advertising
agreement with Go2Net, pursuant to which Go2Net will provide us services
similar to those provided under the Web linking agreement, at similar
monthly costs to us. William Savoy, Diane Daggatt and Linda Fayne Levinson
are directors of Go2Net, and Vulcan Ventures is a significant shareholder
of Go2Net.
Seattle Seahawks. In July 1999, we entered into a contract with Football
Northwest LLC, owner of the Seattle Seahawks franchise of the National
Football League, pursuant to which we received numerous ad placements,
including television commercials, "live" commentator announcements, stadium
announcements and billboard placements, during the telecast of each
preseason Seahawks game. In addition, the Seahawks produced, at their own
cost, a television ad featuring one of the Seahawks players that was used
as one of the ad spots shown during the preseason telecasts. Total
consideration paid by us for these promotional benefits was $40,000. In
August 1999, we agreed with Football Northwest to extend the Seahawk
promotions into the regular season. This contract involved various print,
in-stadium, and certain television network promotions within the Seahawk's
weekly "Seahawks Saturday" show. Total consideration paid by us for these
promotions was $67,000. In March 2000, we entered into a We-Commerce
Network Services Agreement, pursuant to which Football Northwest LLC joined
the We-Commerce Network. The agreement requires that we pay a 5% commission
on revenues from sales made on the Seahawks.com Web site through the We-
Commerce Network. Paul Allen owns Football Northwest Management Inc., which
owns Football Northwest LLC.
Portland Trailblazers. In October 1999, we entered into a sponsorship
agreement with the Portland Trailblazers National Basketball Association
franchise, pursuant to which we will receive numerous television
commercials, in-game features, live PowerBuy announcements, print
advertising, in-arena promotions and on-line banner advertising. The
approximate consideration for the sponsorship agreement is $130,000. Paul
Allen owns Trail Blazers, Inc., which owns the Portland Trailblazers. Bert
Kolde is a director of Trail Blazers, Inc.
CyberSource. In March 1999, we entered into a contract with CyberSource
Corporation for fraud checking and other services, which we expect will
involve payments to CyberSource of over $60,000 per year. Bert Kolde and
Linda Fayne Levinson both are directors of CyberSource.
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BeFree, Inc. On August 5, 1999, we entered into a contract with BeFree,
Inc., pursuant to which BeFree will support our affiliate program. The
agreement requires us to pay BeFree a percentage of monthly net sales
generated through our affiliate programs that are supported by BeFree. We
expect these fees to exceed $60,000 per year. Highland Capital Partners is
a significant shareholder of BeFree, and Dan Nova is a director of BeFree.
We believe that all transactions with affiliates described above were made
on terms no less favorable to us than could have been obtained from
unaffiliated third parties. We expect that a majority of the independent and
disinterested outside directors on our Board of Directors will approve all
future transactions between us and our officers, directors, principal
stockholders and their affiliates. We expect that such transactions will
continue to be on terms no less favorable to us than we could obtain from
unaffiliated third parties.
We plan to enter into indemnification agreements with our executive officers
and directors for the indemnification of and advancement of expenses to such
persons to the fullest extent permitted by law. We also intend to enter into
these agreements with our future directors and executive officers. For a
description of limitations of liability and certain indemnification
arrangements with respect to our directors and officers, see "Management --
Limitation of Liability and Indemnification Matters".
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of our common stock as of March 1, 2000, and as adjusted to reflect
the sale of common stock offered hereby, as to:
. each person (or group of affiliated persons) known by us to own
beneficially more than 5% of our outstanding common stock;
. each of our directors and each executive officer named in the Summary
Compensation Table; and
. all of our directors and executive officers as a group.
Unless otherwise indicated, the address for each of the named individuals is
c/o Mercata, Inc., 110 - 110th Avenue N.E., Bellevue, WA 98004-5840. Except as
otherwise indicated, and subject to applicable community property laws, the
persons named in the table have sole voting and investment power with respect
to all shares of common stock held by them.
<TABLE>
<CAPTION>
Percentage of
Shares
Number of Beneficially Owned
Shares ----------------------
Beneficially Before After
Name Owned Offering Offering
- ---- ------------ --------- ---------
<S> <C> <C> <C>
5% Stockholders: (1)
Global Retail Partners, L.P. and
affiliated entities (2)............. 2,484,826 7.8%
2121 Avenue of the Stars, 30th
Floor Los Angeles, CA 90067
Highland Capital Partners IV Limited
Partnership and affiliated entities
(3)................................. 6,211,730 19.5
c/o Seth Berry, Hutchins, Wheeler &
Dittmar 101 Federal Street
Boston, MA 02110
Vulcan Ventures Incorporated......... 17,461,145 54.7
110 - 110th Avenue N.E., Suite 550
Bellevue, WA 98004-5862
Executive Officers and Directors:
Tom Van Horn (4)..................... 1,431,510 4.5
Terry Miller (5)..................... 245,000 *
Dennis Shepard (6)................... 187,500 *
Jon Engman (7)....................... 200,000 *
Leslie Wallis (8).................... 119,000 *
William Savoy........................ 21,019 *
Diane Daggatt........................ 18,102 *
Bert Kolde........................... 20,204 *
Linda Fayne Levinson................. -- *
Samir Master......................... -- *
Dan Nova............................. -- *
All directors and executive officers as
a group
(13 persons) (9)...................... 3,192,335 9.7%
</TABLE>
- --------
* Less than one percent.
(1) In March 2000, we issued a $10.0 million note to Waelinvest, which
automatically will convert into 840,750 shares of Series C preferred stock
upon the expiration of the waiting period under Hart-Scott-Rodino
Antitrust Improvements Act of 1976. If this conversion occurs, Waelinvest
will be a 5% stockholder.
(2) Includes the following shares held by affiliated entities: DLJ Diversified
Partners (427,953 shares), DLJ Diversified Partners - A, L.P. (158,920
shares), DLJ ESC II L.P. (24,721 shares), Global Retail Partners Funding,
Inc. (98,890 shares), GRP Partners, L.P. (93,363 shares).
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<PAGE>
(3) Includes 248,469 shares held by Highland Entrepreneurs' Fund IV Limited
Partnership.
(4) Includes 16,510 shares of common stock held by the 1999 Halbert Family
Trust, of which Mr. Van Horn's wife is Co-Trustee; and 862,501 shares of
common stock subject to a repurchase right in favor of Mercata.
(5) Includes 15,000 shares of common stock held by the Miller Family Trust and
outstanding options to purchase 210,000 shares exercisable within 60 days
of March 1, 2000.
(6) Mr. Shepard resigned as our Chief Operating Officer effective February 28,
2000. In February 2000, Mr. Shepard exercised options to purchase 150,000
shares of common stock and the vesting of options to purchase 37,500
shares of common stock was accelerated.
(7) Includes outstanding options to purchase 135,000 shares exercisable within
60 days of March 1, 2000.
(8) Includes outstanding options to purchase 52,500 shares exercisable within
60 days of March 1, 2000 and 36,250 shares of common stock subject to a
repurchase right in favor of Mercata.
(9) Includes outstanding options to purchase 1,035,000 shares exercisable
within 60 days of March 1, 2000 and 1,248,751 shares of common stock
subject to a repurchase right in favor of Mercata.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as indicated by the footnotes to the
table, we believe, based on information furnished to us, that the persons and
entities named in the table above have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them.
Percentage of beneficial ownership is based on 31,927,951 shares of common
stock outstanding as of March 1, 2000, as adjusted to reflect the conversion of
all outstanding shares of preferred stock upon the closing of this offering and
treating as outstanding all options exercisable within 60 days of March 1,
2000, held by the optionee. Shares subject to options, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
stockholder. Percentage of beneficial ownership after the offering is also
based on shares of common stock outstanding after the completion of the
offering, assuming no exercise of the underwriters' over-allotment option.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, our authorized capital stock will
consist of shares of common stock, $0.001 par value, and 5,000,000 shares
of preferred stock, $0.001 par value. The following description of our capital
stock does not purport to be complete. This description is subject to and
qualified in its entirety by our Certificate of Incorporation and Bylaws, which
are included as exhibits to the registration statement of which this prospectus
forms a part, and by the provisions of Delaware law.
Common Stock
As of March 1, 2000, there were 4,205,701 shares of common stock outstanding
that were held of record by 61 stockholders. There will be shares of
common stock outstanding after giving effect to the sale of common stock in
this offering.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably those dividends, if any, that may be declared
from time to time by our Board of Directors out of funds legally available for
dividends. See "Dividend Policy". In the event of the liquidation, dissolution
or winding up of Mercata, the holders of our common stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
distribution rights of preferred stock, if any, then outstanding. The common
stock does not have cumulative voting rights. The common stock has no
preemptive or conversion rights or other subscription rights. No redemption or
sinking fund provisions apply to the common stock. All outstanding shares of
common stock are fully paid and nonassessable, and the shares of common stock
to be issued upon completion of this offering will be fully paid and
nonassessable.
Preferred Stock
Subject to stockholder approval, at the closing of this offering our Board
of Directors will have the authority to issue preferred stock in one or more
series and to fix or alter from time to time the designation, powers,
preferences and rights of the shares of each such series, and the
qualifications, limitations or restrictions of any wholly unissued series of
preferred stock, and to establish from time to time the number of shares
constituting any such series. The issuance of preferred stock may have the
effect of delaying, deferring or preventing a change in control of Mercata
without further action by the stockholders. For example, our Board of Directors
could issue preferred stock that has the power to prevent a change of control
transaction. The issuance of preferred stock with voting and conversion rights
may adversely affect the voting power of the holders of common stock, including
the loss of voting control to others. Upon the closing of this offering, no
shares of preferred stock will be outstanding, and we currently have no plans
to issue any of the preferred stock.
Registration Rights
At the closing of this offering, the holders of 28,722,250 shares of common
stock will be entitled to rights with respect to the registration of such
shares ("Registrable Securities") under the Securities Act. Registrable
Securities include shares of our common stock issued upon conversion of our
Series A, Series B and Series C preferred stock, as well as 1,000,000 shares of
our common stock held by Vulcan Ventures Incorporated. Beginning 180 days after
this offering, holders of such securities may require us to use our best
efforts to file a registration statement under the Securities Act, provided
that the proposed aggregate offering price exceeds $25,000,000. If we propose
to register any of our securities under the Securities Act, either for our own
account or for the account
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<PAGE>
of other security holders exercising registration rights, such holders are
entitled to notice of such registration and are entitled to include shares of
common stock in such registration, subject to the ability of the underwriters
to limit the number of shares included in the offering. Furthermore, holders of
Registrable Securities may require us to register all or a portion of their
common stock subject to these rights on Form S-3, when use of this form becomes
available, provided that, among other limitations, the proposed aggregate
offering price would be at least $2,000,000. All fees and expenses of such
registrations (other than underwriting discounts and commissions) will be borne
by us. The registration rights of a holder terminate when the holder can,
within a three-month period, offer and sell all of his or her registrable
securities pursuant to Rule 144 and, as to all holders, three years after this
offering.
Antitakeover Effects of Charter Documents, Delaware Law and Washington Law
Provisions of our Certificate of Incorporation and Bylaws may be deemed to
have an antitakeover effect and may delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider in his best interest,
including those attempts that might result in a premium over the market price
for the shares held by our stockholders.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for
election as directors at an annual meeting of stockholders, must provide timely
notice thereof in writing. To be timely, a stockholder's notice must be
delivered to or mailed and received at our principal executive offices not less
than 60 days or more than 90 days prior to the first anniversary of our
previous year's annual meeting. The Bylaws also specify requirements as to the
form and content of a stockholder's notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of stockholders or
from making nominations for directors at an annual meeting of stockholders.
Authorized But Unissued Shares. The authorized but unissued shares of common
stock and preferred stock will be available for future issuance without
stockholder approval following the closing of this offering. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued shares of
common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of us by means of a proxy contest, tender offer,
merger or otherwise.
Classified Board of Directors; Removal. Subject to stockholder approval,
following this offering, our Board of Directors will be divided into three
classes. The classification of the Board of Directors will have the effect of
requiring at least two annual stockholder meetings, instead of one, to replace
a majority of the directors which could have the effect of delaying or
preventing a change in control of Mercata. Subject to the rights of the holders
of any outstanding series of preferred stock, the Certificate of Incorporation
authorizes only the Board of Directors to fill vacancies, including newly
created directorships. Subject to stockholder approval, the Certificate of
Incorporation also will provide that directors may be removed by stockholders
only for cause and only by the affirmative vote of holders of a majority of the
outstanding shares of voting stock.
Right of First Refusal. Our Bylaws provide Mercata with a right of first
refusal with respect to certain transfers of stock by existing stockholders.
This right of first refusal will expire upon the closing of this offering.
Business Combination Statutes. In addition, we are subject to the provisions
of Section 203 of the Delaware General Corporation Law. Subject to exceptions,
Section 203 prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested
59
<PAGE>
stockholder" for a period of three years from the date of the transaction in
which the person became an interested stockholder, unless the interested
stockholder attained this status with the approval of the Board of Directors or
unless the business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions resulting in
a financial benefit to the interested stockholder. Subject to exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control in attempts
with respect to Mercata and, accordingly, may discourage attempts to acquire
Mercata. Although a corporation may opt out of this statute, we have not.
Finally, the laws of Washington, where our principal executive offices are
located, impose restrictions on transactions between foreign corporations and
significant stockholders. Chapter 23B.19 of the Washington Business Corporation
Act generally prohibits a target corporation from engaging in significant
business transactions with an acquiring person. An acquiring person is defined
as a person or group of persons that beneficially owns 10% or more of the
voting securities of the target corporation, for a period of five years after
the acquisition, unless a majority of the members of the target corporations's
board of directors approves the transaction before the acquisition. Prohibited
transactions include
. a merger or consolidation with, disposition of assets to, or issuance or
redemption of stock to or from, the acquiring person;
. termination of 5% or more of the employees of the target corporation as
a result of the acquiring person's acquisition of 10% or more of the
shares; and
. allowing the acquiring person to receive any disproportionate benefit as
a stockholder.
After the five-year period, a significant business transaction may take
place so long as it complies with the fair price provisions of the statute or
is approved at an annual or special meeting of stockholders. A target
corporation includes a foreign corporation if
. the corporation's principal executive office is located in Washington;
. any of (a) more than 10% of the corporation's stockholders of record are
Washington residents, (b) more than 10% of its shares of record are
owned by Washington residents or (c) 1,000 or more of its stockholders
of record are Washington residents;
. a majority of the corporation's employees are Washington residents or
more than 1,000 Washington residents are employees of the corporation;
and
. a majority of the corporation's tangible assets are located in
Washington or the corporation has more than $50 million of tangible
assets located in Washington.
A corporation may not opt out of this statute. If we continue to meet the
definition of a target corporation, Chapter 23B.19 of the Washington Business
Corporation Act may have the effect of delaying, deferring or preventing a
change of control of Mercata.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is ChaseMellon
Shareholder Services, L.L.C.
Listing
We have applied to list our common stock on the Nasdaq National Market of
the Nasdaq Stock Market, Inc. under the trading symbol "MCTA".
60
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there was no public market for our common stock.
Based on shares outstanding at March 1, 2000, upon completion of the offering
we will have shares of common stock outstanding, assuming no exercise of
the underwriters' over-allotment option and no exercise of outstanding options.
Of these outstanding shares, the shares sold in the offering will be
freely tradeable without restrictions or further registration under the
Securities Act, unless such shares are purchased by our affiliates as that term
is defined in Rule 144 under the Securities Act.
Sales of Restricted Shares
The remaining 31,927,951 shares of common stock outstanding after the
offering are restricted securities under Rule 144 or Rule 701. Restricted
shares may be sold in the public market only if registered or if they qualify
for an exemption from registration under Rule 144, 144(k) or 701 promulgated
under the Securities Act, which are summarized below. No restricted shares will
be available for resale in the public market in reliance on Rule 144(k) on the
date of this prospectus. Upon expiration of the lock-up agreements described
below, 180 days after the date of this prospectus, an additional 28,075,701
shares will be available for resale in the public market in reliance on Rule
144.
Rule 144. In general, under Rule 144 as currently in effect, beginning 90
days after the date of this prospectus, a person who has beneficially owned
restricted shares for at least one year is entitled to sell a number of shares
within any three-month period that cannot exceed the greater of one percent of
the number of shares of common stock then outstanding, which will equal
approximately shares immediately after the offering, and the average
weekly trading volume of our common stock on the Nasdaq National Market during
the four calendar weeks preceding the filing of a notice on Form 144 with
respect to such sale. Sales under Rule 144 are also subject to manner of sale
provisions, notice requirements and the availability of current public
information about Mercata. Rule 144 also provides that affiliates who are
selling shares of common stock that are not restricted shares must nonetheless
comply with the same restrictions applicable to restricted shares, with the
exception of the holding period requirement.
Rule 144(k). Under Rule 144(k), a person who is not deemed to have been our
affiliate at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Accordingly,
unless otherwise restricted, these shares may therefore be sold immediately
upon the completion of the offering. Because Mercata was formed less than two
years ago, no shares will be available for resale in the public market in
reliance on Rule 144(k) on the date of this prospectus.
Options
Rule 701 provides that the shares of common stock acquired upon the exercise
of currently outstanding options or pursuant to other rights granted under our
stock plans may be resold (to the extent not subject to the lock-up agreements)
by persons, other than affiliates, beginning 90 days after the date of this
prospectus, subject only to the manner of sale provisions of Rule 144, and by
affiliates under Rule 144, without compliance with its one-year minimum holding
period, subject to certain limitations. As of the date of this prospectus, the
Board of Directors has authorized an aggregate of up to 7,400,000 shares of
common stock for issuance pursuant to our 1999 Plan. As of March 1, 2000,
options to purchase a total of 2,560,094 shares of common stock were
outstanding, 1,091,918 of which options are exercisable. Of the total shares
issuable pursuant to such options, all are subject to contractual lock-up
agreements with the Company. At the completion of this offering an
61
<PAGE>
aggregate of 4,750,000 shares of common stock will be reserved for issuance
under our 2000 Plan and our 2000 Purchase Plan, and no further options or other
stock awards may be granted under our 1999 Plan.
We intend to file one or more registration statements on Form S-8 under the
Securities Act following the offering to register the shares of common stock
which are issuable pursuant to our stock option and stock purchase plans. These
registration statements are expected to become effective upon filing. Shares
covered by these registration statements will then be eligible for sale in the
public markets, subject to any applicable lock-up agreements and to Rule 144
limitations applicable to affiliates.
Lock-up Agreements
Except for sales of common stock to the underwriters pursuant to the
underwriting agreement and in limited other transactions, Mercata, our
executive officers and directors and some of our stockholders and optionholders
have agreed not to, among other things, sell or otherwise dispose of, directly
or indirectly, any shares of common stock (or any security convertible into or
exchangeable or exercisable for common stock) without the prior written consent
of Goldman, Sachs & Co. for a period of 180 days from the date of this
prospectus. Goldman, Sachs & Co. may, in its sole discretion, at any time and
without notice, release for sale in the public market all or any portion of the
shares subject to the lock-up agreements.
Registration Rights
Registration rights held by certain of our stockholders are described in
this prospectus under the caption "Description of Capital Stock -- Registration
Rights".
Effects of Sales of Shares
Prior to the offering, there has been no public market for our common stock.
No predictions can be made as to the effect, if any, that market sales of
shares of our common stock from time to time, or the availability of shares for
future sale, may have on the market price for our common stock. Sales of
substantial amounts of common stock, or the perception that such sales could
occur, could adversely effect prevailing market prices for our common stock and
could impair our future ability to obtain capital through an offering of equity
securities.
62
<PAGE>
UNDERWRITING
Mercata and the underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to certain
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co., Bear, Stearns &
Co. Inc. and FleetBoston Robertson Stephens Inc. are the representatives of the
underwriters.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Goldman, Sachs & Co...................................................
Bear, Stearns & Co. Inc...............................................
FleetBoston Robertson Stephens Inc....................................
-----
Total...............................................................
=====
</TABLE>
----------------
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from Mercata to cover such sales. They may exercise that option for 30
days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in approximately the same proportion as set
forth in the table above.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by Mercata. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
Paid by Mercata
-------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share............................................. $ $
----- -----
Total...............................................
===== =====
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $ per share
from the initial public offering price. If all the shares are not sold at the
initial public offering price, the representatives may change the offering
price and the other selling terms.
Mercata, its directors, officers and certain of its stockholders have agreed
with the underwriters not to dispose of or hedge any of their common stock or
securities convertible into or exchangeable for common stock during the period
from the date of this prospectus continuing through the date 180 days after the
date of this prospectus, except with the prior written consent of the
representatives. Please see "Shares Eligible for Future Sale" for a discussion
of certain transfer restrictions.
At Mercata's request, the underwriters have reserved, at the initial public
offering price, up to shares of common stock for sale to certain
directors, officers, employees and friends of
63
<PAGE>
Mercata. There can be no assurance that any of the reserved shares will be so
purchased. The number of shares available for sale to the general public in the
offering will be reduced by the number of reserved shares sold. Any reserved
shares not purchased will be offered to the general public on the same basis as
the other shares offered in this prospectus.
Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among Mercata and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be Mercata's historical performance, estimates of its business
potential and earnings prospects, an assessment of its management and the
consideration of the above factors in relation to market valuation of companies
in related businesses.
Mercata has applied to list the common stock on the Nasdaq National Market
under the symbol "MCTA".
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
Mercata estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately $ .
Mercata has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act.
64
<PAGE>
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for us by Cooley Godward LLP, Kirkland, Washington. Certain legal
matters in connection with this offering will be passed upon for the
underwriters by Perkins Coie llp, Seattle, Washington.
EXPERTS
The financial statements and schedule of Mercata, Inc. as of December 31,
1998 and 1999 and for the period from September 23, 1998 (inception) to
December 31, 1998, and the year ended December 31, 1999, have been included in
this prospectus and in the registration statement in reliance upon the report
of KPMG LLP, independent auditors, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act that registers the shares of our common stock to be sold in this
offering. The registration statement, including the attached exhibits and
schedules, contains additional relevant information about us and our capital
stock. The rules and regulations of the SEC allow us to omit certain
information included in the registration statement from this document.
In addition, we file reports, proxy statements and other information with
the SEC under the Securities Exchange Act. You may read and copy this
information at the following public reference rooms of the Commission:
<TABLE>
<S> <C> <C>
Washington, D.C. New York, New York Chicago, Illinois
450 Fifth Street, N.W., 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, NY 10048 Chicago, IL 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. You may obtain information on the operation of
the public reference rooms by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet Web site that contains reports, proxy statements and
other information about issuers, like Mercata, who file electronically with the
SEC. The address of that site is http://www.sec.gov.
We intend to furnish our stockholders with annual reports containing audited
financial statements, and make available to our stockholders quarterly reports
for the first three quarters of each year containing unaudited interim
financial information.
65
<PAGE>
INDEX TO FINANCIAL STATEMENTS
MERCATA, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Balance Sheets at December 31, 1998 and December 31, 1999................. F-3
Statements of Operations for the Period from September 23, 1998
(inception) to December 31, 1998 and fiscal year ended December 31,
1999..................................................................... F-4
Statements of Stockholders' Equity (Deficit) for the Period from September
23, 1998 (inception) to December 31, 1998 and fiscal year ended December
31, 1999................................................................. F-5
Statements of Cash Flows for the Period from September 23, 1998
(inception) to December 31, 1998 and fiscal year ended December 31,
1999..................................................................... F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Mercata, Inc.:
We have audited the accompanying balance sheets of Mercata, Inc. as of
December 31, 1998 and 1999, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the period from September
23, 1998 (inception) to December 31, 1998 and the year ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mercata, Inc. as of
December 31, 1998 and 1999, and the results of its operations and its cash
flows for the period from September 23, 1998 (inception) to December 31, 1998
and the year ended December 31, 1999 in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Seattle, Washington
March 8, 2000
F-2
<PAGE>
MERCATA, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
Pro Forma
December 31, December 31, at December 31,
1998 1999 1999
------------ ------------ ---------------
Assets (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents......... $ 813,243 $ 13,874,040 $ 53,874,040
Accounts receivable, net of
allowance for doubtful accounts
of $50,000 in 1999............... -- 403,085 403,085
Inventories....................... -- 1,511,711 1,511,711
Prepaid marketing expenses........ -- 2,843,491 2,843,491
Other prepaid expenses and current
assets........................... 163,131 234,694 234,694
----------- ------------ ------------
Total current assets................ 976,374 18,867,021 58,867,021
Property and equipment, net......... 844,129 3,809,077 3,809,077
Deposits and other assets........... 38,431 116,964 116,964
----------- ------------ ------------
$ 1,858,934 $ 22,793,062 $ 62,793,062
=========== ============ ============
Liabilities and Stockholders' Equity
(Deficit)
Current liabilities:
Accounts payable.................. $ 602,455 $ 8,861,933 $ 8,861,933
Accrued compensation.............. 169,779 489,692 489,692
Accrued marketing expenses........ -- 629,177 629,177
Other current liabilities......... 222,116 576,761 576,761
Notes payable to stockholder...... 2,400,000 -- --
Convertible note payable.......... -- -- 10,000,000
----------- ------------ ------------
Total current liabilities........... 3,394,350 10,557,563 20,557,563
----------- ------------ ------------
Commitments, contingencies and
subsequent events
Stockholders' equity (deficit):
Convertible preferred stock, $.001
par value; authorized shares--
30,000,000:
Series A preferred stock,
14,000,000 shares designated
Issued and outstanding shares--
14,000,000 shares in 1999;
aggregate liquidation preference
of $14,700,000. (No shares
issued and outstanding pro
forma)........................... -- 14,000 --
Series B preferred stock,
12,000,000 shares designated
Issued and outstanding shares--
11,200,000 shares in 1999;
aggregate liquidation preference
of $35,000,000. (No shares
issued and outstanding pro
forma)........................... -- 11,200 --
Series C preferred stock,
4,000,000 shares designated
Issued and outstanding shares--no
shares in 1999 (no shares issued
and outstanding pro forma)....... -- -- --
Common stock, $.001 par value;
Authorized shares--40,000,000:
Issued and outstanding shares--
4,000,000 shares in 1998 and
1,757,882 shares in 1999,
respectively. (29,480,132 shares
issued and outstanding pro
forma)........................... 4,000 1,758 29,480
Additional paid-in capital........ 396,000 53,076,005 83,073,483
Deferred stock-based
compensation..................... -- (2,839,609) (2,839,609)
Accumulated deficit............... (1,935,416) (38,027,855) (38,027,855)
----------- ------------ ------------
Total stockholders' equity
(deficit).......................... (1,535,416) 12,235,499 42,235,499
----------- ------------ ------------
$ 1,858,934 $ 22,793,062 $ 62,793,062
=========== ============ ============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
MERCATA, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
September 23, 1998
(inception) to Year Ended
December 31, 1998 December 31, 1999
------------------ -----------------
<S> <C> <C>
Net revenues.............................. $ -- $ 6,308,444
Cost of revenues.......................... -- 5,775,545
----------- ------------
Gross profit............................ -- 532,899
Operating expenses:
Sales and marketing..................... 498,084 29,683,461
Technology and development.............. 664,216 3,914,898
General and administrative.............. 760,817 3,493,809
----------- ------------
Total operating expenses.............. 1,923,117 37,092,168
----------- ------------
Operating loss............................ (1,923,117) (36,559,269)
Interest income (expense), net............ (12,299) 466,830
----------- ------------
Net loss.................................. $(1,935,416) $(36,092,439)
=========== ============
Basic and diluted net loss per common
share.................................... $ (0.48) $ (21.33)
=========== ============
Weighted average shares outstanding used
to compute basic and diluted net loss per
common share............................. 4,000,000 1,692,382
=========== ============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
MERCATA, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Convertible Preferred Stock
-------------------------------------
Series A Series B Common Stock Additional Deferred Stockholders'
------------------ ------------------ ------------------ Paid-in Stock-based Accumulated Equity
Shares Amount Shares Amount Shares Amount Capital Compensation Deficit (Deficit)
---------- ------- ---------- ------- ---------- ------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
September 23,
1998
(inception)...... -- $ -- -- $ -- -- $ -- $ -- $ -- $ -- $ --
Issuance of
common stock.... 4,000,000 4,000 396,000 400,000
Net loss........ (1,935,416) (1,935,416)
---------- ------- ---------- ------- ---------- ------ ----------- ----------- ------------ -----------
Balances at
December 31,
1998............. -- -- -- -- 4,000,000 4,000 396,000 -- (1,935,416) (1,535,416)
Issuance of
Series A
preferred stock
for cash........ 10,285,715 10,286 10,789,714 10,800,000
Issuance of
Series A
preferred stock
in exchange for
common stock.... 285,714 286 (3,000,000) (3,000) 2,714 --
Issuance of
Series A
preferred stock
in exchange for
notes payable... 3,428,571 3,428 3,596,572 3,600,000
Issuance of
Series B
preferred stock
for cash, net of
offering costs
of $60,486...... 10,433,333 10,433 32,533,246 32,543,679
Issuance of
Series B
preferred stock
in exchange for
notes payable,
net of offering
costs of
$4,454.......... 766,667 767 2,390,614 2,391,381
Deferred stock-
based
compensation
related to stock
options......... 3,292,115 (3,292,115) --
Amortization of
deferred stock-
based
compensation.... 452,506 452,506
Stock options
exercised....... 757,882 758 75,030 75,788
Net loss........ (36,092,439) (36,092,439)
---------- ------- ---------- ------- ---------- ------ ----------- ----------- ------------ -----------
Balances at
December 31,
1999............. 14,000,000 $14,000 11,200,000 $11,200 1,757,882 $1,758 $53,076,005 $(2,839,609) $(38,027,855) $12,235,499
========== ======= ========== ======= ========== ====== =========== =========== ============ ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
MERCATA, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
September 23, 1998
(inception) to Year Ended
December 31, 1998 December 31, 1999
------------------ -----------------
<S> <C> <C>
Operating activities:
Net loss................................. $(1,935,416) $(36,092,439)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization........... 12,438 822,220
Amortization of stock-based
compensation........................... -- 452,506
Changes in operating assets and
liabilities:
Accounts receivable.................... -- (403,085)
Inventories............................ -- (1,511,711)
Prepaid marketing expenses............. -- (2,843,491)
Other prepaid expenses and current
assets................................ (163,131) (71,563)
Deposits and other assets.............. (38,431) (78,533)
Accounts payable....................... 602,455 8,259,478
Accrued compensation................... 169,779 319,913
Accrued marketing expenses............. -- 629,177
Other current liabilities.............. 222,116 354,645
----------- ------------
Net cash used in operating
activities........................... (1,130,190) (30,162,883)
----------- ------------
Investing activities--purchase of property
and equipment............................ (856,567) (3,787,168)
----------- ------------
Financing activities:
Proceeds from issuance of common stock... 400,000 --
Proceeds from exercise of stock options.. -- 75,788
Proceeds from issuance of Series A
preferred stock......................... -- 10,800,000
Proceeds from issuance of Series B
preferred stock, net of offering costs.. -- 32,539,225
Proceeds from issuance of notes payable.. 2,400,000 5,595,835
Principal payments of notes payable...... -- (2,000,000)
----------- ------------
Net cash provided by financing
activities........................... 2,800,000 47,010,848
----------- ------------
Net increase in cash and cash
equivalents.............................. 813,243 13,060,797
Cash and cash equivalents at beginning of
period................................... -- 813,243
----------- ------------
Cash and cash equivalents at end of
period................................... $ 813,243 $ 13,874,040
=========== ============
Supplemental disclosure of cash flow
information:
Cash paid for interest.................. $ -- $ 61,698
Supplemental disclosure of non-cash
financing and investing activities:
Exchange of common stock for Series A
preferred stock......................... $ -- $ 300,000
Exchange of notes payable for Series A
preferred stock......................... $ -- $ 3,600,000
Conversion of notes payable to Series B
preferred stock......................... $ -- $ 2,395,835
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
MERCATA, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Business and Summary of Significant Accounting Policies
(a) Description of Business
Mercata, Inc. (Company) is a provider of Internet-based demand aggregation
services that empower buyers with common purchasing interests to achieve
discounts on high-quality, brand-name products and services. On the Company's
Mercata.com Web site, buyers can participate in group buying through PowerBuy
group purchases and can also purchase products at fixed prices. For online
businesses, the Company also offers an e-commerce solution, known as the We-
Commerce Network, that enables merchants and portal, community and content Web
sites to offer merchandise for sale using its proprietary business methods and
technology.
The Company was incorporated on September 23, 1998 and launched its Web site
and commenced commercial operations in May 1999. The Company was previously
considered a development stage company. The Company has incurred significant
operating losses since its inception and has limited working capital. The
Company has financed its operations to date primarily through the issuance of
equity securities. Further development and establishment of the Company's
business will require additional equity financing. The Company believes that
equity financing can be obtained from existing or new investors. However, there
can be no assurance that the Company will be able to obtain such equity
financing on acceptable terms, if at all.
(b) 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, liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and reported amounts of net sales and expenses during the reporting
period. Actual results could differ from those estimates.
(c) Cash and Cash Equivalents
Cash equivalents are carried at cost plus accrued interest, which
approximates fair value. For purposes of the statements of cash flows, the
Company considers all highly liquid investments with maturities at the date of
purchase of three months or less to be cash equivalents.
(d) Accounts Receivable
The Company generally does not extend credit to customers, except through
third-party issued credit cards. The Company's agreements with third-party
credit card companies provide for the electronic processing of credit approvals
and the electronic submission of transactions. The Company does not bill
customers' credit cards until the products ordered by the customers have been
shipped. The Company records these amounts as accounts receivable upon the
electronic submission of the transaction to the appropriate processing agency,
and as collections upon remittance of the funds to the Company's bank account.
(e) Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
(f) Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation on property and equipment is calculated on the
straight-line method over the estimated useful lives of the assets, which range
from three to five years. Leasehold improvements are amortized straight line
over the shorter of the lease term or estimated useful life of the asset.
F-7
<PAGE>
MERCATA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
In accordance with the provisions of the American Institute of Certified
Public Accountants Statement of Position 98-1 (SOP 98-1), the Company
capitalizes certain costs related to development of internal-use software for
its enterprise reporting and transaction processing systems. Total capitalized
costs to acquire or develop internal-use software was $650,745 and $2,630,238
for the period ended December 31, 1998 and the year ended December 31, 1999,
respectively. Capitalized costs consisted primarily of external direct costs
for software licenses and services, and payroll and payroll-related costs for
employees who were directly involved in such development projects.
(g) Impairment of Long-lived Assets
The Company accounts for long-lived assets in accordance with the provisions
of Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to undiscounted future net cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. To
date, no such impairment has been indicated.
(h) Revenue Recognition
The Company recognizes revenues from product sales at the time the title to
the product passes from the Company to the customer. Revenues are recorded net
of promotional discounts and allowance for sales returns. The Company provides
an estimated allowance for sales returns in the period of sale that is based on
industry and historical experience. For all product sales transactions with its
customers, the Company takes title to all products sold, bears credit risk and
bears inventory risk for returned products that are not successfully returned
to suppliers, although these risks are mitigated through arrangements with
credit card issuers, shippers and suppliers.
(i) Cost of Revenues
Cost of revenues consists primarily of the cost of merchandise sold to
customers, inbound freight, handling charges at our third-party warehouse and
expedited shipping costs, net of expedited shipping revenues. Cost of revenues
excludes costs of merchandise associated with promotional credits used for new
customer purchases, such as Mercata$ store credits. These costs are included in
sales and marketing expenses.
(j) Sales and Marketing Expenses
Sales and marketing expenses consist primarily of advertising, public
relations and third-party fulfillment fees, as well as payroll and related
expenses for personnel engaged in marketing, sales and related activities.
These expenses also include promotional expenditures, such as free ground
shipping and the cost of merchandise associated with promotional credits used
for new customer purchases.
Advertising costs are expensed as incurred and totaled $0 and approximately
$21,460,000 for the periods ended December 31, 1998 and 1999, respectively.
Prepaid marketing expenses
F-8
<PAGE>
MERCATA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
represent media advertisements purchased by the Company but not yet delivered
by advertisers at the balance sheet date. The costs of merchandise associated
with promotional discount programs used for new customer purchases are included
in sales and marketing expense and totaled approximately $2.4 million for the
year ended December 31, 1999.
(k) Technology and Development Expenses
Technology and development expenses consist primarily of payroll and related
expenses for development, Web site design and network operations, as well as
systems infrastructure costs.
(l) Stock-based Compensation
The Company accounts for its stock option plans for employees in accordance
with the provisions of Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. As
such, compensation expense related to fixed employee stock options is recorded
only if, on the date of grant, the fair value of the underlying stock exceeded
the exercise price. The Company has adopted the disclosure-only requirements of
SFAS No. 123, "Accounting for Stock-Based Compensation," which allows entities
to continue to apply the provisions of APB No. 25 for transactions with
employees and provide pro-forma net income (loss) and pro forma earnings per
share disclosures as if the fair value based method of accounting in
SFAS No. 123 had been applied to employee stock option grants.
(m) Income Taxes
The Company computes income taxes under the asset and liability method.
Under this method, deferred tax assets and liabilities are determined based on
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax
credit carryforwards and are measured using the enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rate is recognized in income in the period that
includes the enactment date.
(n) Fair Value of Financial Instruments
The Company's financial instruments include cash and cash equivalents,
accounts receivable, notes payable, accounts payable and accrued expenses. The
carrying value of these financial instruments approximates their fair values.
(o) Net Loss per Share
Basic net loss per share is computed on the basis of the weighted-average
number of common shares outstanding for all periods presented. Diluted net loss
per share is computed on the basis of the weighted-average number of common
shares plus the dilutive potential common shares outstanding. Securities that
could potentially dilute basic income per share consist of outstanding stock
options and convertible preferred stock. As the Company has incurred net losses
in each of the periods presented, basic and diluted net loss per share are the
same. There were no dilutive potential securities outstanding in 1998. Dilutive
potential securities outstanding in 1999 that were not included in the
computation of diluted earnings per share included preferred stock convertible
into 25.2 million common shares and options to purchase approximately 3.7
million common shares at a weighted average exercise price of $0.18 per share.
F-9
<PAGE>
MERCATA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(p) Comprehensive Income
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income,"
which establishes standards for the reporting and presentation of comprehensive
income and its components in a full set of financial statements. Comprehensive
income is defined as the change in net assets of a business enterprise during a
period from transactions generated from nonowner sources. It includes all
changes in equity during a period except those resulting from investments by
owners and distributions to owners. There were no significant differences
between the Company's net loss and comprehensive loss in the periods presented.
(q) Segment and Geographic Information
The Company identifies its operating segments based on business activities
and management responsibility. The Company operates in a single business
segment across domestic markets selling consumer products online. Substantially
all of the Company's assets and operations are in the United States.
(r) Concentrations of Risk
The Company purchases a majority of its products from seven distributors.
The Company does not have long-term contracts or arrangements with these
distributors and alternative sources of supply exist should changes be
necessary. However, loss of any of these distributors could have an adverse
affect on the Company's operations until alternative sources of supply are
secured. Revenue on merchandise fulfilled by these distributors approximated
67% of net revenues for the year ended December 31, 1999.
The Company uses a third-party fulfillment organization for the warehousing
of its inventory and the shipping, packaging and handling of products purchased
by customers. The Company's reliance on an external source of warehousing and
order fulfillment can be shifted should such a change be necessary. However, if
the fulfillment house becomes unable to provide services, the Company's
operations could be disrupted until an alternative source is secured. Revenue
on merchandise fulfilled by this fulfillment organization approximated 33% of
net revenues for the year ended December 31, 1999.
(s) New Accounting Pronouncements
The Financial Accounting Standards Board issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities" in June 1998. SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. If certain conditions are met, a derivative may be specifically
designated as a hedge. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and the resulting
designation. SFAS No. 133, as amended by SFAS No. 137, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. The adoption of
this statement is not expected to have a material impact on the Company's
financial statements.
In December 1999, the United States Securities and Exchange Commission (SEC)
released Staff Accounting Bulletin (SAB) No. 101 "Revenue Recognition in
Financial Statements," which must be applied in the Company's first fiscal
quarter of 2000. SAB No. 101 provides guidance on revenue recognition and the
SEC staff's views on the application of accounting principles to selected
revenue
F-10
<PAGE>
MERCATA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
recognition issues. The Company does not expect that the adoption of SAB No.
101 will have a material effect on its financial statements.
In October 1999, the SEC identified a list of issues that have arisen in
Internet businesses which the SEC believes should be addressed by the Emerging
Issues Task Force (EITF) of the Financial Accounting Standards Board or other
standard setting bodies. While the EITF is in the process of addressing such
issues, many of the identified issues have not yet been resolved. Future
resolution of all of the issues identified by the SEC may affect the Company's
financial statements. The Company is not able to determine the impact of on its
financial statements, if any, of such future rule making.
(t) Initial Public Offering and Unaudited Pro Forma Information
In February 2000, the board of directors authorized the filing of a
registration statement with the SEC that would permit the Company to sell
shares of the Company's common stock in connection with a proposed initial
public offering (IPO). If the offering is consummated under the terms presently
anticipated, all of the then outstanding shares of the Company's convertible
preferred stock will automatically convert into shares of common stock on a
one-for-one basis upon closing of the proposed IPO. The pro forma information
on the accompanying balance sheet as of December 31, 1999 reflects the issuance
of Series C preferred stock and a convertible note payable (see note 6), and
the conversion of all convertible preferred stock outstanding as of March 1,
2000 as if these transactions had occurred on December 31, 1999.
Pro forma basic and diluted loss per share and pro forma weighted average
common shares used in the calculation of pro forma basic and diluted loss per
share for the year ended 1999 are $(2.25) and 16,044,345, respectively,
assuming conversion at issuance of the convertible preferred stock issued in
1999.
(2) Cash and Cash Equivalents
A summary of cash and cash equivalents follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
---------- -----------
<S> <C> <C>
Cash and cash equivalents:
Cash.............................................. $ 813,243 $ 21,646
Money market funds................................ -- 13,525,200
Certificate of deposit............................ -- 327,194
---------- -----------
$ 813,243 $13,874,040
========== ===========
</TABLE>
F-11
<PAGE>
MERCATA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(3) Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
--------- -----------
<S> <C> <C>
Computer equipment................................... $ 137,859 $ 1,040,779
Computer software.................................... 650,745 3,280,983
Office equipment and furniture....................... 66,463 306,788
Leasehold improvements............................... 1,500 15,185
--------- -----------
856,567 4,643,735
Less--accumulated depreciation and amortization...... (12,438) (834,658)
--------- -----------
$ 844,129 $ 3,809,077
========= ===========
</TABLE>
For the periods ended December 31, 1998 and 1999, depreciation and
amortization expense was $12,438 and $822,220, respectively.
(4) Employee Benefit Plans
The Company has a savings plan (the 401(k) Plan), which qualifies as a
defined contribution arrangement under Section 401(a), 401(k) and 501(a) of the
Internal Revenue Code. Under the 401(k) Plan, participating employees may defer
a percentage (not to exceed 15%) of their eligible pretax earnings up to the
Internal Revenue Code's annual contribution limit. All employees on the payroll
of the Company are eligible to participate in the 401(k) Plan. The Company will
determine its contributions, if any, based on its current profits or retained
earnings; however, no contributions have been made since the inception of the
401(k) Plan.
(5) Notes Payable to Stockholders
In 1998, the Company issued notes payable to a stockholder totaling
$2,400,000. In 1999, the Company issued additional notes payable to a
stockholder totaling $1,200,000. The notes were payable on demand anytime on or
before December 31, 1999 with annual interest accruing at 6%. These notes,
totaling $3,600,000 were exchanged for 3,428,571 shares of Series A preferred
stock in March 1999. In September 1999, the Company issued notes payable to a
stockholder totaling $2,395,835. These notes were convertible into Series B
preferred stock and were converted into 766,667 shares of Series B preferred
stock in October 1999.
In September 1999, the Company issued a promissory note payable to a
stockholder that enabled the Company to borrow up to $10,000,000. Disbursements
under the note payable bear interest at the quoted prime rate (8.5% at December
31, 1999) and are payable on demand. In September 1999, the Company borrowed
$2,000,000 under this note payable. The principal, plus accrued interest of
$9,945 was repaid in October 1999. As of December 31, 1999, the Company may
borrow up to an additional $8,000,000 under this note. The Company canceled
this note in March 2000.
(6) Stockholders' Equity
(a) Incorporation and Authorized Capital
In September 1998, the Company was incorporated in the state of Delaware
with authorized capital of 10,000,000 shares of $.001 par value common stock.
In March 1999, the Company
F-12
<PAGE>
MERCATA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
increased its authorized capital to 21,000,000 shares of common stock and
14,000,000 shares of $.001 par value preferred stock. In September 1999, the
Company increased its authorized common stock to 40,000,000 shares and
increased its authorized preferred stock to 30,000,000 shares.
(b) Convertible Preferred Stock
In March 1999, the Company entered into a Stock Purchase Agreement with a
common stockholder under which the Company agreed to issue and sell 14,000,000
shares of Series A preferred stock for a purchase price of $1.05 per share in
exchange for cash of $10,800,000, promissory notes of $3,600,000, and 3,000,000
shares of outstanding common stock.
In September and October 1999, the Company issued 10,433,333 shares of
Series B preferred stock in a private placement offering in exchange for gross
cash proceeds of $32,604,165. In September 1999, two promissory notes were
issued in the amount of $2,395,835 in connection with the Series B financing.
In October 1999, the notes were converted into 766,667 shares of preferred
Series B stock.
In March 2000, the Company designated 4,000,000 shares of preferred stock as
Series C preferred stock and then issued 2,522,250 shares of Series C preferred
stock in a private placement offering for gross cash proceeds of $30,000,000.
In conjunction with the issuance of Series C preferred stock, the Company
issued a $10,000,000 note payable. This note automatically converts into
840,750 shares of Series C preferred stock upon the occurrence of certain
events. Should the events not occur, the principal amount of the notes plus
accrued interest at 7% become due in May 2000.
Each share of Series A, Series B and Series C preferred stock is convertible
into one share of common stock at the option of the holder, subject to certain
antidilutive adjustments, in accordance with the conversion formula provided in
the Company's certificate of incorporation (currently on a 1:1 ratio).
Outstanding preferred shares automatically convert into common stock upon the
closing of an initial public offering of the Company's common stock in which
gross proceeds exceed $25.0 million with a per share price of not less than
$17.84 per share. Holders of each share of preferred stock are entitled to the
number of votes per share that would be equivalent to the number of shares of
common stock into which a share of preferred stock is convertible and are
entitled to dividends if and when declared by the board of directors. No
dividends have been declared. In the event of any consolidation, merger, or
liquidation, the holders of the Series A, Series B and Series C preferred stock
shall be entitled to receive $1.05, $3.125 and $11.89, respectively, per share
of preferred stock plus cumulative dividends, if and when declared, at the
annual rate of 8%. The Company granted the preferred stockholders certain
registration rights and also agreed not to carry out certain actions without
prior approval of the holders of not less than two-thirds of the outstanding
preferred shares, voting together as a single class.
(c) Common Stock
In October 1998, the Company issued to its initial investor 4,000,000 shares
of common stock at a price of $0.10 per share for an aggregate purchase price
of $400,000. In March 1999, in connection with the issuance of Series A
preferred stock, the Company's initial investor exchanged 3,000,000 shares of
common stock for 285,714 shares of Series A preferred stock.
The Company and its common and preferred Series A, Series B and Series C
stockholders entered into an agreement, which, among other issues, addresses
election of directors, restrictions
F-13
<PAGE>
MERCATA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
on transfer of equity securities by stockholders, sales of new securities by
the Company, and covenants related to transfer of shares of the Company's
stock. All provisions of the agreement, with the exception of covenants related
to transfer of shares, expire upon the closing of an initial public offering.
(d) Equity Incentive Plan
In February 1999, the Company adopted the 1999 Equity Incentive Plan (the
1999 Plan) under which an aggregate of 5,000,000 shares of common stock was
reserved for grants to employees, directors, and independent contractors. Stock
awards may be designated as incentive stock options, nonstatutory stock
options, stock appreciation rights, stock bonuses, and rights to acquire
restricted stock. Incentive stock options may be granted only to employees. In
September 1999, the Company authorized an additional 2,400,000 shares of common
stock increasing the total common shares reserved under the 1999 Plan to
7,400,000.
The Board of Directors determines the option price for stock options granted
under the 1999 Plan. Options expire ten years from the date of grant and
generally vest annually over a four-year period. Certain initial options
granted in 1999 were granted with a portion of the shares vesting immediately
on the date of grant. Additionally, the 1999 Plan allows certain optionholders
to exercise unvested options in exchange for stock subject to repurchase rights
of the Company. These repurchase rights would lapse over the original vesting
schedule of the options. As of December 31, 1999, no unvested options had been
exercised under these provisions.
The following table summarizes the Company's stock option activity:
<TABLE>
<CAPTION>
Outstanding
Options
-------------------
Weighted
Shares Average
Available Number of Exercise
for Grant Shares Price
---------- --------- --------
<S> <C> <C> <C>
Balances at December 31, 1998................ -- --
1999 Plan introduction..................... 5,000,000 --
Plan amendment............................. 2,400,000 --
Options granted:
Exercise Price equal to fair value........ (3,797,300) 3,797,300 $0.10
Exercise Price less than value............ (750,300) 750,300 $0.51
Options exercised.......................... -- (757,882) $0.10
Options canceled........................... 99,105 (99,105) $0.10
---------- --------- -----
Balances at December 31, 1999................ 2,951,505 3,690,613 $0.18
========== ========= =====
</TABLE>
The following table summarizes information about options outstanding and
exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Exercisable
------------------------------ ----------------
Weighted
Average Weighted Weighted
Remaining Average Number Average
Number Of Contractual Exercise Of Exercise
Exercise Price Shares Life Price Shares Price
-------------- --------- ----------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
$0.10........................ 3,331,013 9.18 $0.10 511,909 $0.10
$0.65........................ 50,100 9.75 $0.65 -- --
$1.00........................ 309,500 9.90 $1.00 -- --
--------- ---- ----- ------- -----
$.10 to $1.00................ 3,690,613 9.25 $0.18 511,909 $0.10
========= ==== ===== ======= =====
</TABLE>
F-14
<PAGE>
MERCATA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(e) Stock-based Compensation
The Company applies APB Opinion No. 25 in accounting for options granted to
employees under its 1999 Plan. In 1999, the Company issued certain options to
employees under the 1999 Plan with exercise prices less than the deemed fair
value of the underlying common stock for financial reporting purposes on the
date of grant and recorded an aggregate of $3,292,115 as deferred stock
compensation. This deferred stock-based compensation is being recognized as
compensation expense over the options' vesting period. The Company recognized
compensation expense of $452,506 associated with these options during the year
ended December 31, 1999, of which $284,053, $114,776, and $53,677 is reported
on the accompanying statement of operations in selling and marketing,
technology and development, and general and administrative expense,
respectively.
Under SFAS 123, the per share weighted-average fair value on the date of
grant of stock options granted to employees during 1999 was $0.03 and $4.59,
respectively, for options with the exercise prices equal to the deemed fair
value of common stock and exercise prices less than the deemed fair value of
common stock. The per share weighted average fair value was calculated using
the minimum value method with the following weighted average assumptions:
expected life of 4 years, no dividend yield and a risk free interest rate of
5.5%. If the Company had elected to recognize compensation cost based upon the
per share weighted average fair value of the employee options, net loss and net
loss per common share would have been as follows:
<TABLE>
<CAPTION>
Period from
September 23,
1998
(inception)
to December
31, 1998 1999
------------- -----------
<S> <C> <C>
As reported:
Net loss........................................ $1,935,416 $36,092,439
Basic and diluted net loss per common share..... $ 0.48 $ 21.33
Pro forma:
Net loss........................................ $1,935,416 $36,131,355
Basic and diluted net loss per common share..... $ 0.48 $ 21.35
</TABLE>
(f) Approval of New Employee Stock Plans
In March of 2000, the Board of Directors adopted the 2000 Equity Incentive
Plan (2000 Plan). The 2000 Plan serves as the successor program to the
Company's 1999 Plan. A total of 4,500,000 shares of common stock have been
reserved for issuance under the 2000 Plan. The 2000 Plan will become effective
upon completion of the Company's IPO, and no further option grants will be made
under the 1999 Plan.
In February of 2000, the Board of Directors adopted the 2000 Employee Stock
Purchase Plan (ESPP). The ESPP allows eligible employees to purchase shares of
common stock, at semi-annual intervals, with their accumulated payroll
deductions. The Company has initially reserved 250,000 shares for purchase
under this plan.
F-15
<PAGE>
MERCATA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(7) Commitments
The Company leases office space from a shareholder under a month-to-month
operating lease. For the period from September 23 (inception) until December
31, 1998 and the year ended December 31, 1999, rent expense on this lease was
$42,887 and $307,492, respectively.
The Company also leases property and equipment under noncancelable operating
leases. Total rent expense under these operating lease agreements for the
periods ended December 31, 1998 and 1999 was $0 and $188,220, respectively.
Future minimum lease payments as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
------------------------
<S> <C>
2000............................................................. $ 826,332
2001............................................................. 638,112
----------
Total minimum lease payments..................................... $1,464,444
==========
</TABLE>
(8) Net Interest Income (Expense)
Net interest income (expense) consists of the following:
<TABLE>
<CAPTION>
Period from
September 23,
1998
(inception)
to December
31, 1998 1999
------------- --------
<S> <C> <C>
Interest income...................................... $ 6,025 $510,941
Interest expense..................................... (18,324) (44,111)
-------- --------
Net interest income (expense)........................ $(12,299) $466,830
======== ========
</TABLE>
F-16
<PAGE>
MERCATA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(9) Income Taxes
The Company did not provide any current or deferred United States federal
income tax provision or benefit for any of the periods presented because it has
experienced operating losses since its inception. The Company provided a full
valuation allowance on net deferred tax assets, consisting primarily of net
operating loss carryforwards and research and development credit carryforwards,
because of the uncertainty regarding their realizability.
As of December 31, 1998 and December 31, 1999, the Company had approximately
$12,000 and $35.8 million, respectively, of federal tax net operating loss
carryforwards, which begin to expire in 2018. The Company's utilization of its
net operating loss carryforwards may be limited pursuant to the Tax Reform Act
of 1986, due to cumulative changes in ownership in excess of 50%, as defined.
Deferred tax assets reflect the differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes together with the tax affect of loss carryforwards and
tax credits. Significant items giving rise to deferred tax assets and deferred
tax liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
--------- ------------
<S> <C> <C>
Deferred tax assets:
Nondeductible accruals............................ $ 13,000 $ 98,000
Net operating loss carryforwards.................. 4,000 12,173,000
Start-up costs.................................... 636,000 509,000
Other............................................. 5,000 183,000
--------- ------------
Total deferred tax assets....................... 658,000 12,963,000
Valuation allowance................................. (658,000) (12,771,000)
Deferred tax liabilities--depreciation.............. -- (192,000)
--------- ------------
Total net deferred tax assets....................... $ -- $ --
========= ============
</TABLE>
(10) Related Party Transactions
In 1999, the Company contracted for credit card processing, fraud screening
and other services with a company in which the majority shareholder of the
Company has a minority ownership interest. Total costs for these services was
approximately $30,000 in 1999.
In 1999, the Company entered into advertising and promotion arrangements
with various entities affiliated through common ownership. Under these
agreements the Company incurred advertising and promotional costs of
approximately $484,000 during 1999. At December 31, 1999, prepaid marketing
expenses, accrued marketing expenses, and accounts payable include
approximately $4,000, $86,000, and $90,000, respectively, related to these
agreements.
F-17
<PAGE>
BACK INSIDE COVER
Top: Across the top of the page are the words "How a PowerBuy (TM) group
purchase works."
Middle: Consists of four frames listing the steps of a PowerBuy group purchase
and containing an italicized description following immediately below each step.
Each frame is accompanied by a picture of a Web site feature demonstrating the
step. The text and pictures are:
"1. Choose your product
Many products are available as PowerBuy group purchases every day. Each is
identified with the current PowerBuy price and the time remaining for your to
take advantage of the deal."
This step is accompanied by a picture of two Audiovox 14-Channel Mini 2-Way
Radios as typically presented during a PowerBuy on Mercata.com, including
pricing information.
"2. Make and offer
When you find the product you want, join the PowerBuy group purchase by making
an offer at or below the current PowerBuy price. With Mercata, you decide the
price you want to pay."
This step is accompanied by a picture of screen detail reflecting the
description of the 2-Way radios and the format in which a PowerBuy participant
enters an offer to purchase a product during a PowerBuy group purchase.
"3. Tell your friends
To encourage others to join, you can e-mail friends and family about the
PowerBuy. Remember, the more people who make offers to buy, the lower the price
can drop for everyone."
This step is accompanied by the "Share the Power (TM)" logo and a graphic of an
envelope followed by the words "E-mail this PowerBuy"
"4. Watch the price drop
At the end of the PowerBuy, everyone with an offer at or above the final price
gets the lowest price achieved by the group."
This step is accompanied by a picture of the a PowerBuy update screen featuring
the product description, the time remaining in the PowerBuy, the participant's
offered price, how many Mercata$ store credits were used, the current PowerBuy
price and the price drop since the offer was made.
Bottom: Mercata (TM) logo is at the center of the page.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdiction where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary...................................................... 3
Risk Factors............................................................ 6
Note Regarding Forward-Looking Statements............................... 19
Use of Proceeds......................................................... 19
Dividend Policy......................................................... 19
Capitalization.......................................................... 20
Dilution................................................................ 21
Selected Financial Information.......................................... 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 23
Business................................................................ 30
Management.............................................................. 41
Related Party Transactions.............................................. 52
Principal Stockholders.................................................. 56
Description of Capital Stock............................................ 58
Shares Eligible for Future Sale......................................... 61
Underwriting............................................................ 63
Legal Matters........................................................... 65
Experts................................................................. 65
Where You Can Find Additional Information............................... 65
Index to Consolidated Financial Statements.............................. F-1
</TABLE>
----------------
Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether
or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a
prospectus when acting as an underwriter with respect to an unsold allotment
or subscription.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares
Mercata, Inc.
Common Stock
----------------
[LOGO OF MERCATA, INC.]
----------------
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
Robertson Stephens
Representatives of the Underwriters
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Mercata in connection with
the sale of common stock being registered. All amounts are estimates except the
SEC registration and the NASD filing fees.
<TABLE>
<S> <C>
SEC Registration fee.............................................. $ 26,400
NASD fee.......................................................... 10,500
Nasdaq National Market initial listing fee........................ 95,000
Printing and engraving............................................ 160,000
Legal fees and expenses of Mercata................................ 250,000
Accounting fees and expenses...................................... 250,000
Blue sky fees and expenses........................................ 5,000
Transfer agent fees............................................... 10,000
Miscellaneous..................................................... 93,100
--------
Total........................................................... $900,000
========
</TABLE>
ITEM 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act. Our
Certificate of Incorporation provides for mandatory indemnification of our
directors to the fullest extent of the Delaware General Corporation Law. In
addition, our Bylaws provide for mandatory indemnification of our directors and
officers and permissible indemnification of employees and other agents to the
maximum extent permitted by the Delaware General Corporation Law. These
provisions, however, do not eliminate the directors' fiduciary duty to Mercata.
In addition, each director will continue to be subject to liability for breach
of the director's duty of loyalty to Mercata, for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law.
Upon the closing of this offering, we intend to enter into certain
indemnification agreements with our directors and certain of our officers, the
form of which is attached as Exhibit 10.1 to this registration statement and
incorporated herein by reference. These indemnification agreements will provide
our directors and certain of our officers with indemnification to the maximum
extent permitted by the Delaware General Corporation Law.
The underwriting agreement (Exhibit 1.1 hereto) provides for indemnification
by the underwriters of Mercata and our executive officers and directors, and by
Mercata of the underwriters, for certain liabilities, including liabilities
arising under the Securities Act, in connection with matters specifically
provided in writing by the underwriters for inclusion in this registration
statement.
ITEM 15. Recent Sales of Unregistered Securities
During the past three years, the Registrant has issued unregistered
securities to a limited number of persons as described below:
(a) From February 1, 1999, to March 1 , 2000, we granted stock options
to purchase an aggregate of 6,248,500 shares of common stock at exercise
prices ranging from $0.10 to $1.00
II-1
<PAGE>
per share to employees, consultants, directors and other service providers
pursuant to our 1999 Equity Incentive Plan. Of these options, options for
an aggregate of 3,175,701 shares have been exercised, options for an
aggregate of 1,091,918 shares have vested, options for an aggregate of
512,705 shares have been cancelled and options for an aggregate of
2,560,094 shares remain outstanding as of March 1, 2000.
(b) On October 7, 1998, we issued 4,000,000 shares of our common stock
to Paul G. Allen, the sole stockholder of Vulcan Ventures Incorporated, at
a price per share of $0.10, for an aggregate purchase price of $400,000.
Mr. Allen subsequently assigned the shares to Vulcan Ventures in March
1999.
(c) In March 1999, we issued an aggregate of 14,000,000 shares of Series
A preferred stock to Vulcan Ventures at a price per share of $1.05, for an
aggregate purchase price of $14,700,000. In exchange for the Series A
preferred stock, Vulcan Ventures assigned to us 3,000,000 shares of our
common stock (worth an aggregate of $300,000), canceled $3,600,000 in
promissory notes and paid us $10,800,000 in cash.
(d) From September 1999 to October 1999, we sold an aggregate of
11,200,000 shares of Series B preferred stock at a price per share of
$3.125, for an aggregate purchase price of $35,000,000, to a group of
private investors.
(e) In January 2000, we issued an aggregate of 30,000 shares of common
stock to Amir Alon and Harmony Management, Inc., as partial consideration
for our purchase of certain proprietary technology.
(f) In March 2000, we issued an aggregate of 2,522,250 shares of Series
C preferred stock at a price per share of $11.89, for an aggregate purchase
price of $30,000,000, to a group of private investors.
(g) In March 2000, we issued a $10.0 million note payable to Waelinvest,
S.A which automatically will convert into 840,750 shares of Series C
preferred stock upon expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
None of the transactions set forth in this Item 15 involved any
underwriters, underwriting discounts or commissions, or any public offering.
The issuances described in Items 15(b), (c), (d), (e) and (f) were deemed to be
exempt from registration under the Securities Act in reliance upon Rule 506 of
Regulation D thereunder as transactions by an issuer not involving any public
offering. The issuances described in Item 15(a) were exempt from registration
pursuant to Rule 701 promulgated under the Act. The issuance described in Item
15(g) is exempt from registration under the Securities Act in reliance on
Section 3(a)(9) of the Securities Act. The recipients of securities in each
such transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends where affixed to the securities
issued in such transactions. All recipients had adequate access to information
about us, through their relationships with us.
II-2
<PAGE>
ITEM 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of the Registrant
3.2 Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be effective upon the closing of the offering made
pursuant to this Registration Statement
3.3 Bylaws of the Registrant
3.4 Form of Bylaws of the Registrant, to be effective upon the closing of
the offering made pursuant to this Registration Statement
4.1* Specimen Common Stock Certificate
5.1* Opinion of Cooley Godward LLP
10.1 Form of Indemnification Agreement between the Registrant and each of its
directors and certain of its officers
10.2 2000 Equity Incentive Plan
10.3 1999 Equity Incentive Plan
10.4 2000 Employee Stock Purchase Plan
10.5 Sublease Agreement, dated February 29, 2000, between Registrant and
Vulcan Northwest, Inc.
10.6 Sublease Agreement, dated December 3, 1999, between Registrant and GMAC
Mortgage Corporation
10.7 Lease Agreement, dated February 17, 2000, between Registrant and Bentall
Newport Centre L.L.C.
10.8 Subscription Agreement, dated October 7, 1998, between Registrant and
Paul G. Allen
10.9 Form of Promissory Note, executed by Registrant on October 13, 1998,
December 22, 1998 and February 1, 1999, in favor of Paul G. Allen
10.10 Common Stock and Promissory Note Assignment and Transfer Instructions,
dated March 17, 1999, between Registrant, Paul G. Allen and Vulcan
Ventures Incorporated
10.11 Series A Preferred Stock Purchase Agreement, dated March 17, 1999,
between Registrant and Vulcan Ventures Incorporated
10.12 Promissory Note, dated September 10, 1999, executed by Registrant in
favor of Vulcan Ventures Incorporated
10.13 Series B Preferred Stock Purchase Agreement, dated September 30, 1999,
between Registrant and the purchasers of Registrant's Series B
Preferred Stock
10.14 Form of Promissory Note, dated September 30, 1999, executed by
Registrant in favor of Highland Capital Partners IV Limited Partnership
and Highland Entrepreneurs' Fund IV Limited Partnership
10.15 Series C Preferred Stock Purchase Agreement, dated February 29, 2000,
between Registrant and the purchasers of Registrant's Series C
Preferred Stock
10.16 Form of Promissory Note, dated March 1, 2000, executed by Registrant in
favor of Europ@Web
10.17 Amended and Restated Investor Rights Agreement, dated March 1, 2000,
between Registrant and the purchasers of Registrant's Series A, Series
B and Series C preferred stock
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.18 Amended and Restated Co-Sale Agreement, dated March 1, 2000, between
Registrant, the purchasers of Registrant's Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock
10.19 Amended and Restated Voting Agreement, dated March 1, 2000, between
Registrant and the purchasers of Registrant's Series B Preferred
Stock and Series C Preferred Stock
10.20** Advertising Agreement, dated June 7, 1999, between Registrant and
Go2Net, Inc.
10.21 Sponsorship Agreements, dated July 12, 1999, between Registrant and
Football Northwest Incorporated
10.22 Sponsorship Extension Agreement, dated August 24, 1999, between
Registrant and Football Northwest Incorporated
10.23 Television Letter Agreement, dated October 1, 1999, between Registrant
and Trail Blazers, Inc.
10.24** Service Order Agreement and Terms of Service, dated August 5, 1999,
between Registrant and BeFree, Inc.
10.25** On-Demand Commerce Applications and Services Agreement, dated March
29, 1999, between Registrant and CyberSource Corporation, as amended
10.26 Sublease Agreement, dated January 10, 2000, between Registrant and 110
Atrium Place Associates, LLC
10.27 Sublease Agreement, dated February 23, 2000, between Registrant and
Attachmate Corporation
10.28** Advertising Agreement, dated March 1, 2000, between Registrant and
Go2Net, Inc., and We-Commerce Network Addendum to Go2Net Advertising
Agreement, dated February 18, 2000
10.29 We-Commerce Network Services Agreement, dated March 3, 2000, between
Registrant and Football Northwest LLC
23.1 Report and Consent of KPMG LLP, Independent Auditors
23.2* Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (contained on signature page)
27.1 Financial Data Schedule
</TABLE>
- --------
* To be supplied by amendment.
** Registrant has sought confidential treatment for portions of this exhibit.
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
consolidated financial statements or notes thereto.
ITEM 17. Undertakings
Mercata hereby undertakes to provide to the Underwriters at the closing
specified in the Underwriting Agreement, certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of Mercata pursuant to
the Delaware General Corporation Law, the
II-4
<PAGE>
Certificate of Incorporation or the Bylaws of Mercata, Indemnification
Agreements entered into between Mercata and its officers and directors, the
Underwriting Agreement, or otherwise, Mercata has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by Mercata of expenses incurred or paid by a director,
officer, or controlling person of Mercata in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, Mercata
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 of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Mercata hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by Mercata pursuant to Rule 424(b)(1) or (4) or 497(h)
under the 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 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-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Mercata
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Bellevue, King County, state of Washington, on this
9th day of March, 2000.
Mercata, Inc.
/s/ Tom Van Horn
By: ____________________________________
Tom Van Horn
Chief Executive Officer
and President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Tom Van Horn and Scott Scharfman, his
(or her) true and lawful attorneys-in-fact each acting alone, with full power
of substitution and resubstitution, for him and in his name, place and stead in
any and all capacities to sign any or all amendments (including post-effective
amendments) to this registration statement, and any registration statement
filed pursuant to Rule 462(b) under the Securities Act of 1933 in connection
with the registration under the Securities Act of 1933 of equity securities of
Mercata and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact,
or their substitutes, each acting alone, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Tom Van Horn Chief Executive Officer, March 9, 2000
______________________________________ President and Director
Tom Van Horn (Principal Executive Officer)
/s/ Scott Scharfman Chief Financial Officer March 9, 2000
______________________________________ (Principal Financial Officer)
Scott Scharfman
/s/ Jon Engman Vice President, Finance and March 9, 2000
______________________________________ Administration, Treasurer and
Jon Engman Secretary (Principal Accounting
Officer)
/s/ William Savoy Director March 9, 2000
______________________________________
William Savoy
/s/ Diane Daggatt Director March 9, 2000
______________________________________
Diane Daggatt
/s/ Bert Kolde Director March 9, 2000
______________________________________
Bert Kolde
/s/ Linda Levinson Director March 9, 2000
______________________________________
Linda Levinson
/s/ Samir Master Director March 9, 2000
______________________________________
Samir Master
/s/ Dan Nova Director March 9, 2000
______________________________________
Dan Nova
</TABLE>
II-6
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
MERCATA, INC.
For the period from September 23, 1998 (inception) to December 31, 1998
and the year ended December 31, 1999
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and Deductions End of
Description of Period Expenses (1) Period
- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Period from September 23, 1998
(inception) to December 31,
1998:
Deductions from accounts
receivable--
Allowance for doubtful
accounts..................... $ -- $ -- $ -- $ --
Provisions included in other
current liabilities--
Allowance for sales returns... $ -- $ -- $ -- $ --
Year ended December 31, 1999:
Deductions from accounts
receivable--
Allowance for doubtful
accounts...................... $ -- $ 54,636 $ (4,636) $ 50,000
Provisions included in other
current liabilities--
Allowance for sales returns.... $ -- $361,320 $(162,020) $199,300
</TABLE>
- --------
(1) Represents amounts written off.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of the Registrant
3.2 Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be effective upon the closing of the offering made
pursuant to this Registration Statement
3.3 Bylaws of the Registrant
3.4 Form of Bylaws of the Registrant, to be effective upon the closing of
the offering made pursuant to this Registration Statement
4.1* Specimen Common Stock Certificate
5.1* Opinion of Cooley Godward LLP
10.1 Form of Indemnification Agreement between the Registrant and each of its
directors and certain of its officers
10.2 2000 Equity Incentive Plan
10.3 1999 Equity Incentive Plan
10.4 2000 Employee Stock Purchase Plan
10.5 Sublease Agreement, dated February 29, 2000, between Registrant and
Vulcan Northwest, Inc.
10.6 Sublease Agreement, dated December 3, 1999, between Registrant and GMAC
Mortgage Corporation
10.7 Lease Agreement, dated February 17, 2000, between Registrant and Bentall
Newport Centre L.L.C.
10.8 Subscription Agreement, dated October 7, 1998, between Registrant and
Paul G. Allen
10.9 Form of Promissory Note, executed by Registrant on October 13, 1998,
December 22, 1998 and February 1, 1999, in favor of Paul G. Allen
10.10 Common Stock and Promissory Note Assignment and Transfer Instructions,
dated March 17, 1999, between Registrant, Paul G. Allen and Vulcan
Ventures Incorporated
10.11 Series A Preferred Stock Purchase Agreement, dated March 17, 1999,
between Registrant and Vulcan Ventures Incorporated
10.12 Promissory Note, dated September 10, 1999, executed by Registrant in
favor of Vulcan Ventures Incorporated
10.13 Series B Preferred Stock Purchase Agreement, dated September 30, 1999,
between Registrant and the purchasers of Registrant's Series B Preferred
Stock
10.14 Form of Promissory Note, dated September 30, 1999, executed by
Registrant in favor of Highland Capital Partners IV Limited Partnership
and Highland Entrepreneurs' Fund IV Limited Partnership
10.15 Series C Preferred Stock Purchase Agreement, dated February 29, 2000,
between Registrant and the purchasers of Registrant's Series C Preferred
Stock
10.16 Form of Promissory Note, dated February 29, 2000, executed by Registrant
in favor of Europ@Web
10.17 Amended and Restated Investor Rights Agreement, dated March 1, 2000,
between Registrant and the purchasers of Registrant's Series A, Series B
and Series C preferred stock
10.18 Amended and Restated Co-Sale Agreement, dated March 1, 2000, between
Registrant, the purchasers of Registrant's Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.19 Amended and Restated Voting Agreement, dated March 1, 2000, between
Registrant and the purchasers of Registrant's Series B Preferred Stock
and Series C Preferred Stock
10.20** Advertising Agreement, dated June 7, 1999, between Registrant and
Go2Net, Inc.
10.21 Sponsorship Agreements, dated July 12, 1999, between Registrant and
Football Northwest Incorporated
10.22 Sponsorship Extension Agreement, dated August 24, 1999, between
Registrant and Football Northwest Incorporated
10.23 Television Letter Agreement, dated October 1, 1999, between Registrant
and Trail Blazers, Inc.
10.24** Service Order Agreement and Terms of Service, dated August 5, 1999,
between Registrant and BeFree, Inc.
10.25** On-Demand Commerce Applications and Services Agreement, dated March
29, 1999, between Registrant and CyberSource Corporation, as amended
10.26 Sublease Agreement, dated January 10, 2000, between Registrant and 110
Atrium Place Associates, LLC
10.27 Sublease Agreement, dated February 23, 2000, between Registrant and
Attachmate Corporation.
10.28** Advertising Agreement, dated March 1, 2000, between Registrant and
Go2Net, Inc., and We-Commerce Network Addendum to Go2Net Advertising
Agreement, dated February 18, 2000
10.29 We-Commerce Network Services Agreement, dated March 3, 2000, between
Registrant and Football Northwest LLC
23.1 Report and Consent of KPMG LLP, Independent Auditors
23.2* Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (contained on signature page)
27.1 Financial Data Schedule
</TABLE>
- --------
* To be supplied by amendment.
** Registrant has sought confidential treatment for portions of this exhibit.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MERCATA, INC.
(Incorporated September 23, 1998)
Tom Van Horn and Jon C. Engman hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of Mercata, Inc., a Delaware corporation.
TWO: The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
I.
The name of the corporation is Mercata, Inc. (the "Corporation" or the
"Company").
II.
The address of the registered office of the Corporation in the State of
Delaware is:
CorpAmerica, Inc.
30 Old Rudnick Lane
Dover, DE 19901
County of Kent
The name of the Corporation's registered agent at said address is
CorpAmerica, Inc.
III.
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is seventy million
(70,000,000) shares, forty million (40,000,000) shares of which shall be Common
Stock (the "Common Stock") and thirty million (30,000,000) shares of which shall
be Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have a
par value of one tenth of a cent ($0.001) per share and the Common Stock shall
have a par value of one tenth of a cent ($0.001) per share.
1.
<PAGE>
B. The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares of Common Stock then outstanding)
by the affirmative vote of the holders of a majority of the stock of the
Corporation (voting together on an as-if-converted basis).
C. Fourteen million (14,000,000) of the authorized shares of Preferred
Stock are hereby designated "Series A Preferred Stock," twelve million
(12,000,000) of the authorized shares of Preferred Stock are hereby designated
"Series B Preferred Stock" and four million (4,000,000) of the authorized shares
of Preferred Stock are hereby designated "Series C Preferred Stock"
(collectively, the "Series Preferred").
D. The rights, preferences, privileges, restrictions and other matters
relating to the Series Preferred are as follows:
1. Dividend Rights.
(a) Holders of Series Preferred, in preference to the holders of
any other stock of the Company ("Junior Stock"), shall be entitled to receive,
when and as declared by the Board of Directors, but only out of funds that are
legally available therefor, cash dividends at the rate of eight percent (8%) of
the Original Issue Price (as defined below) per annum on each outstanding share
of Series Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares). The "Original Issue
Price" of the Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock shall be one dollar and five cents ($1.05) per share,
three dollars twelve and one-half cents ($3.125) per share and eleven dollars
and eighty-nine and four thousand one hundred forty-two ten-thousands cents
($11.894142) per share, respectively. Such dividends shall be payable only when,
as and if declared by the Board of Directors and shall be non-cumulative.
(b) So long as any shares of Series Preferred shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Company be purchased, redeemed, or
otherwise acquired for value by the Company (except for acquisitions of Common
Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer) until
all dividends (set forth in Section 1(a) above) on the Series Preferred shall
have been paid or declared and set apart. In the event dividends are paid on any
share of Common Stock, an additional dividend shall be paid with respect to all
outstanding shares of Series Preferred in an amount equal per share (on an
as-if-converted to Common Stock basis) to the amount paid or set aside for each
share of Common Stock. The provisions of this Section 1(b) shall not, however,
apply to (i) a dividend payable in Common Stock, (ii) the acquisition of shares
of any Junior Stock in exchange for shares of any other Junior Stock, or (iii)
any repurchase of any outstanding securities of the Company that is unanimously
approved by the Company's Board of Directors.
2.
<PAGE>
2. Voting Rights.
(a) General Rights. Except as otherwise provided herein or as
required by law, the Series Preferred shall be voted equally with the shares of
the Common Stock of the Company and not as a separate class, at any annual or
special meeting of stockholders of the Company, and may act by written consent
in the same manner as the Common Stock, in either case upon the following basis:
each holder of shares of Series Preferred shall be entitled to such number of
votes as shall be equal to the whole number of shares of Common Stock into which
such holder's aggregate number of shares of Series Preferred are convertible
(pursuant to Section 4 hereof) immediately after the close of business on the
record date fixed for such meeting or the effective date of such written
consent.
(b) Separate Vote of Series Preferred. For so long as at least
ten million (10,000,000) shares of Series Preferred (subject to adjustment for
any stock split, reverse stock split or other similar event affecting the Series
Preferred) remain outstanding, in addition to any other vote or consent required
herein or by law, the vote or written consent of the holders of at least a
majority of the outstanding Series Preferred shall be necessary for effecting or
validating the following actions:
(i) Any amendment, alteration, or repeal of any provision
of the Certificate of Incorporation or Bylaws of the Company (including any
filing of a Certificate of Designation), that alters or changes the voting
powers, preferences, or other special rights or privileges, or restrictions of
the Series Preferred (including by way of a merger or consolidation).
(ii) Any increase or decrease (other than by redemption or
conversion) in the authorized number of shares of Common Stock or Preferred
Stock;
(iii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking on a parity
with or senior to the Series Preferred in right of redemption, liquidation
preference, voting or dividends or any increase in the authorized or designated
number of any such new class or series;
(iv) Any redemption, repurchase, payment of dividends or
other distributions with respect to Junior Stock (except for acquisitions of
Common Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer);
(v) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3(c));
(vi) Any action that results in the payment or declaration
of a dividend on any shares of Common Stock or Preferred Stock;
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(vii) Any voluntary dissolution or liquidation of the
Company; or
(viii) Any increase or decrease in the authorized number of
members of the Company's Board of Directors.
(c) Separate Votes of Series B Preferred Stock and Series C
Preferred Stock. For so long as at least an aggregate of six million (6,000,000)
shares of Series B Preferred Stock and/or Series C Preferred Stock (subject to
adjustment for any stock split, reverse stock split or other similar event
affecting the Series B Preferred Stock or the Series C Preferred Stock) remain
outstanding, in addition to any other vote or consent required herein or by law,
the vote or written consent of the holders of at least a majority of the
outstanding Series B Preferred Stock and Series C Preferred Stock voting
together as a combined class shall be necessary for effecting or validating the
following actions:
(i) Any amendment, alteration, or repeal of any provision
of the Certificate of Incorporation or Bylaws of the Company (including any
filing of a Certificate of Designation), that alters or changes the voting
powers, preferences, or other special rights or privileges, or restrictions of
the Series B Preferred Stock or the Series C Preferred Stock (including by way
of a merger or consolidation).
(ii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking on a parity
with or senior to the Series B Preferred or the Series C Preferred Stock in
right of redemption, liquidation preference, voting or dividends or any increase
in the authorized or designated number of any such new class or series;
(iii) Any redemption, repurchase, payment of dividends or
other distributions with respect to Junior Stock (except for acquisitions of
Common Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer);
(iv) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3(c)).
(d) Election of Board of Directors. For so long as at least ten
million (10,000,000) shares of Series Preferred remain outstanding (subject to
adjustment for any stock split, reverse stock split or similar event affecting
the Series Preferred) (i) the holders of Series A Preferred Stock, voting as a
separate class, shall be entitled to elect two (2) members of the Company's
Board of Directors at each meeting or pursuant to each consent of the Company's
stockholders for the election of directors, and to remove from office such
directors and to fill any vacancy caused by the resignation, death or removal of
such directors; (ii) the holders of Series B Preferred Stock, voting as a
separate class, shall be entitled to elect one (1) member of the Company's Board
of Directors at each meeting or pursuant to each consent of the Company's
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stockholders for the election of directors, and to remove from office such
director and to fill any vacancy caused by the registration, death or removal of
such director; (iii) the holders of Common Stock, voting as a separate class,
shall be entitled to elect two (2) members of the Board of Directors at each
meeting or pursuant to each consent of the Company's stockholders for the
election of directors, and to remove from office such directors and to fill any
vacancy caused by the resignation, death or removal of such directors; and (iv)
the holders of Common Stock and Series Preferred, voting together as a single
class on an as-if-converted basis, shall be entitled to elect all remaining
members of the Board of Directors at each meeting or pursuant to each consent of
the Company's stockholders for the election of directors, and to remove from
office such directors and to fill any vacancy caused by the resignation, death
or removal of such directors.
3. Liquidation Rights.
(a) Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Junior Stock, the holders of Series
Preferred shall be entitled to be paid out of the assets of the Company an
amount per share of Series Preferred equal to the Original Issue Price plus all
declared and unpaid dividends on the Series Preferred (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares) for each share of Series Preferred held by them. If, upon any such
liquidation, distribution, or winding up, the assets of the Company shall be
insufficient to make payment in full to all holders of Series Preferred of the
liquidation preference set forth in this Section 3(a), then such assets shall be
distributed among the holders of Series Preferred at the time outstanding,
ratably in proportion to the full amounts to which they would otherwise be
respectively entitled.
(b) After the payment of the full liquidation preference of the
Series Preferred as set forth in Section 3(a) above, the assets of the Company
legally available for distribution, if any, shall be distributed ratably to the
holders of the Common Stock and Series Preferred on an as-if-converted to Common
Stock basis until such time as the holders of Series Preferred have received
pursuant to Section 3(a) above and this Section 3(b) in aggregate an amount per
share of Series Preferred equal to three (3) times the Original Issue Price (as
adjusted for any stock, dividends, combinations, splits, recapitalizations and
the like with respect to such shares); thereafter the remaining assets of the
Company legally available for distribution, if any, shall be distributed ratably
to the holders of the Common Stock.
(c) The following events shall be considered a liquidation under
this Section:
(i) any consolidation or merger of the Company with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than 50% of the Company's
voting power immediately after such consolidation, merger or reorganization, or
any transaction or series of related transactions to which the Company is a
party in which in excess of fifty percent (50%) of the Company's voting
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power is transferred, excluding any consolidation or merger effected exclusively
to change the domicile of the Company (an "Acquisition"); or
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer").
(iii) In any of such events, if the consideration received
by this corporation is other than cash, its value will be deemed its fair market
value as determined in good faith by the Board of Directors. Any securities
shall be valued as follows:
(A) Securities not subject to investment letter or
other similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or
through the Nasdaq National Market, the value shall be deemed to be the average
of the closing prices of the securities on such quotation system over the thirty
(30) day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period ending three (3) days
prior to the closing; and
(3) If there is no active public market, the
value shall be the fair market value thereof, as determined by the Board of
Directors.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof, as determined by the Board of Directors.
4. Conversion Rights.
The holders of the Series Preferred shall have the following
rights with respect to the conversion of the Series Preferred into shares of
Common Stock (the "Conversion Rights"):
(a) Optional Conversion. Subject to and in compliance with the
provisions of this Section 4, any shares of Series Preferred may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Series Preferred shall be entitled upon conversion shall be the product obtained
by multiplying the "Series Preferred Conversion Rate" then in effect (determined
as provided in Section 4(b)) by the number of shares of Series Preferred being
converted.
(b) Series Preferred Conversion Rate. The conversion rate in
effect at any time for conversion of the Series Preferred (the "Series Preferred
Conversion Rate") shall
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be the quotient obtained by dividing the Original Issue Price of the Series
Preferred by the "Series Preferred Conversion Price," calculated as provided in
Section 4(c).
(c) Series Preferred Conversion Price. The conversion price for
the Series Preferred shall initially be the Original Issue Price of the Series
Preferred (the "Series Preferred Conversion Price"). Such initial Series
Preferred Conversion Price shall be adjusted from time to time in accordance
with this Section 4. All references to the Series Preferred Conversion Price
herein shall mean the Series Preferred Conversion Price as so adjusted.
(d) Mechanics of Conversion. Each holder of Series Preferred who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Company or any transfer agent for the Series Preferred, and
shall give written notice to the Company at such office that such holder elects
to convert the same. Such notice shall state the number of shares of Series
Preferred being converted. Thereupon, the Company shall promptly issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay (i) in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared and unpaid dividends on the shares of Series Preferred being converted
and (ii) in cash (at the Common Stock's fair market value determined by the
Board of Directors as of the date of conversion) the value of any fractional
share of Common Stock otherwise issuable to any holder of Series Preferred. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Series
Preferred to be converted, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date.
(e) Adjustment for Stock Splits and Combinations. If the Company
shall at any time or from time to time after the date that the first share of
Series Preferred is issued (the "Original Issue Date") effect a subdivision of
the outstanding Common Stock without a corresponding subdivision of the
Preferred Stock, the Series Preferred Conversion Price in effect immediately
before that subdivision shall be proportionately decreased. Conversely, if the
Company shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock into a smaller number of shares
without a corresponding combination of the Preferred Stock, the Series Preferred
Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 4(e) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(f) Adjustment for Common Stock Dividends and Distributions. If
the Company at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series Preferred Conversion Price
that is then in effect shall be decreased as of the time of such issuance or, in
the event such record date is fixed, as of the close of business on such record
date, by
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multiplying the Series Preferred Conversion Price then in effect by a fraction
(i) the numerator of which is the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series Preferred Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Series Preferred Conversion Price shall be adjusted pursuant to this Section
4(f) to reflect the actual payment of such dividend or distribution.
(g) Adjustment for Reclassification, Exchange and Substitution.
If at any time or from time to time after the Original Issue Date, the Common
Stock issuable upon the conversion of the Series Preferred is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3(c) or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 4), in any such event each holder
of Series Preferred shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series
Preferred could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
(h) Reorganizations, Mergers, Consolidations or Sales of Assets.
If at any time or from time to time after the Original Issue Date, there is a
capital reorganization of the Common Stock (other than an Acquisition or Asset
Transfer as defined in Section 3(c) or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 4), as a part of such capital reorganization,
provision shall be made so that the holders of the Series Preferred shall
thereafter be entitled to receive upon conversion of the Series Preferred the
number of shares of stock or other securities or property of the Company to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, subject to
adjustment in respect of such stock or securities by the terms thereof. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of Series
Preferred after the capital reorganization to the end that the provisions of
this Section 4 (including adjustment of the Series Preferred Conversion Price
then in effect and the number of shares issuable upon conversion of the Series
Preferred) shall be applicable after that event and be as nearly equivalent as
practicable.
(i) Sale of Shares Below Series Preferred Conversion Price.
(i) If at any time or from time to time after the Original
Issue Date, the Company issues or sells, or is deemed by the express provisions
of this subsection (i) to
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have issued or sold, Additional Shares of Common Stock (as defined in subsection
(i)(iv) below), other than as a dividend or other distribution on any class of
stock as provided in Section 4(f) above, and other than a subdivision or
combination of shares of Common Stock as provided in Section 4(e) above, for an
Effective Price (as defined in subsection (i)(iv) below) less than the then
effective Series Preferred Conversion Price, then and in each such case the then
existing Series Preferred Conversion Price shall be reduced, as of the opening
of business on the date of such issue or sale, to a price determined by
multiplying the Series Preferred Conversion Price by a fraction (i) the
numerator of which shall be (A) the number of shares of Common Stock deemed
outstanding (as defined below) immediately prior to such issue or sale, plus (B)
the number of shares of Common Stock which the aggregate consideration received
(as defined in subsection (i)(ii) by the Company for the total number of
Additional Shares of Common Stock so issued would purchase at such Series
Preferred Conversion Price, and (ii) the denominator of which shall be the
number of shares of Common Stock deemed outstanding (as defined below)
immediately prior to such issue or sale plus the total number of Additional
Shares of Common Stock so issued. For the purposes of the preceding sentence,
the number of shares of Common Stock deemed to be outstanding as of a given date
shall be the sum of (A) the number of shares of Common Stock actually
outstanding, (B) the number of shares of Common Stock into which the then
outstanding shares of Series Preferred could be converted if fully converted on
the day immediately preceding the given date, and (C) the number of shares of
Common Stock which could be obtained through the exercise or conversion of all
other rights, options and convertible securities outstanding on the day
immediately preceding the given date.
(ii) For the purpose of making any adjustment required
under this Section 4(i), the consideration received by the Company for any issue
or sale of securities shall (A) to the extent it consists of cash, be computed
at the net amount of cash received by the Company after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Company in connection with such issue or sale but without deduction of
any expenses payable by the Company, (B) to the extent it consists of property
other than cash, be computed at the fair value of that property as determined in
good faith by the Board of Directors, and (C) if Additional Shares of Common
Stock, Convertible Securities (as defined in subsection (i)(iii)) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Company for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined in
good faith by the Board of Directors to be allocable to such Additional Shares
of Common Stock, Convertible Securities or rights or options.
(iii) For the purpose of the adjustment required under this
Section 4(i), if the Company issues or sells (i) stock or other securities
convertible into, Additional Shares of Common Stock (such convertible stock or
securities being herein referred to as "Convertible Securities") or (ii) rights
or options for the purchase of Additional Shares of Common Stock or Convertible
Securities and if the Effective Price of such Additional Shares of Common Stock
is less than the Series Preferred Conversion Price, in each case the Company
shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an
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amount equal to the total amount of the consideration, if any, received by the
Company for the issuance of such rights or options or Convertible Securities,
plus, in the case of such rights or options, the minimum amounts of
consideration, if any, payable to the Company upon the exercise of such rights
or options, plus, in the case of Convertible Securities, the minimum amounts of
consideration, if any, payable to the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
conversion thereof; provided that if in the case of Convertible Securities the
minimum amounts of such consideration cannot be ascertained, but are a function
of antidilution or similar protective clauses, the Company shall be deemed to
have received the minimum amounts of consideration without reference to such
clauses; provided further that if the minimum amount of consideration payable to
the Company upon the exercise or conversion of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the Effective
Price shall be recalculated using the figure to which such minimum amount of
consideration is reduced; provided further that if the minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased, the
Effective Price shall be again recalculated using the increased minimum amount
of consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities. No further adjustment of the Series
Preferred Conversion Price, as adjusted upon the issuance of such rights,
options or Convertible Securities, shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exercise of any such rights
or options or the conversion of any such Convertible Securities. If any such
rights or options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised, the Series
Preferred Conversion Price as adjusted upon the issuance of such rights, options
or Convertible Securities shall be readjusted to the Series Preferred Conversion
Price which would have been in effect had an adjustment been made on the basis
that the only Additional Shares of Common Stock so issued were the Additional
Shares of Common Stock, if any, actually issued or sold on the exercise of such
rights or options or rights of conversion of such Convertible Securities, and
such Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all
such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted,
plus the consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities, provided that such
readjustment shall not apply to prior conversions of Series Preferred.
(iv) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant to
this Section 4(i), other than (A) shares of Common Stock issued upon conversion
of the Series Preferred; (B) shares of Common Stock and/or options, warrants or
other Common Stock purchase rights, and the Common Stock issued pursuant to such
options, warrants or other rights (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like) after the Original Issue
Date to employees, officers or directors of, or consultants or advisors to the
Company or any subsidiary pursuant to stock purchase or stock option plans or
other
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arrangements that are approved by the Board; (C) shares of Common Stock issued
pursuant to the exercise of options, warrants or convertible securities
outstanding as of the Original Issue Date, (D) shares of Common Stock and/or
options, warrants or other Common Stock purchase rights, and the Common Stock
issued pursuant to such options, warrants or other rights issued for
consideration other than cash pursuant to a merger, consolidation, acquisition
or similar business combination approved by the Board and (E) shares of Common
Stock issued pursuant to any equipment leasing arrangement, or debt financing
from a bank or similar financial institution approved by the Board. References
to Common Stock in the subsections of this clause (iv) above shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant to
this Section 4(i). The "Effective Price" of Additional Shares of Common Stock
shall mean the quotient determined by dividing the total number of Additional
Shares of Common Stock issued or sold, or deemed to have been issued or sold by
the Company under this Section 4(i), into the aggregate consideration received,
or deemed to have been received by the Company for such issue under this Section
4(i), for such Additional Shares of Common Stock.
(j) Certificate of Adjustment. In each case of an adjustment or
readjustment of the Series Preferred Conversion Price for the number of shares
of Common Stock or other securities issuable upon conversion of the Series
Preferred, if the Series Preferred is then convertible pursuant to this Section
4, the Company, at its expense, shall compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of Series Preferred at the
holder's address as shown in the Company's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (i) the
consideration received or deemed to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (ii) the Series Preferred Conversion Price at the time in effect, (iii)
the number of Additional Shares of Common Stock and (iv) the type and amount, if
any, of other property which at the time would be received upon conversion of
the Series Preferred.
(k) Notices of Record Date. Upon (i) any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 3(c)) or
other capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation, or any Asset
Transfer (as defined in Section 3(c)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Company shall mail to
each holder of Series Preferred at least ten (10) days prior to the record date
specified therein (or such shorter period approved by a majority of the
outstanding Series Preferred) a notice specifying (A) the date on which any such
record is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (B) the date on which any such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the holders
of record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such Acquisition, reorganization,
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reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up.
(l) Automatic Conversion.
(i) Each share of Series Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Series
Preferred Conversion Price, (A) at any time upon the affirmative election of the
holders of at least a majority of the outstanding shares of the Series A
Preferred Stock and of the holders of at least a majority of the outstanding
shares of the Series B Preferred Stock and Series C Preferred Stock, voting
together as a combined class, or (B) immediately upon the closing of a firmly
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Company in which (i) the per share price is
at least $17.84 (as adjusted for stock splits, dividends, recapitalizations and
the like), and (ii) the gross cash proceeds to the Company (before underwriting
discounts, commissions and fees) are at least $25,000,000. Upon such automatic
conversion, any declared and unpaid dividends shall be paid in accordance with
the provisions of Section 4(d).
(ii) Upon the occurrence of either of the events specified
in Section 4(l)(i) above, the outstanding shares of Series Preferred shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; provided, however, that the Company shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing such shares of
Series Preferred are either delivered to the Company or its transfer agent as
provided below, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates. Upon the occurrence of such automatic
conversion of the Series Preferred, the holders of Series Preferred shall
surrender the certificates representing such shares at the office of the Company
or any transfer agent for the Series Preferred. Thereupon, there shall be issued
and delivered to such holder promptly at such office and in its name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of Series Preferred
surrendered were convertible on the date on which such automatic conversion
occurred, and any declared and unpaid dividends shall be paid in accordance with
the provisions of Section 4(d).
(m) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
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(n) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series Preferred, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series Preferred, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
(o) Notices. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Company.
(p) Payment of Taxes. The Company will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series Preferred
so converted were registered.
(q) No Dilution or Impairment. Without the consent of the
holders of then outstanding Series Preferred as required under Section 2(b), the
Company shall not amend its Restated Certificate of Incorporation or participate
in any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or take any other voluntary action, for the purpose
of avoiding or seeking to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but shall at all
times in good faith assist in carrying out all such action as may be reasonably
necessary or appropriate in order to protect the conversion rights of the
holders of the Series Preferred against dilution or other impairment.
5. No Reissuance of Series Preferred.
No share or shares of Series Preferred acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued.
V.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
13.
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B. Any repeal or modification of this Article V shall only be prospective
and shall not effect the rights under this Article V in effect at the time of
the alleged occurrence of any action or omission to act giving rise to
liability.
VI.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the Bylaws.
B. Subject to the indemnification provisions in the Bylaws, the Board of
Directors may from time to time make, amend, supplement or repeal the Bylaws;
provided, however, that the stockholders may change or repeal any Bylaw adopted
by the Board of Directors by the affirmative vote of the percentage of holders
of capital stock as provided therein; and, provided further, that no amendment
or supplement to the Bylaws adopted by the Board of Directors shall vary or
conflict with any amendment or supplement thus adopted by the stockholders.
C. The directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide.
* * * *
THREE: This Restated Certificate of Incorporation has been duly approved
by the Board of Directors of this Corporation.
14.
<PAGE>
FOUR: This Restated Certificate of Incorporation has been duly adopted in
accordance with the provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and the
stockholders of the Corporation. The total number of outstanding shares entitled
to vote or act by written consent was three million seven hundred fifty-five
thousand one hundred seventy-five (3,755,173) shares of Common Stock, fourteen
million (14,000,000) shares of Series A Preferred Stock and eleven million two
hundred thousand shares of Series B Preferred Stock. A majority of the
outstanding shares of Common Stock, all of the outstanding shares of Series A
Preferred Stock and a majority of the Series B Preferred Stock approved this
Restated Certificate of Incorporation by written consent in accordance with
Section 228 of the General Corporation Law of the State of Delaware and written
notice of such was given by the Corporation in accordance with said Section 228.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15.
<PAGE>
In Witness Whereof, Mercata, Inc. has caused this Restated Certificate of
Incorporation to be signed by the President and the Secretary in Bellevue,
Washington, this 1st day of March, 2000.
Mercata, Inc.
By: /s/ Tom Van Horn
------------------------------
Tom Van Horn, President
Attest:
By: /s/ Jon Engman
---------------------------
Jon Engman, Secretary
16.
<PAGE>
EXHIBIT 3.2
FORM OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MERCATA, INC.
(Incorporated September 23, 1998)
Tom Van Horn and Jon C. Engman hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of Mercata, Inc., a Delaware corporation.
TWO: The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
I.
The name of the corporation is Mercata, Inc. (the "Corporation" or the
"Company").
II.
The address of the registered office of the Corporation in the State of
Delaware is:
CorpAmerica, Inc.
30 Old Rudnick Lane
Dover, DE 19901
County of Kent
The name of the Corporation's registered agent at said address is
CorpAmerica, Inc.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is
_________________ (__________) shares. _______________ (__________) shares
shall be Common Stock, each having a par value of one-tenth of one cent ($.001).
___________ (_________) shares shall be Preferred Stock, each having a par value
of one-tenth of one cent ($.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law
("DGCL"), to fix or alter from time to time
1.
<PAGE>
the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions of any wholly
unissued series of Preferred Stock, and to establish from time to time the
number of shares constituting any such series or any of them; and to increase or
decrease the number of shares of any series subsequent to the issuance of shares
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be decreased in
accordance with the foregoing sentence, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. Board of Directors
Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "1933 Act"),
covering the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
2.
<PAGE>
3. Removal of Directors
a. Neither the Board of Directors nor any individual director
may be removed without cause.
b. Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the holders of a majority of
the voting power of the corporation entitled to vote at an election of
directors.
4. Vacancies
a. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
b. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
B.
1. Bylaw Amendments
Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of
the then-outstanding shares of the voting stock of the corporation entitled to
vote. The Board of Directors shall also have the power to adopt, amend, or
repeal Bylaws.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws or by written consent of stockholders in accordance with the Bylaws
prior to the closing of the Initial Public
3.
<PAGE>
Offering and following the closing of the Initial Public Offering no action
shall be taken by the stockholders by written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
* * * *
THREE: This Restated Certificate of Incorporation has been duly approved
by the Board of Directors of this Corporation.
FOUR: This Restated Certificate of Incorporation has been duly adopted
in accordance with the provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and the
stockholders of the Corporation. The total number of outstanding shares entitled
to vote or act by written consent was _______________________ (_________) shares
of Common Stock, fourteen million (14,000,000) shares of Series A Preferred
Stock, eleven million two hundred thousand (11,200,000) shares of Series B
Preferred Stock, and ______ (____) shares of Series C Preferred Stock. A
majority of the outstanding shares of Common Stock and all of the outstanding
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock approved this Restated Certificate of Incorporation by written
consent in accordance with Section 228 of the General Corporation Law of the
State of Delaware and written notice of such was given by the Corporation in
accordance with said Section 228.
4.
<PAGE>
In Witness Whereof, Mercata, Inc. has caused this Restated Certificate of
Incorporation to be signed by the President and the Secretary in Bellevue,
Washington, this _______ day of _______________ 2000.
Mercata, Inc.
By:__________________________
President
Attest:
By:____________________________
Secretary
5.
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
MERCATA, INC.
(A DELAWARE CORPORATION)
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I OFFICES..................................................... 1
Section 1. Registered Office........................................ 1
Section 2. Other Offices............................................ 1
ARTICLE II CORPORATE SEAL.............................................. 1
Section 3. Corporate Seal........................................... 1
ARTICLE III STOCKHOLDERS' MEETINGS...................................... 1
Section 4. Place of Meetings........................................ 1
Section 5. Annual Meeting........................................... 1
Section 6. Special Meetings......................................... 2
Section 7. Notice of Meetings....................................... 3
Section 8. Quorum................................................... 3
Section 9. Adjournment and Notice of Adjourned Meetings............. 4
Section 10. Voting Rights............................................ 4
Section 11. Joint Owners of Stock.................................... 4
Section 12. List of Stockholders..................................... 4
Section 13. Action Without Meeting................................... 5
Section 14. Organization............................................. 5
ARTICLE IV DIRECTORS................................................... 6
Section 15. Number and Term of Office................................ 6
Section 16. Powers................................................... 6
Section 17. Term of Directors........................................ 6
Section 18. Vacancies................................................ 6
Section 19. Resignation.............................................. 7
Section 20. Removal.................................................. 7
Section 21 ......................................................... 7
(a) Annual Meetings.......................................... 7
(b) Regular Meetings......................................... 7
(c) Special Meetings......................................... 7
(d) Telephone Meetings....................................... 8
(e) Notice of Meetings....................................... 8
</TABLE>
i.
<PAGE>
Table of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
(f) Waiver of Notice......................................... 8
Section 22. Quorum and Voting........................................ 8
Section 23. Action Without Meeting................................... 8
Section 24. Fees and Compensation.................................... 9
Section 25. Committees............................................... 9
(a) Executive Committee...................................... 9
(b) Other Committees......................................... 9
(c) Term..................................................... 9
(d) Meetings................................................. 10
Section 26. Organization............................................. 10
ARTICLE V OFFICERS..................................................... 10
Section 27 Officers Designated...................................... 10
Section 28 Tenure and Duties of Officers............................ 10
(a) General.................................................. 10
(b) Duties of Chairman of the Board of Directors............. 11
(c) Duties of President...................................... 11
(d) Duties of Vice Presidents................................ 11
(e) Duties of Secretary...................................... 11
(f) Duties of Chief Financial Officer........................ 11
Section 29. Delegation of Authority.................................. 12
Section 30. Resignations............................................. 12
Section 31. Removal.................................................. 12
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION..................................... 12
Section 32. Execution of Corporate Instruments....................... 12
Section 33. Voting of Securities Owned by the Corporation............ 12
ARTICLE VII SHARES OF STOCK.............................................. 13
Section 34. Form and Execution of Certificates....................... 13
Section 35. Lost Certificates........................................ 13
Section 36. Transfers................................................ 14
</TABLE>
ii.
<PAGE>
Table of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 37. Fixing Record Dates...................................... 14
Section 38. Registered Stockholders.................................. 15
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION......................... 15
Section 39. Execution of Other Securities............................ 15
ARTICLE IX DIVIDENDS.................................................... 16
Section 40. Declaration of Dividends................................. 16
Section 41. Dividend Reserve......................................... 16
ARTICLE X. FISCAL YEAR.................................................. 16
Section 42. Fiscal Year.............................................. 16
ARTICLE XI INDEMNIFICATION.............................................. 16
Section 43. Indemnification of Directors, Executive Officers,
Other Officers, Employees and Other Agents............... 16
(a) Directors and Officers................................... 16
(b) Officers, Employees and Other Agents..................... 16
(c) Expenses................................................. 17
(d) Enforcement.............................................. 17
(e) Non-Exclusivity of Rights................................ 18
(f) Survival of Rights....................................... 18
(g) Insurance................................................ 18
(h) Amendments............................................... 18
(i) Saving Clause............................................ 18
(j) Certain Definitions...................................... 18
ARTICLE XII NOTICES...................................................... 19
Section 44. Notices.................................................. 19
(a) Notice to Stockholders................................... 19
(b) Notice to Directors...................................... 19
(c) Affidavit of Mailing..................................... 20
(d) Time Notices Deemed Given................................ 20
(e) Methods of Notice........................................ 20
(f) Failure to Receive Notice................................ 20
</TABLE>
iii.
<PAGE>
Table of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
(g) Notice to Person with Whom Communication Is Unlawful..... 20
(h) Notice to Person with Undeliverable Address.............. 20
ARTICLE XIII AMENDMENTS.................................................. 21
Section 45. Amendments............................................... 21
RIGHT OF FIRST REFUSAL.................................................... 21
Section 46. Right of First Refusal................................... 21
ARTICLE XIV LOANS TO OFFICERS........................................... 23
Section 47. Loans to Officers........................................ 23
</TABLE>
iv.
<PAGE>
BYLAWS
OF
MERCATA, INC.
(A DELAWARE CORPORATION)
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and 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
Corporate Seal
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
Stockholders' Meetings
Section 4. Place of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the principal office of the corporation required
to be maintained pursuant to Section 2 hereof.
Section 5. Annual Meeting.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any
1.
<PAGE>
supplement thereto) given by or at the direction of the Board of Directors, (B)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (C) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation not later than the close of business on the sixtieth (60th) day nor
earlier than the close of business on the ninetieth (90th) day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that no annual meeting was held in the previous year or the
date of the annual meeting has been changed by more than thirty (30) days from
the date contemplated at the time of the previous year's proxy statement, notice
by the stockholder to be timely must be so received not earlier than the close
of business on the ninetieth (90th) day prior to such annual meeting and not
later than the close of business on the later of the sixtieth (60th) day prior
to such annual meeting or, in the event public announcement of the date of such
annual meeting is first made by the corporation fewer than seventy (70) days
prior to the date of such annual meeting, the close of business on the tenth
(10th) day following the day on which public announcement of the date of such
meeting is first made by the corporation. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business and
(v) any other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), in his capacity as a proponent to a stockholder proposal.
Notwithstanding the foregoing, in order to include information with respect to a
stockholder proposal in the proxy statement and form of proxy for a
stockholders' meeting, stockholders must provide notice as required by the
regulations promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b). The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this paragraph (b), and, if he should
so determine, he shall so declare at the meeting that any such business not
properly brought before the meeting shall not be transacted.
(c) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
2.
<PAGE>
directorships at the time any such resolution is presented to the Board of
Directors for adoption) and shall be held at such place, on such date, and at
such time as the Board of Directors shall fix.
(b) If a special meeting is properly called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within sixty (60) days after the receipt of the request, the person or
persons properly requesting the meeting may set the time and place of the
meeting and give the notice. Nothing contained in this paragraph (b) shall be
construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
Section 7. Notice of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
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. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
Section 8. Quorum. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast in all matters other
than the election of directors, the affirmative vote of a majority of shares
present in person or represented by proxy at the meeting and entitled to vote on
the subject matter shall be the act of the stockholders. Except as otherwise
provided by statute, the Certificate of Incorporation or these Bylaws, directors
shall be elected by a plurality of the votes of the shares present in person or
3.
<PAGE>
represented by proxy at the meeting and entitled to vote on the election of
directors. Where a separate vote by a class or classes or series is required,
except where otherwise provided by the statute or by the Certificate of
Incorporation or these Bylaws, a majority of the outstanding shares of such
class or classes or series, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter and, except where otherwise provided by statute or by the Certificate of
Incorporation or these Bylaws, the affirmative vote of the majority (plurality,
in the case of the election of directors) of the votes cast by the holders of
shares of such class or classes or series shall be the act of such class or
classes or series.
Section 9. Adjournment and Notice of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(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 of record entitled to vote at the meeting.
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with Delaware law. An agent so appointed need not be a stockholder. No proxy
shall be voted after three (3) years from its date of creation unless the proxy
provides for a longer period.
Section 11. Joint Owners of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the Delaware General Corporation Law, Section 217(b). If
the instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
Section 12. List of Stockholders. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, 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
4.
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examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
Section 13. Action Without Meeting.
(a) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the 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.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(C) 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. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the Delaware General Corporation Law if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written consent has been given in accordance with
Section 228 of the Delaware General Corporation Law.
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if
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any, the chairman of the meeting shall have the right and authority to prescribe
such rules, regulations and procedures and to do all such acts as, in the
judgment of such chairman, are necessary, appropriate or convenient for the
proper conduct of the meeting, including, without limitation, establishing an
agenda or order of business for the meeting, rules and procedures for
maintaining order at the meeting and the safety of those present, limitations on
participation in such meeting to stockholders of record of the corporation and
their duly authorized and constituted proxies and such other persons as the
chairman shall permit, restrictions on entry to the meeting after the time fixed
for the commencement thereof, limitations on the time allotted to questions or
comments by participants and regulation of the opening and closing of the polls
for balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
Directors
Section 15. Number and Term of Office. The authorized number of directors
of the corporation shall be seven (7). Directors need not be stockholders unless
so required by the Certificate of Incorporation. If for any cause, the directors
shall not have been elected at an annual meeting, they may be elected as soon
thereafter as convenient at a special meeting of the stockholders called for
that purpose in the manner provided in these Bylaws.
Section 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 17. Term of Directors.
(a) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, directors
shall be elected at each annual meeting of stockholders for a term of one year.
Each director shall serve until his successor is duly elected and qualified or
until his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
Section 18. Vacancies.
(a) Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
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Directors shall be deemed to exist under this Bylaw in the case of the death,
removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
Delaware General Corporation Law.
Section 19. Resignation. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
Section 20. Removal.
(a) Subject to any limitations imposed by applicable law, the Board
of Directors or any director may be removed from office at any time (i) with
cause by the affirmative vote of the holders of a majority of the voting power
of all then-outstanding shares of voting stock of the corporation entitled to
vote at an election of directors or (ii) without cause by the affirmative vote
of the holders of a majority of the voting power of all then-outstanding shares
of voting stock of the corporation, entitled to vote at an election of
directors.
Section 21.
(a) Annual Meetings. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular Meetings. Unless otherwise restricted by the Certificate
of Incorporation, regular meetings of the Board of Directors may be held at any
time or date and at any place within or without the State of Delaware which has
been designated by the Board of Directors and publicized among all directors. No
formal notice shall be required for a regular meeting of the Board of Directors.
(c) Special Meetings. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place
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within or without the State of Delaware whenever called by the Chairman of the
Board, the President or any two of the directors.
(d) Telephone Meetings. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting 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
by such means shall constitute presence in person at such meeting.
(e) Notice of Meetings. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least twenty-
four (24) hours before the date and time of the meeting, or sent in writing to
each director by first class mail, postage prepaid, at least three (3) days
before the date of the meeting. Notice of any meeting may be waived in writing
at any time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends the 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.
(f) Waiver of Notice. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
Section 22. Quorum and Voting.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time, a quorum of the Board of Directors shall consist of a
majority of the exact number of directors fixed from time to time by the Board
of Directors in accordance with the Certificate of Incorporation; provided,
however, at any meeting, whether a quorum be present or otherwise, a majority of
the directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors, without notice other than by
announcement at the meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing,
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and such writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
Section 24. Fees and Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
Section 25. Committees.
(a) Executive Committee. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and 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 (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
Delaware General Corporation Law to be submitted to stockholders for approval,
or (ii) adopting, amending or repealing any bylaw of the corporation.
(b) Other Committees. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.
(c) Term. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to any requirements of any
outstanding series of Preferred Stock, the provisions of subsections (a) or (b)
of this Bylaw may at any time increase or decrease the number of members of a
committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
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.
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(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of
any committee may be waived in writing at any time before or after the meeting
and will be waived by any director by attendance thereat, except when the
director attends such special 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. A majority of the authorized number
of members of any such committee shall constitute a quorum for the transaction
of business, and the act of a majority of those present at any meeting at which
a quorum is present shall be the act of such committee.
Section 26. Organization. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, (if a director) or, in the absence of any such person, a chairman of
the meeting chosen by a majority of the directors present, shall preside over
the meeting. The Secretary, or in his absence, any Assistant Secretary directed
to do so by the President, shall act as secretary of the meeting.
ARTICLE V
Officers
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the
officers of the corporation shall be fixed by or in the manner designated by the
Board of Directors.
Section 28. Tenure and Duties of Officers.
(a) General. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any
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time by the Board of Directors. If the office of any officer becomes vacant for
any reason, the vacancy may be filled by the Board of Directors.
(b) Duties of Chairman of the Board of Directors. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) Duties of President. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(d) Duties of Vice Presidents. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) Duties of Secretary. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) Duties of Chief Financial Officer. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and
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perform the duties of the Chief Financial Officer in the absence or disability
of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and
each Controller and Assistant Controller shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time.
Section 29. Delegation of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
Section 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
Execution Of Corporate Instruments And Voting
Of Securities Owned By The Corporation
Section 32. Execution of Corporate Instruments. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
Section 33. Voting of Securities Owned by the Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person
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authorized so to do by resolution of the Board of Directors, or, in the absence
of such authorization, by the Chairman of the Board of Directors, the Chief
Executive Officer, the President, or any Vice President.
ARTICLE VII
Shares Of Stock
Section 34. Form and Execution of Certificates. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
Section 35. Lost Certificates. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount 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, stolen,
or destroyed.
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Section 36. Transfers.
(a) Transfers of record of shares of stock of the corporation shall be
made only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the Delaware General Corporation Law.
Section 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall, subject to
applicable law, not be more than sixty (60) nor less than ten (10) days before
the date of such meeting. If no record date is fixed by the Board of Directors,
the record date for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within ten (10) days after the date
on which such a request is received, adopt a resolution fixing the record date.
If no record date has been fixed by the Board of Directors within ten (10) days
of the date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
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meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 38. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, 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 the laws of Delaware.
ARTICLE VIII
Other Securities Of The Corporation
Section 39. Execution of Other Securities. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
15.
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ARTICLE IX
Dividends
Section 40. Declaration of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law.
Section 41. Dividend Reserve. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors 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 Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
Fiscal Year
Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
Indemnification
Section 43. Indemnification of Directors, Executive Officers, Other
Officers, Employees and Other Agents.
(a) Directors and Officers. The corporation shall indemnify its
directors and officers to the fullest extent not prohibited by the Delaware
General Corporation Law or any other applicable law; provided, however, that the
corporation may modify the extent of such indemnification by individual
contracts with its directors and officers; and, provided, further, that the
corporation shall not be required to indemnify any director or officer in
connection with any proceeding (or part thereof) initiated by such person unless
(i) such indemnification is expressly required to be made by law, (ii) the
proceeding was authorized by the Board of Directors of the corporation, (iii)
such indemnification is provided by the corporation, in its sole discretion,
pursuant to the powers vested in the corporation under the Delaware General
Corporation Law or any other applicable law or (iv) such indemnification is
required to be made under subsection (d).
(b) Officers, Employees and Other Agents. The corporation shall have
power to indemnify its officers, employees and other agents as set forth in the
Delaware General Corporation Law or any other applicable law. The Board of
Directors shall have the power to
16.
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delegate the determination of whether indemnification shall be given to any such
person to such officers or other persons as the Board of Directors shall
determine.
(c) Expenses. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, prior to the final disposition of the proceeding, promptly
following request therefor, all expenses incurred by any director or officer in
connection with such proceeding upon receipt of an undertaking by or on behalf
of such person to repay said amounts if it should be determined ultimately that
such person is not entitled to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
officer of the corporation (except by reason of the fact that such officer is or
was a director of the corporation, in which event this paragraph shall not
apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this Bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the corporation and
the director or officer. Any right to indemnification or advances granted by
this Bylaw to a director or officer shall be enforceable by or on behalf of the
person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standards of conduct that make it permissible under the Delaware General
Corporation Law or any other applicable law for the corporation to indemnify the
claimant for the amount claimed. In connection with any claim by an officer of
the corporation (except in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
officer is or was a director of the corporation) for advances, the corporation
shall be entitled to raise a defense as to any such action clear and convincing
evidence that such person acted in bad faith or in a manner that such person did
not believe to be in or not opposed to the best interests of the corporation, or
with respect to any criminal action or proceeding that such person acted without
reasonable cause to believe that his conduct was lawful. Neither the failure of
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) to have made a determination prior to
17.
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the commencement of such action that indemnification of the claimant is proper
in the circumstances because he has met the applicable standard of conduct set
forth in the Delaware General Corporation Law or any other applicable law, nor
an actual determination by the corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of conduct. In
any suit brought by a director or officer to enforce a right to indemnification
or to an advancement of expenses hereunder, the burden of proving that the
director or officer is not entitled to be indemnified, or to such advancement of
expenses, under this Article XI or otherwise shall be on the corporation.
(e) Non-Exclusivity of Rights. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any applicable statute, provision of the Certificate
of Incorporation, Bylaws, 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 office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law or any
other applicable law.
(f) Survival of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) Insurance. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation or any other applicable law, upon
approval by the Board of Directors, may purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to this Bylaw.
(h) Amendments. Any repeal or modification of this Bylaw shall only
be prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and officer to the full
extent not prohibited by any applicable portion of this Bylaw that shall not
have been invalidated, or by any other applicable law. If this Section 43 shall
be invalid due to the application of the indemnification provisions of another
jurisdiction, then the corporation shall indemnify each director and officer to
the full extent under applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement,
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arbitration and appeal of, and the giving of testimony in, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall include,
without limitation, court costs, attorneys' fees, witness fees, fines, amounts
paid in settlement or judgment and any other costs and expenses of any nature or
kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a director, officer,
employee or agent of the corporation which imposes duties on, or involves
services by, such director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
Notices
Section 44. Notices.
(a) Notice to Stockholders. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) Notice to Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex
19.
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or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) Affidavit of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) Methods of Notice. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) Failure to Receive Notice. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) Notice to Person with Whom Communication Is Unlawful. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(h) Notice to Person with Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person
20.
<PAGE>
shall not be required. Any action or meeting which shall be taken or held
without notice to such person shall have the same force and effect as if such
notice had been duly given. If any such person shall deliver to the corporation
a written notice setting forth his then current address, the requirement that
notice be given to such person shall be reinstated. In the event that the action
taken by the corporation is such as to require the filing of a certificate under
any provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
Amendments
Section 45. Amendments. Subject to paragraph (h) of Section 43 of the
Bylaws, these Bylaws may be amended or repealed and new Bylaws adopted by the
stockholders entitled to vote. The Board of Directors shall also have the
power, if such power is conferred upon the Board of Directors by the Certificate
of Incorporation, to adopt, amend, or repeal Bylaws (including, without
limitation, the amendment of any Bylaw setting forth the number of Directors who
shall constitute the whole Board of Directors).
ARTICLE XIV
Right Of First Refusal
Section 46. Right of First Refusal. No stockholder shall sell, assign,
pledge, or in any manner transfer any of the shares of stock, of the corporation
or any right or interest therein, whether voluntarily or by operation of law, or
by gift or otherwise, except by a transfer which meets the requirements
hereinafter set forth in this bylaw:
(a) If the stockholder desires to sell or otherwise transfer any of
his shares of stock, then the stockholder shall first give written notice
thereof to the corporation. The notice shall name the proposed transferee and
state the number of shares to be transferred, the proposed consideration, and
all other terms and conditions of the proposed transfer.
(b) For thirty (30) days following receipt of such notice, the
corporation shall have the option to purchase all (but not less than all) of the
shares specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the stockholder, the
corporation shall have the option to purchase a lesser portion of the shares
specified in said notice at the price and upon the terms set forth therein. In
the event of a gift, property settlement or other transfer in which the proposed
transferee is not paying the full price for the shares, and that is not
otherwise exempted from the provisions of this Section 46, the price shall be
deemed to be the fair market value of the stock at such time as determined in
good faith by the Board of Directors. In the event the corporation elects to
purchase all of the shares or, with consent of the stockholder, a lesser portion
of the shares, it shall give written notice to the transferring stockholder of
its election and settlement for said shares shall be made as provided below in
paragraph (d).
(c) The corporation may assign its rights hereunder.
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(d) In the event the corporation and/or its assignee(s) elect to
acquire any of the shares of the transferring stockholder as specified in said
transferring stockholder's notice, the Secretary of the corporation shall so
notify the transferring stockholder and settlement thereof shall be made in cash
within thirty (30) days after the Secretary of the corporation receives said
transferring stockholder's notice; provided that if the terms of payment set
forth in said transferring stockholder's notice were other than cash against
delivery, the corporation and/or its assignee(s) shall pay for said shares on
the same terms and conditions set forth in said transferring stockholder's
notice.
(e) In the event the corporation and/or its assignees(s) do not elect
to acquire all of the shares specified in the transferring stockholder's notice,
said transferring stockholder may, within the sixty-day period following the
expiration of the option rights granted to the corporation and/or its
assignees(s) herein, transfer the shares specified in said transferring
stockholder's notice which were not acquired by the corporation and/or its
assignees(s) as specified in said transferring stockholder's notice. All shares
so sold by said transferring stockholder shall continue to be subject to the
provisions of this bylaw in the same manner as before said transfer.
(f) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this bylaw:
(1) A stockholder's transfer of any or all shares held either
during such stockholder's lifetime or on death by will or intestacy to such
stockholder's immediate family or to any custodian or trustee for the account of
such stockholder or such stockholder's immediate family or to any limited
partnership of which the shareholder, members of such shareholder's immediate
family or any trust for the account of such shareholder or such shareholder's
immediate family will be the general of limited partner(s) of such partnership.
"Immediate family" as used herein shall mean spouse, lineal descendant, father,
mother, brother, or sister of the stockholder making such transfer.
(2) A stockholder's bona fide pledge or mortgage of any shares
with a commercial lending institution, provided that any subsequent transfer of
said shares by said institution shall be conducted in the manner set forth in
this bylaw.
(3) A stockholder's transfer of any or all of such stockholder's
shares to the corporation or to any other stockholder of the corporation.
(4) A stockholder's transfer of any or all of such stockholder's
shares to a person who, at the time of such transfer, is an officer or director
of the corporation.
(5) A corporate stockholder's transfer of any or all of its
shares pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of the
corporate stockholder, or pursuant to a sale of all or substantially all of the
stock or assets of a corporate stockholder.
(6) A corporate stockholder's transfer of any or all of its
shares to any or all of its stockholders.
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(7) A transfer by a stockholder which is a limited or general
partnership to any or all of its partners or former partners.
(8) A transfer by a stockholder to a person or entity who
controls, is controlled by or under common control with such stockholder.
In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this bylaw, and there
shall be no further transfer of such stock except in accord with this bylaw.
(g) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the stockholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those shares to be transferred by the transferring stockholder).
This bylaw may be amended or repealed either by a duly authorized action of the
Board of Directors or by the stockholders, upon the express written consent of
the owners of a majority of the voting power of the corporation.
(h) Any sale or transfer, or purported sale or transfer, of
securities of the corporation shall be null and void unless the terms,
conditions, and provisions of this bylaw are strictly observed and followed.
(i) The foregoing right of first refusal shall terminate on either of
the following dates, whichever shall first occur:
(1) On September 23, 2008; or
(2) Upon the date securities of the corporation are first
offered to the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended.
(j) The certificates representing shares of stock of the corporation
shall bear on their face the following legend so long as the foregoing right of
first refusal remains in effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION
AND/OR ITS ASSIGNEE(S), AS PROVIDED IN THE BYLAWS OF THE
CORPORATION."
ARTICLE XIV
Loans To Officers
Section 47. Loans to Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the Board of Directors shall approve, including, without limitation, a pledge
of shares of stock of
23.
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the corporation. Nothing in these Bylaws shall be deemed to deny, limit or
restrict the powers of guaranty or warranty of the corporation at common law or
under any statute.
24.
<PAGE>
EXHIBIT 3.4
BYLAWS
OF
MERCATA, INC.
(A DELAWARE CORPORATION)
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I Offices........................................................ 1
Section 1. Registered Office........................................ 1
Section 2. Other Offices............................................ 1
ARTICLE II Corporate Seal................................................. 1
Section 3 Corporate Seal........................................... 1
ARTICLE III Stockholders' Meetings......................................... 1
Section 4. Place Of Meetings........................................ 1
Section 5. Annual Meetings.......................................... 1
Section 6. Special Meetings......................................... 3
Section 7. Notice Of Meetings....................................... 4
Section 8. Quorum................................................... 5
Section 9. Adjournment And Notice Of Adjourned Meetings............. 5
Section 10. Voting Rights............................................ 5
Section 11. Joint Owners Of Stock.................................... 6
Section 12. List Of Stockholders..................................... 6
Section 13. Action Without Meeting................................... 6
Section 14. Organization............................................. 6
ARTICLE IV Directors ..................................................... 7
Section 15. Number And Term Of Office................................ 7
Section 16. Powers................................................... 7
Section 17. Classes of Directors..................................... 7
Section 18. Vacancies................................................ 8
Section 19. Resignation.............................................. 8
Section 20. Removal.................................................. 8
</TABLE>
i.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 21. Meetings................................................. 8
Section 22. Quorum And Voting........................................ 9
Section 23. Action Without Meeting................................... 10
Section 24. Fees And Compensation.................................... 10
Section 25. Committees............................................... 10
Section 26. Organization............................................. 11
ARTICLE V Officers...................................................... 11
Section 27. Officers Designated...................................... 11
Section 28. Tenure And Duties Of Officers............................ 12
Section 29. Delegation Of Authority.................................. 13
Section 30. Resignations............................................. 13
Section 31. Removal.................................................. 13
ARTICLE VI Execution Of Corporate Instruments And Voting Of Securities
Owned By The Corporation...................................... 14
Section 32. Execution Of Corporate Instruments....................... 14
Section 33. Voting Of Securities Owned By The Corporation............ 14
ARTICLE VII Shares Of Stock............................................... 14
Section 34. Form And Execution Of Certificates....................... 14
Section 35. Lost Certificates........................................ 15
Section 36. Transfers................................................ 15
Section 37. Fixing Record Dates...................................... 15
Section 38. Registered Stockholders.................................. 16
ARTICLE VIII Other Securities Of The Corporation........................... 16
Section 39. Execution Of Other Securities............................ 16
ARTICLE IX Dividends..................................................... 17
Section 40. Declaration Of Dividends................................. 17
Section 41. Dividend Reserve......................................... 17
ARTICLE X Fiscal Year................................................... 17
</TABLE>
ii.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 42. Fiscal Year.............................................. 17
ARTICLE XI Indemnification................................................ 17
Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents..................... 17
ARTICLE XII Notices....................................................... 20
Section 44. Notices.................................................. 20
ARTICLE XIII Amendments.................................................... 22
Section 45. Amendments............................................... 22
ARTICLE XIV Loans To Officers............................................. 22
Section 46. Loans To Officers........................................ 22
</TABLE>
iii.
<PAGE>
BYLAWS
OF
MERCATA, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and 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
CORPORATE SEAL
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
Section 4. Place Of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
Section 5. Annual Meetings.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors. Nominations of persons for election
to the Board of Directors of the corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders:
(i) pursuant to the corporation's notice of meeting of stockholders; (ii) by or
at the direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a
1.
<PAGE>
stockholder of record at the time of giving of notice provided for in the
following paragraph, who is entitled to vote at the meeting and who complied
with the notice procedures set forth in Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (c) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the corporation which are
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owned beneficially and of record by such stockholder and such beneficial owner,
and (iii) whether either such stockholder or beneficial owner intends to deliver
a proxy statement and form of proxy to holders of, in the case of the proposal,
at least the percentage of the corporation's voting shares required under
applicable law to carry the proposal or, in the case of a nomination or
nominations, a sufficient number of holders of the corporation's voting shares
to elect such nominee or nominees (an affirmative statement of such intent, a
"Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section 5(b)
of these Bylaws to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the corporation at least one
hundred (100) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 5 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholders' meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total
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number of authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any such resolution is presented
to the Board of Directors for adoption).
(b) If a special meeting is properly called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors may
be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
Section 7. Notice Of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
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. Any stockholder so waiving notice of such meeting shall be
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bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
Section 8. Quorum. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(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 of record entitled to vote at the meeting.
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
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Section 11. Joint Owners Of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with
the Secretary shows that any such tenancy is held in unequal interests, a
majority or even-split for the purpose of subsection (c) shall be a majority or
even-split in interest.
Section 12. List Of Stockholders. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, 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 (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present.
Section 13. Action Without Meeting.
(a) No action shall be taken by the stockholders except at an annual
or special meeting of stockholders called in accordance with these Bylaws, and
no action shall be taken by the stockholders by written consent.
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in
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such meeting to stockholders of record of the corporation and their duly
authorized and constituted proxies and such other persons as the chairman shall
permit, restrictions on entry to the meeting after the time fixed for the
commencement thereof, limitations on the time allotted to questions or comments
by participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
Section 15. Number And Term Of Office. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
Section 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 17. Classes of Directors. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the
adoption and filing of the Certificate of Incorporation providing for a
classified Board of Directors, the term of office of the Class I directors shall
expire and Class I directors shall be elected for a full term of three years.
At the second annual meeting of stockholders following the adoption and filing
of the Certificate of Incorporation providing for a classified Board of
Directors, the term of office of the Class II directors shall expire and Class
II directors shall be elected for a full term of three years. At the third
annual meeting of stockholders following the adoption and filing of the
Certificate of Incorporation providing for a classified Board of Directors, the
term of office of the Class III directors shall expire and Class III directors
shall be elected for a full term of three years. At each succeeding annual
meeting of stockholders, directors shall be elected for a full term of three
years to succeed the directors of the class whose terms expire at such annual
meeting.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
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Section 18. Vacancies.
(a) Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Section 18 in the case of the
death, removal or resignation of any director. (Del. Code Ann., tit. 8,
Section 223(a), (b))
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL. (Del. Code Ann., tit. 8, Section 223(c)).
Section 19. Resignation. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified. (Del. Code Ann., tit. 8, Sections 141(b),
223(d))
Section 20. Removal.
(a) Neither the Board of Directors nor any individual
director may be removed without cause.
(b) Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the affirmative vote of a
majority of the voting power of the corporation entitled to vote at an election
of directors.
Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and
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such meeting shall be held for the purpose of electing officers and transacting
such other business as may lawfully come before it.
(b) Regular Meetings. Unless otherwise restricted by the Certificate
of Incorporation, regular meetings of the Board of Directors may be held at any
time or date and at any place within or without the State of Delaware which has
been designated by the Board of Directors and publicized among all directors. No
formal notice shall be required for regular meetings of the Board of Directors.
(Del. Code Ann., tit. 8, Section 141(g))
(c) Special Meetings. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors (Del. Code
Ann., tit. 8, Section 141(g))
(d) Telephone Meetings. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting 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
by such means shall constitute presence in person at such meeting. (Del. Code
Ann., tit. 8, Section 141(I))
(e) Notice of Meetings. Notice of the time and place of all meetings
of the Board of Directors shall be orally or in writing, by telephone, including
a voice messaging system or other system or technology designed to record and
communicate messages, facsimile, telegraph or telex, or by electronic mail or
other electronic means, during normal business hours, at least twenty-four (24)
hours before the date and time of the meeting, or sent in writing to each
director by first class mail, charges prepaid, at least three (3) days before
the date of the meeting. Notice of any meeting may be waived in writing at any
time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends the 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. (Del. Code
Ann., tit. 8, Section 229)
(f) Waiver of Notice. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting. (Del. Code Ann., tit. 8, Section 229)
Section 22. Quorum And Voting.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; provided, however, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to
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time until the time fixed for the next regular meeting of the Board of
Directors, without notice other than by announcement at the meeting. (Del. Code
Ann., tit. 8, Section 141(b))
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws. (Del. Code Ann., tit. 8,
Section 141(b))
Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee. (Del. Code Ann., tit. 8, Section 141(f))
Section 24. Fees And Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor. (Del. Code
Ann., tit. 8, Section 141(h))
Section 25. Committees.
(a) Executive Committee. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and 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 (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation. (Del. Code Ann., tit. 8, Section 141(c))
(b) Other Committees. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws. (Del. Code Ann., tit. 8, Section 141(c))
(c) Term. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the
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number of members of a committee or terminate the existence of a committee. The
membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any 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. (Del. Code Ann., tit. 8, Section 141(c))
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of
any committee may be waived in writing at any time before or after the meeting
and will be waived by any director by attendance thereat, except when the
director attends such special 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. A majority of the authorized number
of members of any such committee shall constitute a quorum for the transaction
of business, and the act of a majority of those present at any meeting at which
a quorum is present shall be the act of such committee. (Del. Code Ann., tit.
8, Sections 141(c), 229)
Section 26. Organization. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President (if a director), or if the President is absent, the most
senior Vice President (if a director), or, in the absence of any such person, a
chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
OFFICERS
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual
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organizational meeting of the Board of Directors. The Board of Directors may
also appoint one or more Assistant Secretaries, Assistant Treasurers, Assistant
Controllers and such other officers and agents with such powers and duties as it
shall deem necessary. The Board of Directors may assign such additional titles
to one or more of the officers as it shall deem appropriate. Any one person may
hold any number of offices of the corporation at any one time unless
specifically prohibited therefrom by law. The salaries and other compensation of
the officers of the corporation shall be fixed by or in the manner designated by
the Board of Directors. (Del. Code Ann., tit. 8, Sections 122(5), 142(a), (b))
Section 28. Tenure And Duties Of Officers.
(a) General. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors. (Del. Code Ann., tit. 8, Section 141(b), (e))
(b) Duties of Chairman of the Board of Directors. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28. (Del. Code Ann., tit. 8, Section 142(a))
(c) Duties of President. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers, as
the Board of Directors shall designate from time to time. (Del. Code Ann., tit.
8, Section 142(a))
(d) Duties of Vice Presidents. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time. (Del. Code Ann., tit. 8,
Section 142(a))
(e) Duties of Secretary. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
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these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time. (Del. Code Ann., tit. 8, Section 142(a))
(f) Duties of Chief Financial Officer. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time. (Del. Code Ann., tit. 8, Section 142(a))
Section 29. Delegation Of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer. (Del. Code Ann., tit. 8, Section 142(b))
Section 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
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ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF
SECURITIES OWNED BY THE CORPORATION
Section 32. Execution Of Corporate Instruments. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation. (Del. Code
Ann., tit. 8, Sections 103(a), 142(a), 158)
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount. (Del. Code
Ann., tit. 8, Sections 103(a), 142(a), 158).
Section 33. Voting Of Securities Owned By The Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President. (Del. Code Ann., tit. 8, Section 123)
ARTICLE VII
SHARES OF STOCK
Section 34. Form And Execution Of Certificates. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests
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the powers, designations, preferences and relative, participating, optional, or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
Within a reasonable time after the issuance or transfer of uncertificated stock,
the corporation shall send to the registered owner thereof a written notice
containing the information required to be set forth or stated on certificates
pursuant to this section or otherwise required by law or with respect to this
section a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights. Except as otherwise expressly provided by law, the rights and
obligations of the holders of certificates representing stock of the same class
and series shall be identical. (Del. Code Ann., tit. 8, Section 158)
Section 35. Lost Certificates. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount 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, stolen,
or destroyed. (Del. Code Ann., tit. 8, Section 167)
Section 36. Transfers.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares. (Del. Code Ann., tit.
8, Section 201, tit. 6, Section 8- 401(1))
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the DGCL. (Del. Code Ann., tit. 8, Section 160 (a))
Section 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
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which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. (Del. Code Ann., tit. 8, Section 213)
Section 38. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, 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 the laws of Delaware.
(Del. Code Ann., tit. 8, Sections 213(a), 219)
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 39. Execution Of Other Securities. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
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ARTICLE IX
DIVIDENDS
Section 40. Declaration Of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law. (Del. Code Ann., tit. 8,
Sections 170, 173)
Section 41. Dividend Reserve. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors 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 Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created. (Del.
Code Ann., tit. 8, Section 171).
ARTICLE X
FISCAL YEAR
Section 42. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents.
(a) Directors and Officers. The corporation shall indemnify its
directors and officers to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized by the Board of
Directors of the corporation, (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the DGCL or any other applicable law or (iv) such
indemnification is required to be made under subsection (d).
(b) Employees and Other Agents. The corporation shall have power
to indemnify its employees and other agents as set forth in the DGCL or any
other applicable law. The Board of Directors shall have the power to delegate
the determination of whether
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indemnification shall be given to any such person or other persons as the Board
of Directors shall determine.
(c) Expenses. The corporation shall advance to any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the corporation, or is or was serving at the request of the corporation as a
director or executive officer of another corporation, partnership, joint
venture, trust or other enterprise, prior to the final disposition of the
proceeding, promptly following request therefor, all expenses incurred by any
director or officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Section 43 or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the corporation to
an officer of the corporation (except by reason of the fact that such officer is
or was a director of the corporation in which event this paragraph shall not
apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
(d) Enforcement. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or officer. Any right to indemnification or
advances granted by this Section 43 to a director or officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
DGCL or any other applicable law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an officer of the
corporation (except in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such executive
officer is or was a director of the corporation) for advances, the corporation
shall be entitled to raise a defense as to any such action clear and convincing
evidence that such person acted in bad faith or in a manner that such person did
not believe to be in or not opposed to the best interests of the corporation, or
with respect to any criminal action or proceeding that such person acted without
reasonable cause to believe that his conduct was lawful. Neither the failure of
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) to have made a determination prior to the
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commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in the DGCL or any other applicable law, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct. In any suit brought by a
director or officer to enforce a right to indemnification or to an advancement
of expenses hereunder, the burden of proving that the director or officer is not
entitled to be indemnified, or to such advancement of expenses, under this
Article XI or otherwise shall be on the corporation.
(e) Non-Exclusivity of Rights. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any applicable statute, provision of the
Certificate of Incorporation, Bylaws, 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 office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law, or by any other applicable law.
(f) Survival of Rights. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) Insurance. To the fullest extent permitted by the DGCL or any
other applicable law, the corporation, upon approval by the Board of Directors,
may purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section 43.
(h) Amendments. Any repeal or modification of this Section 43
shall only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and officer to the full
extent not prohibited by any applicable portion of this Section 43 that shall
not have been invalidated, or by any other applicable law. If this Section 43
shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
officer to the full extent under any other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement,
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arbitration and appeal of, and the giving of testimony in, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Section 43 with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(4) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 43.
ARTICLE XII
NOTICES
Section 44. Notices.
(a) Notice To Stockholders. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent. (Del. Code Ann., tit. 8,
Section 222)
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(b) Notice To Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(c) Affidavit Of Mailing. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained. (Del. Code Ann., tit. 8, Section
222)
(d) Time Notices Deemed Given. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) Methods of Notice. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) Failure To Receive Notice. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) Notice To Person With Whom Communication Is Unlawful.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate shall state, if such is the fact and if
notice is required, that notice was given to all persons entitled to receive
notice except such persons with whom communication is unlawful.
(h) Notice To Person With Undeliverable Address. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-
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month period, have been mailed addressed to such person at his address as shown
on the records of the corporation and have been returned undeliverable, the
giving of such notice to such person shall not be required. Any action or
meeting which shall be taken or held without notice to such person shall have
the same force and effect as if such notice had been duly given. If any such
person shall deliver to the corporation a written notice setting forth his then
current address, the requirement that notice be given to such person shall be
reinstated. In the event that the action taken by the corporation is such as to
require the filing of a certificate under any provision of the DGCL, the
certificate need not state that notice was not given to persons to whom notice
was not required to be given pursuant to this paragraph. (Del. Code Ann, tit. 8,
Section 230)
ARTICLE XIII
AMENDMENTS
Section 45. Amendments. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
Section 45. Loans To Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute. (Del. Code Ann., tit. 8, Section 143)
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EXHIBIT 10.1
INDEMNITY AGREEMENT
This Agreement is made and entered into this __________ day of __________,
2000 by and between Mercata Corporation, a Delaware corporation (the
"Corporation"), and __________ ("Agent").
Recitals
Whereas, Agent performs a valuable service to the Corporation in __________
capacity as __________ of the Corporation;
Whereas, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
Whereas, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
Whereas, in order to induce Agent to continue to serve as __________ of the
Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
Now, Therefore, in consideration of Agent's continued service as __________
after the date hereof, the parties hereto agree as follows:
Agreement
1. Services to the Corporation. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
__________ of the Corporation or as a director, officer or other fiduciary of an
affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.
2. Indemnity of Agent. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
1.
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3. Additional Indemnity. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay because of any claim or
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent by
the Corporation under the non-exclusivity provisions of the Code and Section 41
of the Bylaws.
4. Limitations on Additional Indemnity. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent solely for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(b) on account of Agent's conduct that is established by a final
judgment as knowingly fraudulent or deliberately dishonest or that constituted
willful misconduct;
(c) on account of Agent's conduct that is established by a final
judgment as constituting a breach of Agent's duty of loyalty to the Corporation
or resulting in any personal profit or advantage to which Agent was not legally
entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect, both the
Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the Corporation, (iii) such
2.
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indemnification is provided by the Corporation, in its sole discretion, pursuant
to the powers vested in the Corporation under the Code, or (iv) the proceeding
is initiated pursuant to Section 9 hereof.
5. Continuation of Indemnity. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. Partial Indemnification. Agent shall be entitled under this Agreement
to indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.
7. Notification and Defense of Claim. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at its
own expense;
(b) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded, and so notified the Corporation, that
there is an actual conflict of interest between the Corporation and Agent in the
conduct of the defense of such action or (iii) the Corporation shall not in fact
have employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of Agent's separate counsel shall be at the expense
of the Corporation. The Corporation shall not be entitled to assume the defense
of any
3.
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action, suit or proceeding brought by or on behalf of the Corporation or as to
which Agent shall have made the conclusion provided for in clause (ii) above;
and
(c) the Corporation shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. Expenses. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. Enforcement. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof (other than an action brought
to enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of
Directors or its stockholders) to have made a determination prior to the
commencement of such enforcement action that indemnification of Agent is proper
in the circumstances, nor an actual determination by the Corporation (including
its Board of Directors or its stockholders) that such indemnification is
improper shall be a defense to the action or create a presumption that Agent is
not entitled to indemnification under this Agreement or otherwise.
10. Subrogation. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. Non-Exclusivity of Rights. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
12. Survival of Rights.
(a) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve
4.
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at the request of the Corporation as a director, officer, employee or other
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise and shall inure to the benefit of Agent's
heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. Separability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. 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 but one and the same Agreement. Only
one such counterpart need be produced to evidence the existence of this
Agreement.
17. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
(b) If to the Corporation, to:
Mercata, Inc.
110 - 110th Avenue N.E., Suite 390
Bellevue, Washington 98004-5840
or to such other address as may have been furnished to Agent by the Corporation.
5.
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In Witness Whereof, the parties hereto have executed this Agreement on and
as of the day and year first above written.
[Name]
By: ______________________________________
Title: ___________________________________
Agent
__________________________________________
__________
Address:
__________________________________________
__________________________________________
6.
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EXHIBIT 10.2
MERCATA, INC.
2000 EQUITY INCENTIVE PLAN
Adopted March 7, 2000
Approved By Stockholders _______, 2000
Termination Date: March 6, 2010
1. Purposes.
(a) Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) Available Stock Awards. The purpose of the Plan is to provide a means by
which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) stock bonuses and (iv) rights to acquire restricted
stock.
(c) General Purpose. The Company, by means of the Plan, seeks to retain the
services of the group of persons eligible to receive Stock Awards, to
secure and retain the services of new members of this group and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
2. Definitions.
(a) "Accountants" means the Company's independent public accountants.
(b) "Affiliate" means any parent corporation or subsidiary corporation of the
Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means (i) conviction of, a guilty plea with respect to, or a plea
of nolo contendere to a charge that a Participant has committed a felony
under the laws of the United States or of any state or a crime involving
moral turpitude, including, but not limited to, fraud, theft, embezzlement
or any crime that results in or is intended to result in personal
enrichment at the expense of the Company or an Affiliate; (ii) material
breach of any agreement entered into between the Participant and the
Company or an Affiliate that impairs the Company's or the Affiliate's
interest therein; (iii) willful misconduct, significant failure of the
Participant to perform the Participant's duties, or gross neglect by the
Participant of the Participant's duties; or (iv) engagement in any activity
that constitutes a material conflict of interest with the Company or any
Affiliate.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
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(f) "Committee" means a committee of one or more members of the Board appointed
by the Board in accordance with subsection 3(c).
(g) "Common Stock" means the common stock of the Company.
(h) "Company" means Mercata, Inc., a Delaware corporation.
(i) "Consultant" means any person, including an advisor, (i) engaged by the
Company or an Affiliate to render consulting or advisory services and who
is compensated for such services or (ii) who is a member of the Board of
Directors of an Affiliate. However, the term "Consultant" shall not
include either Directors who are not compensated by the Company for their
services as Directors or Directors who are merely paid a director's fee by
the Company for their services as Directors.
(j) "Continuous Service" means that the Participant's service with the Company
or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not
be deemed to have terminated merely because of a change in the capacity in
which the Participant renders service to the Company or an Affiliate as an
Employee, Consultant or Director or a change in the entity for which the
Participant renders such service, provided that there is no interruption or
termination of the Participant's Continuous Service. For example, a change
in status from an Employee of the Company to a Consultant of an Affiliate
or a Director will not constitute an interruption of Continuous Service.
The Board or the chief executive officer of the Company, in that party's
sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.
(k) "Covered Employee" means the chief executive officer and the four (4) other
highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as
determined for purposes of Section 162(m) of the Code.
(l) "Director" means a member of the Board of Directors of the Company.
(m) "Disability" means the permanent and total disability of a person within
the meaning of Section 22(e)(3) of the Code.
(n) "Employee" means any person employed by the Company or an Affiliate. Mere
service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company
or an Affiliate.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(p) "Fair Market Value" means, as of any date, the value of the Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no
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<PAGE>
sales were reported) as quoted on such exchange or market (or the
exchange or market with the greatest volume of trading in the Common
Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair Market
Value shall be determined in good faith by the Board.
(q) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(r) "Listing Date" means the effective date of the initial public offering of
the Company's Common Stock.
(s) "Non-Employee Director" means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or a subsidiary, does not
receive compensation (directly or indirectly) from the Company or its
parent or a subsidiary for services rendered as a consultant or in any
capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K
promulgated pursuant to the Securities Act ("Regulation S-K")), does not
possess an interest in any other transaction as to which disclosure would
be required under Item 404(a) of Regulation S-K and is not engaged in a
business relationship as to which disclosure would be required under Item
404(b) of Regulation S-K; or (ii) is otherwise considered a "non-employee
director" for purposes of Rule 16b-3.
(t) "Nonstatutory Stock Option" means an Option not intended to qualify as an
Incentive Stock Option.
(u) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(v) "Option" means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
(w) "Option Agreement" means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.
(x) "Optionholder" means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
(y) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning
of Treasury Regulations promulgated under Section 162(m) of the Code), is
not a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an
"affiliated corporation" at any time and is not currently receiving direct
or indirect remuneration from the Company or an
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"affiliated corporation" for services in any capacity other than as a
Director or (ii) is otherwise considered an "outside director" for purposes
of Section 162(m) of the Code.
(z) "Participant" means a person to whom a Stock Award is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding
Stock Award.
(aa) "Plan" means this Mercata, Inc. 2000 Equity Incentive Plan.
(bb) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.
(cc) "Securities Act" means the Securities Act of 1933, as amended.
(dd) "Stock Award" means any right granted under the Plan, including an Option,
a stock bonus and a right to acquire restricted stock.
(ee) "Stock Award Agreement" means a written agreement between the Company and a
holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject
to the terms and conditions of the Plan.
(ff) "Ten Percent Shareholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or of any of its Affiliates.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) Powers of Board. The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award
shall be granted; the provisions of each Stock Award granted (which
need not be identical), including the time or times when a person
shall be permitted to receive Common Stock pursuant to a Stock Award;
and the number of shares of Common Stock with respect to which a
Stock Award shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted under it,
and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct
any defect, omission or inconsistency in the Plan or in any Stock
Award Agreement, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 12.
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(iv) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the
Plan.
(c) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one (1) or more members of the Board, and
the term "Committee" shall apply to any person or persons to whom such
authority has been delegated. If administration is delegated to a
Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the
Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from
time to time by the Board. The Board may abolish the Committee at any
time and revest in the Board the administration of the Plan.
(ii) Committee Composition when Common Stock is Publicly Traded. At such
time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside
Directors, in accordance with Section 162(m) of the Code, and/or
solely of two or more Non-Employee Directors, in accordance with Rule
16b-3. Within the scope of such authority, the Board or the Committee
may (1) delegate to a committee of one or more members of the Board
who are not Outside Directors the authority to grant Stock Awards to
eligible persons who are either (a) not then Covered Employees and are
not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect
to whom the Company wishes to comply with Section 162(m) of the Code
and/or (2) delegate to a committee of one or more members of the Board
who are not Non-Employee Directors the authority to grant Stock Awards
to eligible persons who are not then subject to Section 16 of the
Exchange Act.
(d) Effect of Board's Decision. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to
review by any person and shall be final, binding and conclusive on all
persons.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 12 relating to
adjustments upon changes in Common Stock, the Common Stock that may be
issued pursuant to Stock Awards shall not exceed in the aggregate Four
Million Five Hundred Thousand (4,500,000) shares of Common Stock, plus an
annual increase to be added each January 1, beginning January 1, 2002,
equal to the lesser of One Million Five Hundred Thousand (1,500,000) shares
or five percent (5%) of the total number of shares of Common Stock
outstanding on such January 1. Notwithstanding the foregoing, the Board
may designate a smaller number of shares of Common Stock to be added to the
share reserve as of a particular January 1.
(b) Reversion of Shares to the Share Reserve. If any Stock Award shall for any
reason expire or otherwise terminate, in whole or in part, without having
been exercised in full,
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the shares of Common Stock not acquired under such Stock Award shall revert
to and again become available for issuance under the Plan.
(c) Source of Shares. The shares of Common Stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or otherwise.
5. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.
(b) Ten Percent Stockholders. A Ten Percent Shareholder shall not be granted
an Incentive Stock Option unless the exercise price of such Option is at
least one hundred ten percent (110%) of the Fair Market Value of the Common
Stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Section 162(m) Limitation. Subject to the provisions of Section 12
relating to adjustments upon changes in the shares of Common Stock, no
Employee shall be eligible to be granted Options covering more than two
million (2,000,000) shares of Common Stock during any calendar year.
(d) Consultants.
(i) A Consultant shall not be eligible for the grant of a Stock Award if,
at the time of grant, a Form S-8 Registration Statement under the
Securities Act ("Form S-8") is not available to register either the
offer or the sale of the Company's securities to such Consultant
because of the nature of the services that the Consultant is providing
to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8,
unless the Company determines both (i) that such grant (A) shall be
registered in another manner under the Securities Act (e.g., on a Form
S-3 Registration Statement) or (B) does not require registration under
the Securities Act in order to comply with the requirements of the
Securities Act, if applicable, and (ii) that such grant complies with
the securities laws of all other relevant jurisdictions.
(ii) Form S-8 generally is available to consultants and advisors only if
(i) they are natural persons; (ii) they provide bona fide services to
the issuer, its parents, its majority-owned subsidiaries or majority-
owned subsidiaries of the issuer's parent; and (iii) the services are
not in connection with the offer or sale of securities in a capital-
raising transaction, and do not directly or indirectly promote or
maintain a market for the issuer's securities.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but
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each Option shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) the substance of each of the following
provisions:
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten Percent
Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions of
subsection 5(b) regarding Ten Percent Stockholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option
on the date the Option is granted. Notwithstanding the foregoing, an
Incentive Stock Option may be granted with an exercise price lower than
that set forth in the preceding sentence if such Option is granted pursuant
to an assumption or substitution for another option in a manner satisfying
the provisions of Section 424(a) of the Code.
(c) Exercise Price of a Nonstatutory Stock Option. The exercise price of each
Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, a Nonstatutory
Stock Option may be granted with an exercise price lower than that set
forth in the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.
(d) Consideration. The purchase price of Common Stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash or check at the time the Option is
exercised or (ii) at the discretion of the Board at the time of the grant
of the Option (or subsequently in the case of a Nonstatutory Stock Option)
(1) by delivery to the Company of other Common Stock, (2) according to a
deferred payment or other similar arrangement with the Optionholder or (3)
in any other form of legal consideration that may be acceptable to the
Board. Unless otherwise specifically provided in the Option, the purchase
price of Common Stock acquired pursuant to an Option that is paid by
delivery to the Company of other Common Stock acquired, directly or
indirectly from the Company, shall be paid only by shares of the Common
Stock of the Company that have been held for more than six (6) months (or
such longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). At any time that the Company
is incorporated in Delaware, payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by
deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be
interest under the deferred payment arrangement.
(e) Transferability of an Incentive Stock Option. An Incentive Stock Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. Notwithstanding
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the foregoing, the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party
who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option shall be transferable to the extent provided in the Option
Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Optionholder only by the
Optionholder. Notwithstanding the foregoing, the Optionholder may, by
delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock subject to
an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may
be exercised (which may be based on performance or other criteria) as the
Board may deem appropriate. The vesting provisions of individual Options
may vary. The provisions of this subsection 6(g) are subject to any Option
provisions governing the minimum number of shares of Common Stock as to
which an Option may be exercised. Notwithstanding the foregoing, in the
event an Employee who is also a member of the Board terminates his or her
employment for any reason but remains as a member of the Board, the vesting
on such individual's Option shall (unless the Board determines otherwise)
cease as of the date of the termination of his or her employment but such
individual shall be permitted to exercise his or her Option to purchase the
vested number of shares of Common Stock subject to the Option for such
period of time as provided above or in his or her Option Agreement.
(h) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent
that the Optionholder was entitled to exercise such Option as of the date
of termination) but only within such period of time ending on the earlier
of (i) the date three (3) months following the termination of the
Optionholder's Continuous Service (or such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, after termination,
the Optionholder does not exercise his or her Option within the time
specified in the Option Agreement, the Option shall terminate.
(i) Extension of Termination Date. An Optionholder's Option Agreement may also
provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death
or Disability) would be prohibited at any time solely because the issuance
of shares of Common Stock would violate the registration requirements under
the Securities Act, then the Option shall terminate on the earlier of (i)
the expiration of the term of the Option set forth in subsection 6(a) or
(ii) the expiration of a period of three (3) months after the termination
of the Optionholder's Continuous Service during which the exercise of the
Option would not be in violation of such registration requirements.
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(j) Disability of Optionholder. In the event that an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of
termination), but only within such period of time ending on the earlier of
(i) the date twelve (12) months following such termination (or such longer
or shorter period specified in the Option Agreement) or (ii) the expiration
of the term of the Option as set forth in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her Option within
the time specified herein, the Option shall terminate.
(k) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service
for a reason other than death, then the Option may be exercised (to the
extent the Optionholder was entitled to exercise such Option as of the date
of death) by the Optionholder's estate, by a person who acquired the right
to exercise the Option by bequest or inheritance or by a person designated
to exercise the Option upon the Optionholder's death pursuant to subsection
6(e) or 6(f), but only within the period ending on the earlier of (1) the
date eighteen (18) months following the date of death (or such longer or
shorter period specified in the Option Agreement) or (2) the expiration of
the term of such Option as set forth in the Option Agreement. If, after
death, the Option is not exercised within the time specified herein, the
Option shall terminate.
(l) Early Exercise. The Option may, but need not, include a provision whereby
the Optionholder may elect at any time before the Optionholder's Continuous
Service terminates to exercise the Option as to any part or all of the
shares of Common Stock subject to the Option prior to the full vesting of
the Option. Any unvested shares of Common Stock so purchased may be
subject to a repurchase option in favor of the Company or to any other
restriction the Board determines to be appropriate. The Company will not
exercise its repurchase option until at least six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes) have elapsed following exercise of the
Option unless the Board otherwise specifically provides in the Option.
(m) Re-Load Options.
(i) Without in any way limiting the authority of the Board to make or not
to make grants of Options hereunder, the Board shall have the
authority (but not an obligation) to include as part of any Option
Agreement a provision entitling the Optionholder to a further Option
(a "Re-Load Option") in the event the Optionholder exercises the
Option evidenced by the Option Agreement, in whole or in part, by
surrendering other shares of Common Stock in accordance with this
Plan and the terms and conditions of the Option Agreement. Unless
otherwise specifically provided in the Option, the Optionholder shall
not surrender shares of Common Stock acquired, directly or indirectly
from the Company, unless such shares have been held for more than six
(6) months (or such longer or shorter period of time required to
avoid a charge to earnings for financial accounting purposes).
(ii) Any such Re-Load Option shall (1) provide for a number of shares of
Common Stock equal to the number of shares of Common Stock
surrendered as part or all of the
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exercise price of such Option; (2) have an expiration date which is
the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (3) have an exercise price
which is equal to one hundred percent (100%) of the Fair Market Value
of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-
Load Option shall be subject to the same exercise price and term
provisions heretofore described for Options under the Plan.
(iii) Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of
the grant of the original Option; provided, however, that the
designation of any Re-Load Option as an Incentive Stock Option shall
be subject to the one hundred thousand dollar ($100,000) annual
limitation on the exercisability of Incentive Stock Options described
in subsection 9(d) and in Section 422(d) of the Code. There shall be
no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock
under subsection 4(a) and the "Section 162(m) Limitation" on the
grants of Options under subsection 5(c) and shall be subject to such
other terms and conditions as the Board may determine which are not
inconsistent with the express provisions of the Plan regarding the
terms of Options.
7. Non-Employee Director Stock Options.
Without any further action of the Board, each Non-Employee Director shall
be granted Nonstatutory Stock Options as described in subsections 7(a) and 7(b)
(collectively, "Non-Employee Director Options"). The provisions of this Section
7 shall apply only to a Non-Employee Director Option. Each Non-Employee
Director Option shall include the substance of the terms set forth in
subsections 7(c) through 7(k).
(a) Initial Grants. On the IPO Date, each person who is elected or appointed
for the first time to be a Non-Employee Director automatically shall, upon
the date of his or her initial election or appointment to be a Non-Employee
Director by the Board or stockholders of the Company, be granted an Initial
Grant to purchase forty thousand (40,000) shares of Common Stock on the
terms and conditions set forth herein. For purposes of the foregoing
sentence, on the IPO Date, each person then serving as a Non-Employee
Director and who has not previously been granted options to acquire Common
Stock shall be deemed to have been initially elected as a Non-Employee
Director on such date.
(b) Annual Grants. After the IPO Date, each person who is a Non-Employee
Director on the Board on the day after the annual stockholders' meeting,
shall, on that date, be granted an Annual Grant to purchase five thousand
(5,000) shares of Common Stock on the terms and conditions set forth herein
for each committee of the Board on which he or she serves; provided, that
each Non-Employee Director who is on a committee of the Board on the IPO
Date shall be granted his or her first such Annual Grant on the IPO Date
for each committee on which he or she serves. Notwithstanding the
foregoing, each Non-Employee Director who is first elected or appointed to
a committee after an annual stockholders' meeting shall be entitled to the
Annual Grant for service on that committee which shall be reduced, pro-rata
on a twelve-month basis, for each month following the annual stockholders'
meeting that such person did not serve on the committee; the pro-rated
Annual Grant shall vest monthly over the remainder of the twelve (12) month
period immediately following the annual stockholders' meeting.
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(c) Term. Each Non-Employee Director Option shall have a term of ten (10)
years from the date it is granted.
(d) Exercise Price. The exercise price of each Non-Employee Director Option
shall be one hundred percent (100%) of the Fair Market Value of the stock
subject to the Non-Employee Director Option on the date of grant.
Notwithstanding the foregoing, a Non-Employee Director Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Non-Employee Director Option is granted pursuant to an
assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code. The exercise price for each
Initial Grant shall be the initial offering price for the initial public
offering of the Company's Common Stock as set forth in the Company's
prospectus for the initial public offering.
(e) Vesting. Each Initial Grant shall vest one-fourth (1/4th) per year from
the date on which the director first served on the Board. Each Annual
Grant shall vest fully one (1) year from the date on which it is granted.
(f) Consideration. The purchase price of stock acquired pursuant to a Non-
Employee Director Option may be paid, to the extent permitted by applicable
statutes and regulations, in any combination of (i) cash or check, (ii)
delivery to the Company of other Common Stock, (ii) deferred payment or
(iv) any other form of legal consideration that may be acceptable to the
Board and provided in the Non-Employee Director Option Agreement; provided,
however, that at any time that the Company is incorporated in Delaware,
payment of the Common Stock's "par value," as defined in the Delaware
General Corporation Law, shall not be made by deferred payment. In the case
of any deferred payment arrangement, interest shall be compounded at least
annually and shall be charged at the minimum rate of interest necessary to
avoid the treatment as interest, under any applicable provisions of the
Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(g) Transferability. A Non-Employee Director Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Non-Employee Director only by the
Non-Employee Director. Notwithstanding the foregoing, the Non-Employee
Director may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of
the death of the Non-Employee Director, shall thereafter be entitled to
exercise the Non-Employee Director Option.
(h) Termination of Continuous Service. In the event a Non-Employee Director's
Continuous Service terminates (other than upon the Non-Employee Director's
death or Disability), the Non-Employee Director may exercise his or her
Non-Employee Director Option (to the extent that the Non-Employee Director
was entitled to exercise it as of the date of termination) but only within
such period of time ending on the earlier of (i) the date three (3) months
following the termination of the Non-Employee Director's Continuous
Service, or (ii) the expiration of the term of the Non-Employee Director
Option as set forth in the Non-Employee Director Option Agreement. If,
after termination, the Non-Employee Director does not exercise his or her
Non-Employee Director Option within the time specified in the Non-Employee
Director Option Agreement, the Non-Employee Director Option shall
terminate.
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(i) Extension of Termination Date. If the exercise of the Non-Employee Director
Option following the termination of the Non-Employee Director's Continuous
Service (other than upon the Non-Employee Director's death or Disability)
would be prohibited at any time solely because the issuance of shares would
violate the registration requirements under the Securities Act, then the
Non-Employee Director Option shall terminate on the earlier of (i) the
expiration of the term of the Non-Employee Director Option set forth in
subsection 7(c) or (ii) the expiration of a period of three (3) months
after the termination of the Non-Employee Director's Continuous Service
during which the exercise of the Non-Employee Director Option would not
violate such registration requirements.
(j) Disability of Non-Employee Director. In the event a Non-Employee
Director's Continuous Service terminates as a result of the Non-Employee
Director's Disability, the Non-Employee Director may exercise his or her
Non-Employee Director Option (to the extent that the Non-Employee Director
was entitled to exercise it as of the date of termination), but only within
such period of time ending on the earlier of (i) the date twelve (12)
months following such termination or (ii) the expiration of the term of the
Non-Employee Director Option as set forth in the Non-Employee Director
Option Agreement. If, after termination, the Non-Employee Director does
not exercise his or her Non-Employee Director Option within the time
specified herein, the Non-Employee Director Option shall terminate.
(k) Death of Non-Employee Director. In the event (i) a Non-Employee Director's
Continuous Service terminates as a result of the Non-Employee Director's
death or (ii) the Non-Employee Director dies within the three-month period
after the termination of the Non-Employee Director's Continuous Service for
a reason other than death, then the Non-Employee Director Option may be
exercised (to the extent the Non-Employee Director was entitled to exercise
the Non-Employee Director Option as of the date of death) by the Non-
Employee Director's estate, by a person who acquired the right to exercise
the Non-Employee Director Option by bequest or inheritance or by a person
designated to exercise the Non-Employee Director Option upon the Non-
Employee Director's death, but only within the period ending on the earlier
of (1) the date eighteen (18) months following the date of death or (2) the
expiration of the term of such Non-Employee Director Option as set forth in
the Non-Employee Director Option Agreement. If, after death, the Non-
Employee Director Option is not exercised within the time specified herein,
the Non-Employee Director Option shall terminate.
8. Provisions of Stock Awards other than Options.
(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form and
shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change
from time to time, and the terms and conditions of separate stock bonus
agreements need not be identical, but each stock bonus agreement shall
include (through incorporation of provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:
(i) Consideration. A stock bonus may be awarded in consideration for
past services actually rendered to the Company or an Affiliate for
its benefit.
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(ii) Vesting. Shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share repurchase option
in favor of the Company in accordance with a vesting schedule to be
determined by the Board.
(iii) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may
reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under
the terms of the stock bonus agreement.
(iv) Transferability. Rights to acquire shares of Common Stock under the
stock bonus agreement shall be transferable by the Participant only
upon such terms and conditions as are set forth in the stock bonus
agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the stock bonus agreement remains subject
to the terms of the stock bonus agreement.
(b) Restricted Stock Awards. Each restricted stock purchase agreement shall be
in such form and shall contain such terms and conditions as the Board shall
deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include
(through incorporation of provisions hereof by reference in the agreement
or otherwise) the substance of each of the following provisions:
(i) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine
and designate in such restricted stock purchase agreement. The
purchase price shall not be less than eighty-five percent (85%) of
the Common Stock's Fair Market Value on the date such award is made
or at the time the purchase is consummated.
(ii) Consideration. The purchase price of Common Stock acquired pursuant
to the restricted stock purchase agreement shall be paid either: (i)
in cash or check at the time of purchase; (ii) at the discretion of
the Board, according to a deferred payment or other similar
arrangement with the Participant; or (iii) in any other form of legal
consideration that may be acceptable to the Board in its discretion;
provided, however, that at any time that the Company is incorporated
in Delaware, then payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by
deferred payment.
(iii) Vesting. Shares of Common Stock acquired under the restricted stock
purchase agreement may, but need not, be subject to a share
repurchase option in favor of the Company in accordance with a
vesting schedule to be determined by the Board.
(iv) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of Common
Stock held by the Participant which have not vested as of the date of
termination under the terms of the restricted stock purchase
agreement.
(v) Transferability. Rights to acquire shares of Common Stock under the
restricted stock purchase agreement shall be transferable by the
Participant only upon such terms
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and conditions as are set forth in the restricted stock purchase
agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the restricted stock purchase agreement
remains subject to the terms of the restricted stock purchase
agreement.
9. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock Awards, the Company
shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell
shares of Common Stock upon exercise of the Stock Awards; provided,
however, that this undertaking shall not require the Company to register
under the Securities Act the Plan, any Stock Award or any Common Stock
issued or issuable pursuant to any such Stock Award. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems
necessary for the lawful issuance and sale of Common Stock under the Plan,
the Company shall be relieved from any liability for failure to issue and
sell Common Stock upon exercise of such Stock Awards unless and until such
authority is obtained.
10. Use of Proceeds from Stock.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
11. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Board shall have the power
to accelerate the time at which a Stock Award may first be exercised or the
time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating
the time at which it may first be exercised or the time during which it
will vest.
(b) Stockholder Rights. No Participant shall be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares of Common
Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer
upon any Participant any right to continue to serve the Company or an
Affiliate in the capacity in effect at the time the Stock Award was granted
or shall affect the right of the Company or an Affiliate to terminate (i)
the employment of an Employee with or without notice and with or without
cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the
service of a Director pursuant to the Bylaws of the Company or an
Affiliate, and any applicable provisions of the corporate law of the state
in which the Company or the Affiliate is incorporated, as the case may be.
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(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all plans of
the Company and its Affiliates) exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award,
(i) to give written assurances satisfactory to the Company as to the
Participant's knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business
matters and that he or she is capable of evaluating, alone or together with
the purchaser representative, the merits and risks of exercising the Stock
Award; and (ii) to give written assurances satisfactory to the Company
stating that the Participant is acquiring Common Stock subject to the Stock
Award for the Participant's own account and not with any present intention
of selling or otherwise distributing the Common Stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall
be inoperative if (1) the issuance of the shares of Common Stock upon the
exercise or acquisition of Common Stock under the Stock Award has been
registered under a then currently effective registration statement under
the Securities Act or (2) as to any particular requirement, a determination
is made by counsel for the Company that such requirement need not be met in
the circumstances under the then applicable securities laws. The Company
may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including,
but not limited to, legends restricting the transfer of the Common Stock.
(f) Withholding Obligations. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of
Common Stock under a Stock Award by any of the following means (in addition
to the Company's right to withhold from any compensation paid to the
Participant by the Company) or by a combination of such means: (i)
tendering a cash payment; (ii) authorizing the Company to withhold shares
of Common Stock from the shares of Common Stock otherwise issuable to the
Participant as a result of the exercise or acquisition of Common Stock
under the Stock Award, provided, however, that no shares of Common Stock
are withheld with a value exceeding the minimum amount of tax required to
be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.
12. Adjustments upon Changes in Stock.
The provisions in this Section 12 may be modified by the Board, Committee
or the person or persons delegated the authority to make Stock Awards under
Section 3 with respect to a particular Stock Award as provided in the pertinent
Stock Award Agreement.
(a) Capitalization Adjustments. If any change is made in the stock subject to
the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend,
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dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure or
other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and
maximum number of securities subject to the Plan pursuant to subsection
4(a) and the maximum number of securities subject to award to any person
pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price
per share of stock subject to such outstanding Stock Awards. The Board
shall make such adjustments, and its determination shall be final, binding
and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of
consideration" by the Company.)
(b) Dissolution or Liquidation. In the event of a dissolution or liquidation
of the Company, then all outstanding Stock Awards shall terminate
immediately prior to such event.
(c) Asset Sale, Merger, Consolidation or Reverse Merger.
(i) In the event of a "Change of Control" (as defined below), the
surviving corporation or acquiring corporation shall assume any Stock
Awards outstanding under the Plan or shall substitute similar stock
awards (including an award to acquire the same consideration paid to
the stockholders in the transaction constituting a "Change of
Control" for those outstanding under the Plan). In the event such
surviving corporation or acquiring corporation in the "Change of
Control" refuses to assume such Stock Awards or to substitute similar
stock awards for those outstanding under the Plan, then with respect
to Stock Awards held by Participants whose Continuous Service has not
terminated, the vesting of such Stock Awards (and, if applicable, the
time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not
exercised (if applicable) at or prior to such event. With respect to
any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such event
(ii) If within twelve (12) months following the effective date of a
"Change of Control," the employment of a Participant is terminated
without Cause, then with respect to Stock Awards held by Participants
whose Continuous Service was not terminated prior to the effective
date of the "Change of Control," the vesting of such Stock Awards
(and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full, and the Stock Awards shall
be exercisable as provided in this Plan or the Participant's Stock
Award Agreement.
(iii) For purposes of this Section 12(c), a "Change of Control" shall mean
any one of the following transactions or events: the following
transactions ((i) a dissolution or liquidation of the Company; (ii) a
sale of all or substantially all of the assets of the Company; (iii)
a merger or consolidation in which the Company is not the surviving
corporation and in which beneficial ownership of securities of the
Company representing at least fifty percent (50%) of the combined
voting power entitled to vote in the election of Directors has
changed; (iv) a reverse merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, and
in which beneficial ownership of securities of the Company
representing at least fifty percent (50%) of the
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combined voting power entitled to vote in the election of Directors
has changed; (v) an acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Exchange Act, or any
comparable successor provisions (excluding any employee benefit plan,
or related trust, sponsored or maintained by the Company or
subsidiary of the Company or other entity controlled by the Company)
of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%)
of the combined voting power entitled to vote in the election of
Directors; or (vi) in the event that the individuals who, as of the
Listing Date, are members of the Company's Board (the "Incumbent
Board"), cease for any reason to constitute at least fifty percent
(50%) of the Board. If the election, or nomination for election by
the Company's stockholders, of any new Director is approved by a vote
of at least fifty percent (50%) of the Incumbent Board, such new
Director shall be considered to be a member of the Incumbent Board in
the future. Notwithstanding the foregoing, the initial public
offering of the common stock of the Company shall not constitute a
Change of Control.
13. Amendment of the Plan and Stock Awards.
(a) Amendment of Plan. The Board at any time, and from time to time, may amend
the Plan. However, except as provided in Section 12 relating to
adjustments upon changes in Common Stock, no amendment shall be effective
unless approved by the Stockholders of the Company to the extent
shareholder approval is necessary to satisfy the requirements of Section
422 of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing
requirements.
(b) Shareholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for shareholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) Contemplated Amendments. It is expressly contemplated that the Board may
amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan
and/or Incentive Stock Options granted under it into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.
(e) Amendment of Stock Awards. The Board at any time, and from time to time,
may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant
and (ii) the Participant consents in writing.
14. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the
tenth (10th) anniversary of the
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date the Plan is adopted by the Board or approved by the Stockholders of
the Company, whichever is earlier. No Stock Awards may be granted under the
Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall not
impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
15. Effective Date of Plan.
The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the Stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
16. Choice of Law.
The law of the State of Delaware shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state's conflict of laws rules.
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EXHIBIT 10.3
MERCATA, INC.
1999 Equity Incentive Plan
Adopted February 1, 1999
Approved By Stockholders February 1, 1999
Amended September 29, 1999
Approved by Stockholders September 29, 1999
Termination Date: February 1, 2009
1. Purposes.
(a) Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) Available Stock Awards. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock appreciation rights, (iv) stock bonuses and (v) rights to
acquire restricted stock.
(c) General Purpose. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. Definitions.
(a) "Accountants" means the Company's independent public accountants.
(B) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means (i) conviction of, a guilty plea with respect to, or a
plea of nolo contendere to a charge that a Participant has committed a felony
under the laws of the United States or of any state or a crime involving moral
turpitude, including, but not limited to, fraud, theft, embezzlement or any
crime that results in or is intended to result in personal enrichment at the
expense of the Company or an Affiliate; (ii) material breach of any agreement
entered into between the Participant and the Company or an Affiliate that
impairs the Company's or the Affiliate's interest therein; (iii) willful
misconduct, significant failure of the Participant to perform the Participant's
duties, or gross neglect by the Participant of the Participant's duties; or (iv)
engagement in any activity that constitutes a material conflict of interest with
the Company or any Affiliate.
1.
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(e) "Constructive Termination" means the occurrence of any of the
following events or conditions: (i) (A) a change in the Participant's status,
title, position or responsibilities (including reporting responsibilities) which
represents an adverse change from the Participant's status, title, position or
responsibilities as in effect at any time within ninety (90) days preceding the
date of a Change in Control (as defined in subsection 11(d)) or at any time
thereafter; (B) the assignment to the Participant of any duties or
responsibilities which are inconsistent with the Participant's status, title,
position or responsibilities as in effect at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter; or (C) any
removal of the Participant from or failure to reappoint or reelect the
Participant to any of such offices or positions, except in connection with the
termination of the Participant's Continuous Service for Cause, as a result of
the Participant's Disability or death or by the Participant other than as a
result of Constructive Termination; (ii) a reduction in the Participant's annual
base compensation or any failure to pay the Participant any compensation or
benefits to which the Participant is entitled within five (5) days of the date
due; (iii) the Company's requiring the Participant to relocate to any place
outside a twenty (20) mile radius of the Participant's current work site, except
for reasonably required travel on the business of the Company or its Affiliates
which is not materially greater than such travel requirements prior to the
Change in Control; (iv) the failure by the Company to (A) continue in effect
(without reduction in benefit level and/or reward opportunities) any material
compensation or employee benefit plan in which the Participant was participating
at any time within ninety (90) days preceding the date of a Change in Control or
at any time thereafter, unless such plan is replaced with a plan that provides
substantially equivalent compensation or benefits to the Participant, or (B)
provide the Participant with compensation and benefits, in the aggregate, at
least equal (in terms of benefit levels and/or reward opportunities) to those
provided for under each other employee benefit plan, program and practice in
which the Participant was participating at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter; (v) any
material breach by the Company of any provision of an agreement between the
Company and the Participant, whether pursuant to this Plan or otherwise, other
than a breach which is cured by the Company within fifteen (15) days following
notice by the Participant of such breach; or (vi) the failure of the Company to
obtain an agreement, satisfactory to the Participant, from any successors and
assigns to assume and agree to perform the obligations created under this Plan.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(G) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c).
(h) "Common Stock" means the common stock of the Company.
(i) "Company" means Mercata, Inc., a Delaware corporation.
(j) "Consultant" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors of the Company who are not compensated
2.
<PAGE>
by the Company for their services as Directors or Directors of the Company who
are merely paid a director's fee by the Company for their services as Directors.
(k) "Continuous Service" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(l) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(m) "Director" means a member of the Board of Directors of the Company.
(n) "Disability" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(o) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(q) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
3.
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(r) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(s) "Listing Date" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system.
(t) "Non-Employee Director" means a Director of the Company who either (i)
is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act ("Regulation S-K")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(u) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(v) "Officer" means (i) before the Listing Date, any person designated by
the Company as an officer and (ii) on and after the Listing Date, a person who
is an officer of the Company within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder.
(w) "Option" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(x) "Option Agreement" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(y) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(z) "Outside Director" means a Director of the Company who either (i) is
not a current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
4.
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(aa) "Participant" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(bb) "Plan" means this Mercata, Inc. 1999 Equity Incentive Plan of the
Company.
(cc) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(dd) "Securities Act" means the Securities Act of 1933, as amended.
(ee) "Stock Award" means any right granted under the Plan, including an
Option, a stock appreciation right, a stock bonus and a right to acquire
restricted stock.
(ff) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(gg) "Ten Percent Stockholder" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
5.
<PAGE>
(c) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(ii) Committee Composition when Common Stock is Publicly Traded. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more Non-
Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors, the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or (2) delegate
to a committee of one or more members of the Board who are not Non-Employee
Directors the authority to grant Stock Awards to eligible persons who are not
then subject to Section 16 of the Exchange Act.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate seven million four hundred
thousand (7,400,000) shares of non-voting Common Stock.
(b) Reversion of Shares to the Share Reserve. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not acquired under such Option shall revert to and
again become available for issuance under the Plan. Shares subject to stock
appreciation rights exercised in accordance with the Plan shall not be available
for subsequent issuance under the Plan.
(c) Source of Shares. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
6.
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5. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants.
(b) Ten Percent Stockholders. No Ten Percent Stockholder shall be eligible
for the grant of an Incentive Stock Option unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value of
the Common Stock at the date of grant and the Option is not exercisable after
the expiration of five (5) years from the date of grant.
(c) Section 162(m) Limitation. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no employee shall be eligible to
be granted Stock Awards covering more than one million seven hundred fifty
thousand (1,750,000) shares of the Common Stock during any calendar year. This
subsection 5(c) shall not apply prior to the Listing Date and, following the
Listing Date, this subsection 5(c) shall not apply until (i) the earliest of:
(1) the first material modification of the Plan (including any increase in the
number of shares reserved for issuance under the Plan in accordance with Section
4); (2) the issuance of all of the shares of Common Stock reserved for issuance
under the Plan; (3) the expiration of the Plan; or (4) the first meeting of
stockholders at which Directors of the Company are to be elected that occurs
after the close of the third calendar year following the calendar year in which
occurred the first registration of an equity security under Section 12 of the
Exchange Act; or (ii) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the stock subject to the Option on the date the Option
is granted. Notwithstanding the foregoing, an Incentive Stock Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
7.
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(c) Exercise Price of a Nonstatutory Stock Option. The exercise price of
each Nonstatutory Stock Option shall be not less than fifty percent (50%) of the
Fair Market Value of the stock subject to the Option on the date the Option is
granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(d) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or (3) in any
other form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) Transferability of an Incentive Stock Option. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option shall be transferable to the extent provided in the Option Agreement. If
the Nonstatutory Stock Option does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder. Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
8.
<PAGE>
(h) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service (or
such longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.
(i) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death or
Disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.
(j) Disability of Optionholder. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement) or (ii) the expiration of the term of the Option as set forth
in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.
(k) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person designated to exercise the option upon
the Optionholder's death pursuant to subsection 6(e) or 6(f), but only within
the period ending on the earlier of (1) the date eighteen (18) months following
the date of death (or such longer or shorter period specified in the Option
Agreement) or (2) the expiration of the term of such Option as set forth in the
Option Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
(l) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option. Any
unvested shares so purchased may be subject to an unvested share
9.
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repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate.
(m) Right of Repurchase. The Option may, but need not, include a provision
whereby the Company may elect, prior to the Listing Date, to repurchase all or
any part of the vested shares acquired by the Optionholder pursuant to the
exercise of the Option.
(n) Right of First Refusal. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares received upon the exercise
of the Option. Except as expressly provided in this subsection 6(n), such right
of first refusal shall otherwise comply with any applicable provisions of the
Bylaws of the Company.
(o) Re-Load Options. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall (i) provide for a number of shares equal to the
number of shares surrendered as part or all of the exercise price of such
Option; (ii) have an expiration date which is the same as the expiration date of
the Option the exercise of which gave rise to such Re-Load Option; and (iii)
have an exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load Option
shall be subject to the same exercise price and term provisions heretofore
described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares under subsection 4(a) and
the "Section 162(m) Limitation" on the grants of Options under subsection 5(c)
and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.
7. Provisions of Stock Awards other than Options.
(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus
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agreement shall include (through incorporation of provisions hereof by reference
in the agreement or otherwise) the substance of each of the following
provisions:
(i) Consideration. A stock bonus shall be awarded in consideration
for past services actually rendered to the Company or an Affiliate for its
benefit.
(ii) Vesting. Shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.
(iii) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the stock bonus agreement.
(iv) Transferability. Rights to acquire shares under the stock bonus
agreement shall be transferable by the Participant only upon such terms and
conditions as are set forth in the stock bonus agreement, as the Board shall
determine in its discretion, so long as stock awarded under the stock bonus
agreement remains subject to the terms of the stock bonus agreement.
(b) Restricted Stock Awards. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. The purchase price shall
not be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made or at the time the purchase is consummated.
(ii) Consideration. The purchase price of stock acquired pursuant to
the restricted stock purchase agreement shall be paid either: (i) in cash at the
time of purchase; (ii) at the discretion of the Board, according to a deferred
payment or other arrangement with the Participant; or (iii) in any other form of
legal consideration that may be acceptable to the Board in its discretion;
provided, however, that at any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value," as defined in the Delaware
General Corporation Law, shall not be made by deferred payment.
(iii) Vesting. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.
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(iv) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.
(v) Transferability. Rights to acquire shares under the restricted
stock purchase agreement shall be transferable by the Participant only upon such
terms and conditions as are set forth in the restricted stock purchase
agreement, as the Board shall determine in its discretion, so long as stock
awarded under the restricted stock purchase agreement remains subject to the
terms of the restricted stock purchase agreement.
(c) Stock Appreciation Rights.
(i) Authorized Rights. The following three types of stock
appreciation rights shall be authorized for issuance under the Plan:
(1) Tandem Rights. A "Tandem Right" means a stock appreciation
right granted appurtenant to an Option which is subject to the same terms and
conditions applicable to the particular Option grant to which it pertains with
the following exceptions: The Tandem Right shall require the holder to elect
between the exercise of the underlying Option for shares of Common Stock and the
surrender, in whole or in part, of such Option for an appreciation distribution.
The appreciation distribution payable on the exercised the Tandem Right shall be
in cash (or, if so provided, in an equivalent number of shares of Common Stock
based on Fair Market Value on the date of the Option surrender) in an amount up
to the excess of (A) the Fair Market Value (on the date of the Option surrender)
of the number of shares of Common Stock covered by that portion of the
surrendered Option in which the Optionholder is vested over (B) the aggregate
exercise price payable for such vested shares.
(2) Concurrent Rights. A "Concurrent Right" means a stock
appreciation right granted appurtenant to an Option which applies to all or a
portion of the shares of Common Stock subject to the underlying Option and which
is subject to the same terms and conditions applicable to the particular Option
grant to which it pertains with the following exceptions: A Concurrent Right
shall be exercised automatically at the same time the underlying Option is
exercised with respect to the particular shares of Common Stock to which the
Concurrent Right pertains. The appreciation distribution payable on an exercised
Concurrent Right shall be in cash (or, if so provided, in an equivalent number
of shares of Common Stock based on Fair Market Value on the date of the exercise
of the Concurrent Right) in an amount equal to such portion as determined by the
Board at the time of the grant of the excess of (A) the aggregate Fair Market
Value (on the date of the exercise of the Concurrent Right) of the vested shares
of Common Stock purchased -under the underlying Option which have Concurrent
Rights appurtenant to them over (B) the aggregate exercise price paid for such
shares.
(3) Independent Rights. An "Independent Right" means a stock
appreciation right granted independently of any Option but which is subject to
the same terms and conditions applicable to a Nonstatutory Stock Option with the
following exceptions: An Independent Right shall be denominated in share
equivalents. The appreciation distribution
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payable on the exercised Independent Right shall be not greater than an amount
equal to the excess of (a) the aggregate Fair Market Value (on the date of the
exercise of the Independent Right) of a number of shares of Company stock equal
to the number of share equivalents in which the holder is vested under such
Independent Right, and with respect to which the holder is exercising the
Independent Right on such date, over (b) the aggregate Fair Market Value (on the
date of the grant of the Independent Right) of such number of shares of Company
stock. The appreciation distribution payable on the exercised Independent Right
shall be in cash or, if so provided, in an equivalent number of shares of Common
Stock based on Fair Market Value on the date of the exercise of the Independent
Right.
(ii) Relationship to Options. Stock appreciation rights appurtenant
to Incentive Stock Options may be granted only to Employees. The "Section 162(m)
Limitation" provided in subsection 5(c) and any authority to reprice Options
shall apply as well to the grant of stock appreciation rights.
(iii) Exercise. To exercise any outstanding stock appreciation right,
the holder shall provide written notice of exercise to the Company in compliance
with the provisions of the Stock Award Agreement evidencing such right. Except
as provided in subsection 5(c) regarding the "Section 162(m) Limitation," no
limitation shall exist on the aggregate amount of cash payments that the Company
may make under the Plan in connection with the exercise of a stock appreciation
right.
8. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is
obtained.
9. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
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10. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Stockholder Rights. No Participant shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares subject to
such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(c) No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the stock
subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (ii) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or
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appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(f) Withholding Obligations. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under a
Stock Award by any of the following means (in addition to the Company's right to
withhold from any compensation paid to the Participant by the Company) or by a
combination of such means: (i) tendering a cash payment; (ii) authorizing the
Company to withhold shares from the shares of the Common Stock otherwise
issuable to the participant as a result of the exercise or acquisition of stock
under the Stock Award; or (iii) delivering to the Company owned and unencumbered
shares of the Common Stock.
11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in the stock subject
to the Plan, or subject to any Stock Award, without the receipt of consideration
by the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the maximum number of securities subject to award to any
person pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price per
share of stock subject to such outstanding Stock Awards. The Board shall make
such adjustments, and its determination shall be final, binding and conclusive.
(The conversion of any convertible securities of the Company shall not be
treated as a transaction "without receipt of consideration" by the Company.)
(b) Dissolution or Liquidation. In the event of a dissolution or
liquidation of the Company, then all outstanding Stock Awards shall terminate
immediately prior to such event.
(c) Asset Sale, Merger, Consolidation or Reverse Merger. In the event of
(i) a sale of all or substantially all of the assets of the Company, (ii) a
merger or consolidation in which the Company is not the surviving corporation or
(iii) a reverse merger in which the Company is the surviving corporation but the
shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, then any surviving corporation or acquiring
corporation shall assume any Stock Awards outstanding under the Plan or shall
substitute similar stock awards (including an award to acquire the same
consideration paid to the stockholders in the transaction described in this
subsection 11(c) for those outstanding under the Plan). In the event any
surviving corporation or acquiring corporation refuses to assume such Stock
Awards or to substitute similar stock awards for those outstanding under the
Plan, then with respect to Stock Awards held by Participants whose Continuous
Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised (if
applicable)
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at or prior to such event. With respect to any other Stock Awards outstanding
under the Plan, such Stock Awards shall terminate if not exercised (if
applicable) prior to such event.
(d) Special Acceleration Provisions. Notwithstanding any other provisions
of this Plan to the contrary, following the Listing Date if (i) a Change in
Control (as such term is defined below) occurs and (ii) within one (1) month
prior to the date of such Change in Control or thirteen (13) months after the
date of such Change in Control the Continuous Service of a Participant
terminates due to an involuntary termination (not including death or Disability)
without Cause or due to a Constructive Termination, then the vesting and
exercisability of all Stock Awards held by such Participant shall be accelerated
in full or any reacquisition or repurchase rights held by the Company with
respect to a Stock Award shall lapse in full, as appropriate; provided, however,
that if such potential acceleration of the vesting and exercisability of Stock
Awards (or lapse of reacquisition or repurchase rights held by the Company with
respect to Stock Awards) would cause a contemplated Change in Control
transaction that would otherwise be eligible to be accounted for as a "pooling-
of-interests" transaction to become ineligible for such accounting treatment
under generally accepted accounting principles as determined by the Accountants
prior to the Change of Control, such acceleration shall not occur.
For purposes of this subsection 11(d) only, Change in Control means: (i) a
dissolution or liquidation of the Company; (ii) a sale of all or substantially
all of the assets of the Company; (iii) a merger or consolidation in which the
Company is not the surviving corporation and in which beneficial ownership of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of Directors has changed;
(iv) a reverse merger in which the Company is the surviving corporation but the
shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, and in which beneficial ownership of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of Directors has changed; (v) an
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or subsidiary of the Company or other entity controlled by the Company)
of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of Directors; or (vi) in the event that the individuals
who, as of the Listing Date, are members of the Company's Board (the "Incumbent
Board"), cease for any reason to constitute at least fifty percent (50%) of the
Board. (If the election, or nomination for election by the Company's
stockholders, of any new Director is approved by a vote of at least fifty
percent (50%) of the Incumbent Board, such new Director shall be considered to
be a member of the Incumbent Board in the future.)
(e) Parachute Payments. In the event that the acceleration of the vesting
and exercisability of the Stock Awards or lapse of reacquisition or repurchase
rights held by the Company with respect to Stock Awards provided for in
subsection 11(d) and benefits otherwise
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payable to a Participant (i) constitute "parachute payments" within the meaning
of Section 280G (as it may be amended or replaced) of the Code, and (ii) but for
this subsection 11(e) would be subject to the excise tax imposed by Section 4999
(as it may be amended or replaced) of the Code (the "Excise Tax"), then such
Participant's benefits hereunder shall be delivered to such lesser extent which
would result in no portion of such benefits being subject to the Excise Tax;
provided, however, that the benefits hereunder shall be reduced only to the
extent necessary only after all cash amounts otherwise payable to such
Participant and which constitute "parachute payments" have been returned. Unless
the Company and such Participant otherwise agree in writing, any determination
required under this subsection 11(e) shall be made in writing in good faith by
the Accountants. For purposes of making the calculations required by this
subsection 11(e), the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of the Code. The Company and
such Participants shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a
determination under this subsection 11(e). The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this subsection 11(e).
12. Amendment of the Plan and Stock Awards.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval, including, but not limited
to, amendments to the Plan intended to satisfy the requirements of Section
162(m) of the Code and the regulations thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) Contemplated Amendments. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
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13. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
14. Effective Date of Plan.
The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
15. Choice of Law.
All questions concerning the construction, validity and interpretation of
this Plan shall be governed by the law of the State of Delaware, without regard
to such state's conflict of laws rules.
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EXHIBIT 10.4
Mercata, Inc.
2000 Employee Stock Purchase Plan
Adopted by the Board of Directors February 23, 2000
Approved by Stockholders _____, 2000
1. Purpose.
(a) The purpose of the Plan is to provide a means by which Employees of
the Company and certain designated Affiliates may be given an opportunity to
purchase shares of the Common Stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
such Employees, to secure and retain the services of new Employees and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.
(c) The Company intends that the Rights to purchase shares of the Common
Stock granted under the Plan be considered options issued under an "employee
stock purchase plan," as that term is defined in Section 423(b) of the Code.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with subparagraph 3(c) of the Plan.
(e) "Common Stock" means the Common Stock of Mercata, Inc..
(f) "Company" means Mercata, Inc., a Delaware corporation.
(g) "Director" means a member of the Board.
(h) "Eligible Employee" means an Employee who meets the requirements set
forth in the Offering for eligibility to participate in the Offering.
(i) "Employee" means any person, including Officers and Directors,
employed by the Company or an Affiliate of the Company. Neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
"employment" by the Company or the Affiliate.
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(j) "Employee Stock Purchase Plan" means a plan that grants rights
intended to be options issued under an "employee stock purchase plan," as that
term is defined in Section 423(b) of the Code.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(l) "Fair Market Value" means the value of a security, as determined in
good faith by the Board. If the security is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
then, except as otherwise provided in the Offering, the Fair Market Value of the
security shall be the closing sales price (rounded up where necessary to the
nearest whole cent) for such security (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the relevant security of the Company) on the
relevant determination date, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or if such date is not a trading day,
then on the next preceding trading day.
(m) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(n) "Offering" means the grant of Rights to purchase shares of the Common
Stock under the Plan to Eligible Employees.
(o) "Offering Date" means a date selected by the Board for an Offering to
commence.
(p) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(q) "Participant" means an Eligible Employee who holds an outstanding
Right granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Right granted under the Plan.
(r) "Plan" means this Mercata, Inc. Amended and Restated 1997 Employee
Stock Purchase Plan.
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(s) "Purchase Date" means one or more dates established by the Board
during an Offering on which Rights granted under the Plan shall be exercised and
purchases of shares of the Common Stock carried out in accordance with such
Offering.
(t) "Right" means an option to purchase shares of the Common Stock granted
pursuant to the Plan.
(u) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(v) "Securities Act" means the Securities Act of 1933, as amended.
3. Administration.
(a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subparagraph 3(c).
Whether or not the Board has delegated administration, the Board shall have the
final power to determine all questions of policy and expediency that may arise
in the administration of the Plan.
(b) The Board (or the Committee) shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine when and how Rights to purchase shares of the
Common Stock shall be granted and the provisions of each Offering of such Rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and Rights granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 14.
(v) To terminate or suspend the Plan as provided in paragraph 16.
(vi) Generally, to exercise such powers and to perform such acts as
it deems necessary or expedient to promote the best interests of the Company and
its Affiliates and to carry out the intent that the Plan be treated as an
Employee Stock Purchase Plan.
(c) The Board may delegate administration of the Plan to a Committee of
the Board composed of two (2) or more members, all of the members of which
Committee may be, in the discretion of the Board, Non-Employee Directors and/or
Outside Directors. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
3.
<PAGE>
subcommittee of two (2) or more Outside Directors any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or such a subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.
4. Shares subject to the Plan.
(a) Subject to the provisions of paragraph 13 relating to adjustments upon
changes in securities, the shares of the Common Stock that may be sold pursuant
to Rights granted under the Plan shall not exceed in the aggregate two hundred
fifty thousand (250,000) shares of the Common Stock (the "Reserved Shares"). As
of each January 1, beginning on January 1, 2002, and continuing through and
including January 1, 2010, the number of Reserved Shares will be increased
automatically by the lesser of (i) one percent (1%) of the total number of
shares of the Common Stock outstanding on such January 1 or (ii) one hundred
twenty-five thousand (125,000) shares. Notwithstanding the foregoing, the Board
may designate a smaller number of shares to be added to the share reserve as of
a particular January 1. If any Right granted under the Plan shall for any
reason terminate without having been exercised, the shares of the Common Stock
not purchased under such Right shall again become available for the Plan.
(b) The shares of the Common Stock subject to the Plan may be unissued
shares of the Common Stock or shares of the Common Stock that have been bought
on the open market at prevailing market prices or otherwise.
5. Grant of Rights; Offering.
The Board may from time to time grant or provide for the grant of Rights to
purchase shares of the Common Stock under the Plan to Eligible Employees in an
Offering on an Offering Date or Dates selected by the Board. Each Offering
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all Employees granted Rights to purchase shares of
the Common Stock under the Plan shall have the same rights and privileges. The
terms and conditions of an Offering shall be incorporated by reference into the
Plan and treated as part of the Plan. The provisions of separate Offerings need
not be identical, but each Offering shall include (through incorporation of the
provisions of this Plan by reference in the document comprising the Offering or
otherwise) the period during which the Offering shall be effective, which period
shall not exceed twenty-seven (27) months beginning with the Offering Date, and
the substance of the provisions contained in paragraphs 6 through 9, inclusive.
6. Eligibility.
(a) Rights may be granted only to Employees of the Company or, as the
Board may designate as provided in subparagraph 3(b), to Employees of an
Affiliate. Except as provided in subparagraph 6(b), an Employee shall not be
eligible to be granted Rights under the Plan unless, on the Offering Date, such
Employee has been in the employ of the Company or the Affiliate, as the case may
be, for such continuous period preceding such grant as the Board may require,
but
4.
<PAGE>
in no event shall the required period of continuous employment be less than
ninety (90) days or equal to or greater than two (2) years; provided, however,
that Employees who are employed by the Company as of the Effective Date of this
Plan who would otherwise be Eligible Employees if not for the required period of
continuous employment with the Company shall be eligible to participate in the
Plan with respect to the first Offering Period without regard to their period of
prior continuous employment with the Company provided that they remain in
continuous employment through the end of the first Offering Period.
(b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee will, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a Right under that
Offering, which Right shall thereafter be deemed to be a part of that Offering.
Such Right shall have the same characteristics as any Rights originally granted
under that Offering, as described herein, except that:
(i) the date on which such Right is granted shall be the "Offering
Date" of such Right for all purposes, including determination of the exercise
price of such Right;
(ii) the period of the Offering with respect to such Right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she will not receive any Right under that Offering.
(c) No Employee shall be eligible for the grant of any Rights under the
Plan if, immediately after any such Rights are granted, such Employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 6(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any Employee, and stock which such Employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such Employee.
(d) An Eligible Employee may be granted Rights under the Plan only if such
Rights, together with any other Rights granted under all Employee Stock Purchase
Plans of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such Eligible Employee's rights to purchase shares of
the Common Stock or any Affiliate to accrue at a rate which exceeds twenty five
thousand dollars ($25,000) of the fair market value of such shares of the Common
Stock (determined at the time such Rights are granted) for each calendar year in
which such Rights are outstanding at any time.
(e) The Board may provide in an Offering that Employees who are highly
compensated Employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
5.
<PAGE>
7. Rights; Purchase Price.
(a) On each Offering Date, each Eligible Employee, pursuant to an Offering
made under the Plan, shall be granted the Right to purchase up to the number of
shares of the Common Stock purchasable either:
(i) with a percentage designated by the Board not exceeding fifteen
percent (15%) of such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering; or
(ii) with a maximum dollar amount designated by the Board that, as the
Board determines for a particular Offering, (1) shall be withheld, in whole or
in part, from such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering and/or (2) shall be contributed, in whole or in part, by such Employee
during such period.
(b) The Board shall establish one or more Purchase Dates during an
Offering on which Rights granted under the Plan shall be exercised and purchases
of shares of the Common Stock carried out in accordance with such Offering.
(c) In connection with each Offering made under the Plan, the Board may
specify a maximum number of shares of the Common Stock that may be purchased by
any Participant as well as a maximum aggregate number of shares of the Common
Stock that may be purchased by all Participants pursuant to such Offering. In
addition, in connection with each Offering that contains more than one Purchase
Date, the Board may specify a maximum aggregate number of shares of the Common
Stock which may be purchased by all Participants on any given Purchase Date
under the Offering. If the aggregate purchase of shares of the Common Stock
upon exercise of Rights granted under the Offering would exceed any such maximum
aggregate amount, the Board shall make a pro rata allocation of the shares of
the Common Stock available in as nearly a uniform manner as shall be practicable
and as it shall deem to be equitable.
(d) The purchase price of shares of the Common Stock acquired pursuant to
Rights granted under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the shares of the Common Stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the shares of the Common Stock on the Purchase Date.
8. Participation; Withdrawal; Termination.
(a) An Eligible Employee may become a Participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll
6.
<PAGE>
deductions of up to the maximum percentage specified by the Board of such
Employee's Earnings during the Offering (as defined in each Offering). The
payroll deductions made for each Participant shall be credited to a bookkeeping
account for such Participant under the Plan and either may be deposited with the
general funds of the Company or may be deposited in a separate account in the
name of, and for the benefit of, such Participant with a financial institution
designated by the Company. To the extent provided in the Offering, a Participant
may reduce (including to zero) or increase such payroll deductions. To the
extent provided in the Offering, a Participant may begin such payroll deductions
after the beginning of the Offering. A Participant may make additional payments
into his or her account only if specifically provided for in the Offering and
only if the Participant has not already had the maximum permitted amount
withheld during the Offering.
(b) At any time during an Offering, a Participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board in the Offering. Upon such withdrawal from the
Offering by a Participant, the Company shall distribute to such Participant all
of his or her accumulated payroll deductions (reduced to the extent, if any,
such deductions have been used to acquire shares of the Common Stock for the
Participant) under the Offering, without interest unless otherwise specified in
the Offering, and such Participant's interest in that Offering shall be
automatically terminated. A Participant's withdrawal from an Offering will have
no effect upon such Participant's eligibility to participate in any other
Offerings under the Plan but such Participant will be required to deliver a new
participation agreement in order to participate in subsequent Offerings under
the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating Employee's employment with the
Company or a designated Affiliate for any reason (subject to any post-employment
participation period required by law) or other lack of eligibility. The Company
shall distribute to such terminated Employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire shares of the Common Stock for the terminated Employee) under
the Offering, without interest unless otherwise specified in the Offering. If
the accumulated payroll deductions have been deposited with the Company's
general funds, then the distribution shall be made from the general funds of the
Company, without interest. If the accumulated payroll deductions have been
deposited in a separate account with a financial institution as provided in
subparagraph 8(a), then the distribution shall be made from the separate
account, without interest unless otherwise specified in the Offering.
(d) Rights granted under the Plan shall not be transferable by a
Participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 15 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such Rights
are granted.
9. Exercise.
(a) On each Purchase Date specified therefor in the relevant Offering,
each Participant's accumulated payroll deductions and other additional payments
specifically
7.
<PAGE>
provided for in the Offering (without any increase for interest) will be applied
to the purchase of shares of the Common Stock up to the maximum number of shares
of the Common Stock permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares of the Common Stock shall be issued upon the exercise of
Rights granted under the Plan unless specifically provided for in the Offering.
(b) Unless otherwise specifically provided in the Offering, the amount, if
any, of accumulated payroll deductions remaining in any Participant's account
after the purchase of shares of the Common Stock that is equal to the amount
required to purchase one or more whole shares of the Common Stock on the final
Purchase Date of the Offering shall be distributed in full to the Participant at
the end of the Offering, without interest. If the accumulated payroll deductions
have been deposited with the Company's general funds, then the distribution
shall be made from the general funds of the Company, without interest. If the
accumulated payroll deductions have been deposited in a separate account with a
financial institution as provided in subparagraph 8(a), then the distribution
shall be made from the separate account, without interest unless otherwise
specified in the Offering. The amount of accumulated payroll deductions
remaining in any Participant's account that is less than the amount required to
purchase one whole share of Common Stock on the final Purchase Date of the
Offering shall be carried over to the next Offering or shall, if the Participant
requests or does not participate in the next Offering, be refunded.
(c) No Rights granted under the Plan may be exercised to any extent unless
the shares of the Common Stock to be issued upon such exercise under the Plan
(including Rights granted thereunder) are covered by an effective registration
statement pursuant to the Securities Act and the Plan is in material compliance
with all applicable state, foreign and other securities and other laws
applicable to the Plan. If on a Purchase Date in any Offering hereunder the Plan
is not so registered or in such compliance, no Rights granted under the Plan or
any Offering shall be exercised on such Purchase Date, and the Purchase Date
shall be delayed until the Plan is subject to such an effective registration
statement and such compliance, except that the Purchase Date shall not be
delayed more than twelve (12) months and the Purchase Date shall in no event be
more than twenty-seven (27) months from the Offering Date. If, on the Purchase
Date of any Offering hereunder, as delayed to the maximum extent permissible,
the Plan is not registered and in such compliance, no Rights granted under the
Plan or any Offering shall be exercised and all payroll deductions accumulated
during the Offering (reduced to the extent, if any, such deductions have been
used to acquire Shares) shall be distributed to the Participants, without
interest unless otherwise specified in the Offering. If the accumulated payroll
deductions have been deposited with the Company's general funds, then the
distribution shall be made from the general funds of the Company, without
interest. If the accumulated payroll deductions have been deposited in a
separate account with a financial institution as provided in subparagraph 8(a),
then the distribution shall be made from the separate account, without interest
unless otherwise specified in the Offering.
10. Covenants of the Company.
(a) During the terms of the Rights granted under the Plan, the Company
shall ensure that the number of shares of the Common Stock required to satisfy
such Rights are available.
8.
<PAGE>
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of the Common Stock upon
exercise of the Rights granted under the Plan. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful
issuance and sale of shares of the Common Stock under the Plan, the Company
shall be relieved from any liability for failure to issue and sell shares of the
Common Stock upon exercise of such Rights unless and until such authority is
obtained.
11. Use of Proceeds from Shares.
Proceeds from the sale of shares of the Common Stock pursuant to Rights
granted under the Plan shall constitute general funds of the Company.
12. Rights as a Stockholder.
A Participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, shares of the Common Stock subject to
Rights granted under the Plan unless and until the Participant's shares of the
Common Stock acquired upon exercise of Rights under the Plan are recorded in the
books of the Company.
13. Adjustments upon Changes in Securities.
(a) If any change is made in the shares of the Common Stock subject to the
Plan, or subject to any Right, without the receipt of consideration by the
Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of Reserved Shares of the Common Stock subject to
the Plan pursuant to subparagraph 4(a) including the annual increases in the
Reserved Shares of the Common Stock to be reserved under the Plan, and the
outstanding Rights will be appropriately adjusted in the class(es), number of
shares of the Common Stock and purchase limits of such outstanding Rights. The
Board shall make such adjustments, and its determination shall be final, binding
and conclusive. (The conversion of any convertible securities of the Company
shall not be treated as a transaction that does not involve the receipt of
consideration by the Company.)
(b) In the event of: (i) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving corporation; or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of the Common
Stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, then: (1) any surviving or acquiring corporation may assume Rights
outstanding under the Plan or may substitute similar rights (including a right
to acquire the same consideration paid to the Company's stockholders in the
transaction described in this subparagraph 13(b)) for those outstanding under
the Plan, or (2) in the event any surviving or acquiring corporation does not
assume such Rights or substitute similar rights for those
9.
<PAGE>
outstanding under the Plan, then, as determined by the Board in its sole
discretion, such Rights may continue in full force and effect or the
Participants' accumulated payroll deductions (exclusive of any accumulated
interest which cannot be applied toward the purchase of shares of the Common
Stock under the terms of the Offering) may be used to purchase shares of the
Common Stock immediately prior to the transaction described above under the
ongoing Offering and the Participants' Rights under the ongoing Offering
thereafter terminated.
14. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 13 relating to adjustments upon changes
in securities and except as to minor amendments to benefit the administration of
the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Affiliate, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 423 of the Code, Rule 16b-3
under the Exchange Act and any Nasdaq or other securities exchange listing
requirements. Currently under the Code, stockholder approval within twelve (12)
months before or after the adoption of the amendment is required where the
amendment will:
(i) Increase the number of shares of the Common Stock reserved for
Rights under the Plan;
(ii) Modify the provisions as to eligibility for participation in the
Plan to the extent such modification requires stockholder approval in order for
the Plan to obtain employee stock purchase plan treatment under Section 423 of
the Code or to comply with the requirements of Rule 16b-3; or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the requirements
of Rule 16b-3.
(b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Employee Stock Purchase Plans
and/or to bring the Plan and/or Rights granted under it into compliance
therewith.
(c) Rights and obligations under any Rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such Rights were granted, or except as necessary
to comply with any laws or governmental regulations, or except as necessary to
ensure that the Plan and/or Rights granted under the Plan comply with the
requirements of Section 423 of the Code.
15. Designation of Beneficiary.
(a) A Participant may file a written designation of a beneficiary who is
to receive any shares of the Common Stock and/or cash, if any, from the
Participant's account under the Plan in
10.
<PAGE>
the event of such Participant's death subsequent to the end of an Offering but
prior to delivery to the Participant of such shares of the Common Stock and
cash. In addition, a Participant may file a written designation of a beneficiary
who is to receive any cash from the Participant's account under the Plan in the
event of such Participant's death during an Offering.
(b) The Participant may change such designation of beneficiary at any time
by written notice. In the event of the death of a Participant and in the absence
of a beneficiary validly designated under the Plan who is living at the time of
such Participant's death, the Company shall deliver such shares of the Common
Stock and/or cash to the executor or administrator of the estate of the
Participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its sole discretion, may deliver such
shares of the Common Stock and/or cash to the spouse or to any one or more
dependents or relatives of the Participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.
16. Termination or Suspension of the Plan.
(a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the shares of the Common Stock subject to the Plan's reserve, as increased
and/or adjusted from time to time, have been issued under the terms of the Plan.
No Rights may be granted under the Plan while the Plan is suspended or after it
is terminated.
(b) Rights and obligations under any Rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
Rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
Rights granted under the Plan comply with the requirements of Section 423 of the
Code.
17. Effective Date of Plan.
The Plan shall become effective simultaneously with the effectiveness of
the Company's registration statement under the Securities Act with respect to
the initial public offering of shares of the Company's Common Stock (the
"Effective Date"), but no Rights granted under the Plan shall be exercised
unless and until the Plan has been approved by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board, which date may be prior to the Effective Date.
11.
<PAGE>
Exhibit 10.5
SUBLEASE
(110 Atrium Place)
This Sublease, dated for reference purposes as of February 29, 2000, is made
by and between VULCAN NORTHWEST INC., a Washington corporation ("Landlord"), and
MERCATA, INC., a Delaware corporation ("Tenant"), subject to the terms and
conditions set forth herein.
Landlord, as tenant, entered that certain Lease Agreement dated September
8, 1993 (the "Original Lease") between Dean Witter Realty Income Partnership II,
L.P., a Delaware limited partnership ("Original Lessor"), whose interest was
subsequently assigned and transferred to 110 Atrium Place Associates, LLC
("Prime Landlord"). Pursuant to the Original Lease, Original Lessor leased to
Landlord, and Landlord leased from Original Lessor approximately 9,271 rentable
square feet of office space identified as Suite 550 on the 5th floor of the
building known as 110 Atrium Place located at 110 -110th Avenue N.E., Bellevue,
Washington (the "Building"). Original Lessor and Landlord entered into a First
Amendment to Lease dated April 29, 1994 (the "First Amendment") by which
Landlord leased additional space in the Building, consisting of approximately
2,070 rentable square feet, known as Suite 530; a Second Amendment to Lease
dated as of May 27, 1994 (the "Second Amendment") by which Landlord leased
additional space in the Building, consisting of approximately 2,662 rentable
square feet, known as Suite 535; a Third Amendment to Lease dated as of January
26, 1996 (the "Third Amendment"); a Fourth Amendment to Lease dated as of March
31, 1996 (the "Fourth Amendment"); a Fifth Amendment to Lease dated as of March
12, 1997 (the "Fifth Amendment") by which Lessor leased to Landlord additional
spaces in the Building, consisting of a total of approximately 7,151 rentable
square feet (the "Fifth Amendment Space"), known as Suites 520, 525, 375 and
385; a Sixth Amendment to Leased dated as of April 15, 1998 (the "Sixth
Amendment") by which Lessor leased to Landlord two (2) additional spaces in the
Building consisting of (i) approximately 8,247 rentable square feet (and
containing approximately 7,497 usable square feet), known as Suite 590, and (ii)
approximately 9,993 rentable square feet (and containing approximately 9,085
usable square feet), known as Suite 300; and a Seventh Amendment to Lease dated
as of September 14, 1998 (the "Seventh Amendment") by which Lessor leased to
Landlord additional space in the Building consisting of approximately 4,043
rentable square feet known as Suite 310. The Original Lease, as amended by the
First Amendment, the Second Amendment, the Third Amendment, the Fourth
Amendment, the Fifth Amendment, the Sixth Amendment, and the Seventh Amendment,
is hereinafter referred to as the "Prime Lease." The Building is located on the
real property described on Exhibit A.
---------
The parties hereto have agreed that Landlord shall sublet approximately
17,332 rentable square feet of such space to Tenant, subject to the terms and
conditions set forth herein as follows:
1. Premises. Landlord hereby leases to Tenant Suite 300 (approximately
--------
9,993 rentable square feet), Suite 310 (approximately 4,043 rentable square
feet), Suite 375 (approximately 1,117 square feet) and Suite 385 (approximately
2,179 square feet) on the third floor of the Building ("Premises"), shown by
cross-hatching on Exhibit B attached hereto and made a part hereof.
---------
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<PAGE>
2. Term. The term of this Sublease as to each Suite shall be as follows:
----
(a) Suite 300. The commencement date as to Suite 300 shall be October 5,
---------
1998, and the termination date shall be October 31, 2003.
(b) Suite 310. The commencement date as to Suite 310 shall be August 1,
----------
1999, and the termination date shall be October 31, 2003.
(c) Suites 375 & 385. The commencement date as to Suites 375 and 385
-----------------
shall be March 1, 2000, and the termination date shall be April 30, 2000.
3. Rent. Tenant shall pay to Landlord rent at the rate of Twenty-Five
----
Dollars and 75/100 ($25.75) per rentable square foot per annum, plus the
additional rent mentioned in paragraph 6 below. Tenant shall pay the rent and
additional rent provided for hereunder in equal monthly installments in advance
on the first day of each and every month during the term.
4. Use. The Premises shall be used for general office purposes and for
---
no other purpose without Landlord's prior written consent, which consent shall
not be unreasonably withheld, conditioned or delayed.
5. Assignment. Tenant shall not assign this Sublease nor sublet the
----------
Premises in whole or in part, and shall not permit Tenant's interest in this
Sublease to be vested in any third party by operation of law or otherwise,
without (i) the prior written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed; and (ii) the prior written
consent of Prime Landlord in accordance with Section 16 of the Prime Lease.
6. Additional Charges. If Landlord shall be charged for additional rent
------------------
or other sums pursuant to the provisions of the Prime Lease, including (without
limitation) Section 9 (Rental Adjustments, Operating Costs) thereof, Tenant
shall be liable for such additional rent or sums to the extent the same apply to
the Premises. If any such rent or sums shall be due to additional use by Tenant
of electrical current in excess of Tenant's proportionate part of additional use
in the Premises demised under the Prime Lease, such excess shall be paid in
entirety by Tenant. If Tenant shall procure any additional services from the
Building, such as alterations or after-hour air conditioning, Tenant shall pay
for such services at the rates charged therefor by the Prime Landlord and shall
make such payment to the Landlord or Prime Landlord, as Landlord shall direct.
Any rent or other sums payable by Tenant under this Article 6 shall be
additional rent and collectable as such.
7. Alterations and Allowance. Tenant shall have the right to make
-------------------------
Alterations in the Premises prior to, and up to thirty (30) months following,
November 1, 1998, in accordance with the provisions of Section 11 of the Prime
Lease. Upon completion of the Alterations for such space, Landlord shall pay to
Tenant a construction allowance (the "Allowance") up to $5.00 per usable square
foot of area in the Premises, provided, such Allowance shall be payable by
Landlord only if within thirty (30) months following November 1, 1998, Tenant
(a) completes such Alterations and (b) submits to Landlord a written request for
reimbursement for the costs of such Alterations, together with lien waivers from
the general contractor and all subcontractor and suppliers showing that the
costs of such Alterations have been paid in full; provided further, however,
that the
-2-
<PAGE>
Allowance shall in no event exceed the amount of the tenant improvement
allowance remaining available at any time to the Landlord pursuant to the Prime
Lease with respect to each portion of the Premises.
8. Prime Lease. This Sublease is subject and subordinate to the Prime
-----------
Lease. Except as may be inconsistent with the terms hereof, all the terms,
covenants and conditions in the Prime Lease relating to the Premises shall be
applicable to this Sublease with the same force and effect as if Landlord were
the landlord under the Prime Lease and Tenant were the tenant thereunder; and in
case of any breach hereof by Tenant, Landlord shall have all the rights against
Tenant as would be available to the landlord against the tenant under the Prime
Lease if such breach were by the tenant thereunder. Landlord warrants and
represents that all consents required under the Prime Lease to enter into this
Sublease have been obtained.
9. Limitation. Notwithstanding anything herein contained, the only
----------
services or rights to which Tenant is entitled hereunder are those to which
Landlord is entitled under the Prime Lease and that for all such services and
rights Tenant will look to the Prime Landlord.
10. Indemnity. Tenant shall neither do nor permit anything to be done
---------
which would cause the Prime Lease to be terminated or forfeited by reason of any
right of termination or forfeiture reserved or vested in the Prime Landlord, and
Tenant shall indemnify and hold Landlord harmless from and against all claims of
any kind whatsoever by reason of any breach or default on the part of Tenant by
reason of which the Prime Lease may be terminated or forfeited.
11. Security Deposit. **[INTENTIONALLY OMITTED]**
----------------
12. Representation. Tenant represents that it has read and is familiar
--------------
with the terms of the Prime Lease.
13. Entire Agreement. All prior understandings and agreements between the
----------------
parties are merged within this Sublease, which alone fully and completely sets
forth the understanding of the parties; and this Sublease may not be changed or
terminated orally or in any manner other than by an agreement in writing and
signed by the party against whom enforcement of the charge or termination is
sought.
14. Notices. Any notice or demand which either party may or must give to
-------
the other hereunder shall be in writing and delivered personally or sent
by registered mail addressed as follows:
If to Landlord: Vulcan Northwest Inc.
110 - 110th Avenue N.E., #550
Bellevue, Washington 98004
Attention: Joe Franzi
With a copy to: Foster Pepper & Shefelman PLLC
1111 Third Avenue, #3400
Seattle, Washington 98101
-3-
<PAGE>
Attention: Bruce Coffey
If to Tenant: Mercata, Inc.
110 - 110th Avenue NE, Suite 300
Bellevue, Washington 98004
Attention: General Counsel
Either party may, by notice in writing, direct the future notices or demands be
sent to a different address.
15. Successors and Assigns. The covenants and agreements herein contained
----------------------
shall bind and inure to the benefit of Landlord, the Tenant, and their
respective executors, administrators, successors and assigns.
16. Waiver of Subrogation. The waiver of subrogation provision set forth
---------------------
in Section 17 of the Prime Lease shall be deemed a three party agreement binding
among and inuring to the benefit of Landlord, Tenant and Prime Landlord (by
reason of its consent hereto).
17. Attorneys' Fees. In the event of any action or proceeding by either
---------------
party against the other under this Sublease, the prevailing party shall be
entitled to recover for the fees of its attorneys in such action or proceeding,
including costs of appeal, if any, in such amount as the court may adjudge
reasonable as attorneys' fees
Exhibits:
Exhibit A: Legal Description
Exhibit B: Floor Plan of Sublet Space
-4-
<PAGE>
IN WITNESS WHEREOF, this Sublease is executed by the parties, intending to be
legally bound, as of the date first written above.
LANDLORD: VULCAN NORTHWEST INC., a Washington corporation
By: /s/ Joseph Franzi
----------------------------------
Name: ___________________________
Title: ____________________
TENANT: MERCATA, INC., a Delaware corporation
By: /s/ Tom Van Horn
----------------------------------
Tom Van Horn
President and CEO
-5-
<PAGE>
CONSENT OF PRIME LANDLORD
-------------------------
The undersigned, hereby joins in this Sublease solely for the purpose of
consenting to such sublease in accordance with Section 16 of the Prime Lease,
and for no other purpose.
PRIME LANDLORD: 110 ATRIUM PLACE ASSOCIATES, LLC, a California
limited liability company
By: Opportunity Capital Partners III, LLC, a
California limited liability company
By: __________________________
Name: ___________________
Title: ___________________
-6-
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that Joseph Franzi is
the person who appeared before me, and said person acknowledged that said person
signed this instrument, on oath stated that said person was authorized to
execute the instrument and acknowledged it as the _________________ of VULCAN
NORTHWEST INC., a corporation, to be the free and voluntary act of such
corporation for the uses and purposes mentioned in the instrument.
Dated this 1st day of March, 2000.
/s/ Craig A. Fielden
--------------------------------------
(Signature of Notary)
Craig A. Fielden
---------------------------------------
(Legibly Print or Stamp Name of Notary)
Notary public in and for the state of
Washington, residing at Fall City
---------------
My appointment expires 5-26-02
----------------
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that Tom Van Horn is
the person who appeared before me, and said person acknowledged that said person
signed this instrument, on oath stated that said person was authorized to
execute the instrument and acknowledged it as the President and CEO of MERCATA,
INC., a corporation, to be the free and voluntary act of such corporation for
the uses and purposes mentioned in the instrument.
Dated this 29th day of February, 2000.
/s/ Craig A. Fielden
--------------------------------------
(Signature of Notary)
Craig A. Fielden
--------------------------------------
(Legibly Print or Stamp Name of Notary)
[Notary Seal] Notary public in and for the state of
Washington, residing at Fall City
--------------
My appointment expires 5-26-02
---------------
-7-
<PAGE>
EXHIBIT A
---------
TO SUBLEASE
(110 Atrium Place)
Legal Description
-----------------
Page A-1 of 1
<PAGE>
EXHIBIT B
---------
TO SUBLEASE
(110 Atrium Place)
[Architect's Depiction of 110 Atrium Place]
<PAGE>
EXHIBIT 10.6
THIS SUBLEASE, dated December 3, 1999, between GMAC MORTGAGE CORPORATION, a
Pennsylvania corporation, with its principal address at 100 Witmer Road,
Horsham, Pennsylvania 19044, hereinafter referred to as Sublessor, and MERCATA,
INC., a Delaware corporation, with its principal address at 110 - 110th Avenue
N.E., Suite 300, Bellevue, Washington 98004, hereinafter referred to as
Sublessee,
W I T N E S S E T H:
Sublessor hereby lets to the Sublessee and Sublessee hires from the Sublessor
the following described premises:
Approximately 2,912 rentable square feet known as Suite 100 located at
110 - 110th Avenue, Bellevue, Washington,
to be used only for office purposes, for a term commencing December 1, 1999 (or
upon the date of first occupancy, whichever occurs later), and expiring May 31,
2000, at the yearly rent of EIGHTY-ONE THOUSAND FIVE HUNDRED THIRTY-SIX AND
04/100 DOLLARS ($81,536.04), payable in equal installments of $6,794.67 in
advance on the first business day of each and every month during the term,
together with monthly payments of $800.00 for furniture rental.
THE PARTIES HERETO COVENANT AND AGREE WITH EACH OTHER AS FOLLOWS:
FIRST - PAYMENT OF RENT: Sublessee shall pay the rent at the times and in the
manner aforesaid to General Motors Corporation, c/o Corporate Accounting, 4
Walnut Grove, Horsham, PA 19044, Attention: Leslie Kornfeld.
SECOND - REPAIRS: Sublessee at Sublessee's expense shall keep the premises in
good repair, ordinary wear and tear, repairs to the roof, exterior of the
building and structural repairs excepted, unless such repairs are made necessary
by the act or negligence of the Sublessee and at the expiration of the term to
remove its goods and effects and peaceably yield up the premises to the
Sublessor in as good condition as when delivered to Sublessee, ordinary wear and
tear, damage by fire, the elements, act of the public enemy or casualty
excepted; all notices to quit or vacate being hereby expressly waived, any law,
usage or custom to the contrary notwithstanding.
THIRD - COMPLIANCE WITH LAWS, ORDINANCES, AND ENVIRONMENTAL: Sublessee shall
promptly comply with all laws, ordinances, requirements, and regulations of the
federal, state, county, municipal, and other authorities, the fire insurance
underwriters, and any insurance organizations or associations; except that
Sublessee shall not be required to make any alterations to the exterior of the
building, or alterations of a structural nature. Sublessee represents and
warrants that it will comply with all specifically applicable Environmental Laws
in connection with its use of or operations at the property, and that Sublessee
warrants and agrees that it will indemnify and hold Sublessor harmless from any
claim to which Sublessor may be subjected to the extent such claim results from
Sublessee's breach of any of its representations or warranties.
FOURTH - VIEWING PREMISES: Sublessee shall use the premises exclusively for the
purpose set forth herein and during the last three (3) months of this Sublease,
or any extension thereof, and permit the Sublessor to display the usual "To Let"
signs and to show the premises to prospective tenants. Sublessee further agrees
that at any time during the term Sublessor, Sublessor's landlord, or their
agents, may enter the premises for the purpose of examining the condition
thereof, or to make repairs in any part of the building, but in making such
reservation, Sublessor does not assume any liability for the care or supervision
of the premises or appurtenances.
FIFTH - ALTERATIONS AND ASSIGNMENT: Sublessee will not make or permit to be made
any alterations or additions to said premises, nor assign, mortgage, or pledge
this Sublease, nor sublet the whole or any part of the premises without
Sublessor's written consent. Consent by Sublessor shall apply solely to the
particular transaction consented to and shall not constitute a waiver by
Sublessor of the provisions of this Sublease.
SIXTH - INSURANCE: Sublessee will not leave the premises unoccupied during the
term, nor by any act of commission or omission cause an increase in the rate of
insurance or the cancellation of any insurance policy. In the event of any
increase in the rate of insurance caused by Sublessee's occupancy, Sublessee
agrees to pay on demand the amount of any such increase, and in default of such
payment, such amount may be added to the next installment of rent as additional
rent. Sublessee shall, at its sole cost and expense, obtain and maintain during
the term of the Sublease, Comprehensive General Liability Insurance, including
Blanket Contractual Liability coverage, with limits of not less than Two Million
Dollars ($2,000,000) Combined Single Limit for Personal Injury and Property
Damage; Comprehensive Automobile Liability Insurance covering all owned, non-
owned and hired vehicles with limits of not less than One Million Dollars
($1,000,000) Combined Single Limit for Personal Injury and Property Damage; and
Statutory Workers Compensation and Employers Liability coverage with limits of
not less than $250,000. Sublessee shall deliver to Sublessor upon request a
certificate evidencing such coverages. Such insurance policies shall provide for
no cancellation or material alteration without thirty (30) days prior written
notice to Sublessor.
SEVENTH - SIGNS AND SIDEWALKS: Sublessee shall not install any awnings,
advertisements, or signs on any part of the premises without Sublessor's written
consent and will keep the sidewalks free from ice, snow, and all obstructions.
EIGHTH - UTILITIES: Sublessee will make its own arrangements for the supply and
payment of all services including without limitation gas, electricity, and
water.
NINTH - INDEMNIFICATION: Sublessor shall not be responsible for any defect or
change of condition in said premises, nor for any damage thereto, not to any
person, nor to goods or things contained therein due to any cause whatsoever
except the act or negligence of the Sublessor, and Sublessee will indemnify
Sublessor from any claims, demands, and actions arising in connection with
Sublessee's use of the property, or the use by any person occupying said
premises during the term hereof, or by reason of any breach or non-performance
of any covenant herein, or the violation of any law or regulation by Sublessee.
1.
<PAGE>
TENTH - FIRE AND CASUALTY: If the premises shall be so damaged by fire, other
casualty, or act of the public enemy so as to be substantially destroyed, then
this Sublease shall terminate and any unearned rent paid in advance by Sublessee
shall be apportioned and refunded to it, but in case the premises are not
substantially destroyed, Sublessor will endeavor to have its Lessor restore the
premises and a just proportion of the rent shall abate according to the extent
to which premises have been rendered untenantable until the premises have been
restored. The Sublessee agrees to give the Sublessor immediate notice of any
damage to the premises.
ELEVENTH - DEFAULT: In the event Sublessee fails to perform or observe any of
the covenants contained herein on its part to be observed and performed for ten
(10) days after notice by Sublessor, (a) Sublessor may forthwith terminate or
cancel this Sublease by notifying Sublessee as hereinafter provided, and upon
such termination or cancellation, Sublessee shall be liable to Sublessor for all
damages Sublessor sustains by reason of Sublessee's breach of covenant and of
such termination or cancellation; or (b) Sublessor may forthwith re-enter the
premises without notice and upon re-entry may let the premises or any part
thereof as agent for Sublessee and receive the rent therefor, applying the same
first to the payment of such expense as Sublessor may be put to in entering and
letting the premises and then to the payment of the rent and the fulfillment of
Sublessee's covenants hereunder, and Sublessee agrees to pay and shall be liable
for amounts equal to the several installments of rent as they would, under the
terms of this Sublease, become due if no default had occurred, whether the
demised premises be re-let or remain vacant in whole or in part for a period
less than the remainder of the term, or for the whole thereof, but Sublessee
shall be entitled to be credited at the end of each month with any net amounts
actually received by Sublessor during such months for the use or occupancy of
the demised premises or any part thereof; provided, however, that all sums paid
and liabilities incurred by Sublessor for any of the purposes aforesaid (which
Sublessee also agrees to pay and shall be liable for) shall have been first paid
in full to Sublessor, either directly by Sublessee or out of moneys actually
received for renting said demised premises after Sublessor shall have received
undisputed possession thereof, and the maintenance of any action or proceeding
to recover possession of the premises or any installment or installments of rent
or any other moneys that may be due or become due from Sublessee to Sublessor
shall not preclude Sublessor from thereafter instituting and maintaining
subsequent actions or proceedings for the recovery of possession of the premises
or of any subsequent payment or payments of rent or any other moneys that may be
due or become due from Sublessee or Sublessor. A waiver by Sublessor of any
breach or breaches by Sublessee of any one or more of the covenants or
conditions hereof shall not bar forfeiture or any other rights or remedies of
Sublessor for any subsequent breach of any such or other covenants and
conditions.
TWELFTH - ADDITIONAL RENT: If Sublessor shall make any expenditure for which
Sublessee is responsible, or if Sublessee shall fail to make any payment which
Sublessee is obliged to make hereunder, then the amount thereof may, at
Sublessor's option, be added to any installment of rent then due or thereafter
becoming due.
THIRTEENTH - CONDEMNATION: In the event the premises or any part thereof are
taken or condemned for a temporary or permanent public or quasi-public use,
Sublessor may, at its option, terminate this Sublease and in such event any
unearned rent paid in advance shall be returned to Sublessee.
FOURTEENTH - DEMOLITION: If any authority having jurisdiction shall decide that
the building or buildings should be demolished and removed, then forthwith upon
such decision being made, the Sublessee shall vacate the premises and this
Sublease shall cease and come to an end and any unearned rent paid in advance by
Sublessee shall be apportioned and refunded to it.
FIFTEENTH - NOTICES: That all notices to be given hereunder by either party
shall be in writing and given by personal delivery to the Sublessee or to one of
the executive officers of the Sublessor or shall be sent by certified mail
addressed to the party intended to be notified at the post office address of
such party last known to the party giving such notice and notice given as
aforesaid shall be a sufficient service thereof. Provided, however, that it is
mutually agreed that the Sublessor appoints the General Director and all
Directors of Worldwide Real Estate, General Motors Corporation, Mail Code 482-
309-939, 485 West Milwaukee Avenue, Detroit, Michigan 48202, as its agents, and
that any of them may give or receive all notices to be given hereunder, and
notices shall be sent to any of them and not otherwise. The right is hereby
reserved by the Sublessor to countermand such appointments and make others
consistent herewith, due notice of which shall be given by the Sublessor to the
Sublessee.
SIXTEENTH - TERMINATION: If at any time proceedings in bankruptcy, or pursuant
to any other act for the relief of debtors, shall be instituted by or against
Sublessee, or if Sublessee shall compound Sublessee's debts or assign over
Sublessee's estate or effects for payment thereof, or if any execution shall
issue against Sublessee or any of Sublessee's effects whatsoever, or if a
receiver or trustee shall be appointed of Sublessee's property, or if this
Sublease shall by operation of law, devolve upon or pass to any person or
persons other than Sublessee personally, then and in each of said cases,
Sublessor may terminate this Sublease forthwith by notifying Sublessee as herein
provided. Upon such termination all sums due and payable or to become due and
payable by Sublessee shall at once become due and payable.
SEVENTEENTH - SUBLEASE: This is a Sublease and the Sublessor's interest in the
premises is as Lessee under an underlying Lease made by 110 Atrium Place
Associates, LLC, dated October 19, 1998, a copy of which, initialed for
identification, is attached hereto. This Sublease is expressly made subject to
all the terms and conditions of said underlying Lease and the Sublessee agrees
to use the premises in accordance with the terms of said underlying Lease and
not do or omit to do anything which will breach any of the terms thereof. If
said underlying Lease is terminated, this Sublease shall terminate
simultaneously and any unearned rent paid in advance shall be refunded to the
Sublessee.
EIGHTEENTH - QUIET POSSESSION: Sublessor hereby covenants that Sublessee, upon
paying the rent as herein reserved and performing all the covenants and
agreements herein contained on the part of the Sublessee, may quietly enjoy the
premises, except as herein otherwise provided, and subject, however, to the
terms of the Sublease to Sublessor, and to the terms of any mortgages which may
now or hereafter affect the premises.
NINETEENTH - WAIVER OF SUBROGATION: Sublessor and Sublessee waive all rights,
each against the other, for damages caused by fire or other perils covered by
insurance where such damages are sustained in connection with the occupancy of
the leased premises.
The covenants and agreements contained in the foregoing Sublease are binding
upon the parties hereto and their respective heirs, executors, administrators,
successors, legal representatives and assigns.
2.
<PAGE>
IN WITNESS WHEREOF, the Sublessor has signed and sealed this instrument this
9th day of December, 1999, and the Sublessee has signed and sealed this
- --- --------
instrument this _____ day of __________, 1999.
In the presence of: GMAC Mortgage Corporation
/s/ Kathleen M. Manga By: /s/ L.F. Whatley
- ------------------------------ -----------------------------
Kathleen M. Manga Attest: /s/ Cheryl Pence Lindeman
-------------------------
In the presence of: Mercata, Inc.
By: /s/ Tom Van Horn
______________________________ -----------------------------
President
Attest: /s/ Jon Engman
______________________________ -------------------------
Secretary
C O N S E N T
110 ATRIUM PLACE ASSOCIATES, LLC, the Lessor under the underlying Lease dated
October 19, 1998, and referred to in the within Sublease dated December 3, 1999,
hereby consents to the making and the terms of the within Sublease with the
express understanding that such consent shall not operate to release GMAC
Mortgage Corporation from any of the Lessee's covenants in the underlying Lease.
Dated:_______________________
110 ATRIUM PLACE ASSOCIATES, LLC
By __________________________________
3.
<PAGE>
EXHIBIT 10.7
ONE NEWPORT
OFFICE BUILDING LEASE
MERCATA, INC.
<PAGE>
Mercata, Inc.
One Newport
Office Building Lease
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1. BASIC LEASE TERMS............................................... 1
2. PREMISES........................................................ 3
3. TERM............................................................ 7
4. DELAY IN POSSESSION............................................. 10
5. RENT............................................................ 11
6. OPERATING COSTS................................................. 11
7. SECURITY DEPOSIT................................................ 16
8. UTILITIES AND SERVICES.......................................... 18
9. CARE OF PREMISES................................................ 19
10. ASSIGNMENT AND SUBLETTING....................................... 21
11. DAMAGE OR DESTRUCTION........................................... 23
12. INDEMNIFICATION................................................. 24
13. DAMAGE TO TENANT'S PROPERTY..................................... 25
14. TENANT'S INSURANCE.............................................. 25
15. WAIVER OF SUBROGATION........................................... 26
16. EMINENT DOMAIN.................................................. 26
17. BANKRUPTCY...................................................... 27
18. DEFAULT AND REMEDIES............................................ 27
19. SUBORDINATION, QUIET ENJOYMENT.................................. 30
20. ESTOPPEL CERTIFICATES........................................... 30
21. ATTORNEYS' FEES................................................. 31
22. LATE CHARGES.................................................... 31
23. NOTICES......................................................... 31
24. HOLDING OVER.................................................... 32
25. ALTERATIONS..................................................... 32
26. RENT TAX........................................................ 33
27. PRIOR AGREEMENT, AMENDMENTS..................................... 33
28. PERSONAL PROPERTY TAXES......................................... 34
29. SUCCESSORS...................................................... 34
30. RIGHT TO PERFORM................................................ 34
31. FORCE MAJEURE................................................... 34
32. LIMITATION ON LIABILITY......................................... 34
33. MODIFICATION BY LENDER..........................................
34. MISCELLANEOUS................................................... 35
35. HAZARDOUS MATERIALS............................................. 38
36. RIDERS.......................................................... 39
</TABLE>
i
<PAGE>
Mercata, Inc.
One Newport
________________________________________________________________________________
Office Building Lease
________________________________________________________________________________
THIS LEASE IS MADE ON February 17, 2000, by and between Bentall Newport
Centre L.L.C., a Washington limited liability company, hereinafter called
"Landlord", and Mercata, Inc., a Delaware corporation, hereinafter called
"Tenant".
<TABLE>
<CAPTION>
________________________________________________________________________________________________________________________
1. BASIC LEASE TERMS
________________________________________________________________________________________________________________________
<S> <C> <C>
(a) Premises:
---------
Building Name: One Newport
Building Address: 3605 132nd Avenue S.E.
Bellevue, Washington 98006
Floors Second (2nd) Floor and Third (3rd) Floor
Suite(s): Suites 200 (Second Floor) and 300 (Third Floor)
Premises Area: (Subject to subsection 2(a) below)
Rentable Square Feet on Second Floor: Approximately 23,509
Useable Square Feet on Second Floor: Approximately 20,653
Rentable Square Feet on Third Floor: Approximately 22,180
Useable Square Feet on Third Floor: Approximately 19,615
Building Area: 90,133 Rentable Square Feet
Newport Corporate Center Area: 675,370 Rentable Square Feet
Tenant's Percentage of the Building upon 24.61% (Subject to Section 2(a) below).
occupancy of Third Floor only:
Tenant's Percentage of the Building upon 50.69% (Subject to Section 2(a) below).
occupancy of both the Second Floor and the
Third Floor:
Tenant's Percentage of Newport Corporate 3.28% (Subject to Section 2(a) below).
Center upon occupancy of the Third Floor
only:
Tenant's Percentage of Newport Corporate 6.77% (Subject to Section 2(a) below).
Center upon occupancy of both the Second
Floor and Third Floor:
(b) Term of the Lease: Subject to Section 3,
-----------------
the term of this Lease shall be for the period from the "Commencement Date" as
defined in Section 3(a) through the end of the
sixtieth (60th) full month after the "Second Floor
Commencement Date" as defined in Section 3(a) below.
Estimated Third Floor Availability Date: April 8, 2000.
---------------------------------------
Estimated Second Floor Availability Date: January 1, 2001.
----------------------------------------
(c) Basic Rent (Subject to Section 5 below):
----------
Lease Basic Rent Per Rentable Basic Rent per Month Basic Rent per Month for the
Months Square Foot (Annual) for the Third Floor Second and Third Floors
only
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C> <C>
1 - 12 $22.00, NNN $40,663.33 $83,763.17
13 - 24 $22.50, NNN $41,587.50 $85,666.87
25 - 36 $23.00, NNN $42,511.67 $87,570.58
37 - 48 $23.50, NNN $43,435.83 $89,474.29
49 - 72 $24.00, NNN $44,360.00 $91,378.00
</TABLE>
*****
**If the initial Term extends beyond 72 months from the Commencement Date for
any reason (other than Tenant's exercise of an option to renew and extend), the
Basic Rent per Rentable Square Foot per year for months 73 through the
expiration of the initial Term shall be $24.50, NNN.
<TABLE>
<S> <C> <C>
(d) Security Deposit: Initially, a $1,000,000.00 Letter of Credit (as
----------------
defined in Section 7 below), subject to
adjustment as set forth in Section 7 below.
(e) Tenant's Use of the Premises: General office, software development and other
----------------------------
lawful uses consistent with Tenant's business.
(f) Leasing Broker(s)/Agent(s):
--------------------------
Landlord's Leasing Broker/Agent: Lisa C. Rowe, Bentall U.S. L.L.C.
Tenant's Leasing Broker/Agent: Broderick Group, Inc.
(g) Parking: Pursuant to the terms of subsection 34(n): Four (4) Parking stalls per 1,000 Usable Square
-------
Feet of leased Premises, as such Premises may be
expanded as provided in this Lease. Tenant shall
pay for parking on a monthly basis regardless of
whether or not Tenant uses such parking as
Additional Rent at the rates set forth below:
During the initial twenty-four (24) months of the
Term, parking shall be $55.00 per stall. Thereafter,
parking rates shall be based on the market rates for
covered parking stalls along the I-90 corridor as
reasonably determined by Landlord.
(h) Addresses for Notices:
---------------------
i) Landlord: c/o Bentall U.S. L.L.C.
Suite 200
320 108th Avenue N.E., Suite 200
Bellevue, Washington 98004-5731
Attn: Gary Carpenter, COO,
and Lisa C. Rowe, Director of Leasing
ii) Tenant (prior to Commencement Date): Mercata, Inc.
110 110th Avenue N.E.
Bellevue, WA 98004-5840
Attn: Legal Department
iii) Tenant (after Commencement Date): Mercata, Inc.
3605 132nd Avenue S.E., Suite 300
Bellevue, Washington 98006
</TABLE>
2
<PAGE>
Attn: Legal Department
With a copy to: Gordon W. Tanner
Stoel Rives LLP
600 University Street, Suite 3600
Seattle, WA 98101
This Section 1 represents a summary of the basic terms of this Lease. In
the event of any inconsistency between the terms contained in Section 1 and any
specific clause of this Lease, the terms of the more specific clause shall
prevail.
________________________________________________________________________________
2. PREMISES
________________________________________________________________________________
(a) Premises. Landlord hereby leases to Tenant and Tenant leases from
--------
Landlord those certain premises described in subsection 1(a) and in Exhibit "A"
-----------
attached hereto (the "Premises"); provided, that prior to the Second Floor
Commencement Date (defined below), the Premises shall include only the area
depicted on Exhibit "A" on the third floor of the Building (the "Third Floor").
-----------
Immediately upon the Second Floor Commencement Date, and without any further
action of the parties, the Premises shall be automatically expanded to include
the area depicted on Exhibit "A" on the second floor of the Building (the
-----------
"Second Floor"). The exact amount of Rentable Square Feet and Useable Square
Feet in the Third Floor shall be determined upon the completion of the build-out
of the Tenant Improvements in and to the Third Floor pursuant to the Work Letter
Agreement attached hereto. The exact amount of Rentable Square Feet and Useable
Square Feet in the Second Floor shall be determined upon completion of the
build-out of the Tenant Improvements in and to the Second Floor pursuant to the
Work Letter Agreement attached hereto. All exact square footages of space in the
Premises, the Building, the Newport Corporate Center, or any portion thereof
shall be determined reasonably by Landlord's architect and verified by Tenant's
architect. Any dispute regarding any such determination shall be resolved in
accordance with Section 18(j). Until such determination of the exact number of
Rentable Square Feet and Useable Square Feet of space in the Premises, the
Building and the Newport Corporate Center as set forth above, the number of
Rentable Square Feet and Useable Square Feet of space shown in subsection 1(a)
shall control. Upon final determination of the number of Rentable Square Feet
and Useable Square Feet of space in the Second Floor or Third Floor, as the case
may be, the Building or the Newport Corporate Center, Landlord and Tenant shall,
within ten (10) days of Landlord's written request, execute a written
confirmation of Rentable Square Feet and Useable Square Feet in such floor
generally in the form attached hereto as "Exhibit D". The "Rentable Square
----------
Feet" and "Useable Square Feet" as used in this Lease shall be calculated
according to the Building Owner's and Manager's Association ("1996 BOMA")
standard, the "Standard Method for Measuring Floor Area in Office Buildings -
American National Standard," ANSI Z65.1-1996. The Premises are contained within
the building (the "Building") which is located at the address designated in
subsection 1(a). The Building is located on the real property (the "Land")
described on Exhibit "B" attached hereto. The term "Newport Corporate Center"
-----------
shall mean the properties and buildings located thereon commonly known as One
Newport, Two Newport, Newport Tower, Newport Heights, Newport Terrace and Four
Newport described on Exhibit "B-1" attached hereto, together with such other
-------------
additional properties and/or buildings in the immediately adjacent area which
Landlord may add in the future, all of which Landlord may rename from time to
time. Tenant now consents to the addition of Five Newport to the Newport
Corporate Center at such time as Landlord so elects, provided it shall have been
completed. "Tenant's Percentage of the Building" shall equal a fraction whose
numerator is the number of Rentable Square Feet within the Premises as set forth
in subsection 1(a) and whose denominator is the number of Rentable Square Feet
within the Building as set forth in subsection 1(a). "Tenant's Percentage of
Newport Corporate Center" shall equal a fraction whose numerator is the number
of Rentable Square Feet within the Premises as set forth in subsection 1(a) and
whose denominator is the number of Rentable Square Feet within Newport Corporate
Center as set forth in subsection 1(a). If the number of Rentable Square Feet
within the Premises, the Building or the Newport Corporate Center is adjusted,
including without limitation pursuant to the automatic expansion of the Premises
to include the Second Floor of the Building as provided in this subparagraph
1(a), then Tenant's Percentage of the Building and Tenant's Percentage of the
Newport Corporate Center shall be automatically adjusted without further action
of either party. Upon the written request of either party, both parties shall
execute a written confirmation of such percentages generally in the form
attached hereto as "Exhibit D".
---------
3
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(b) Acceptance of Premises. All prior representations of Landlord and its
----------------------
agents with respect to the Premises or the Building are superceded by those
expressly set forth herein. No rights, easements, or licenses are acquired by
Tenant by implication or otherwise except as expressly set forth in the
provisions of this Lease. Tenant accepts the Premises "as is", subject to
Landlord's obligations under Exhibit "C", including without limitation
-----------
Landlord's obligation to construct any Tenant Improvements described in Exhibit
-------
"C", and subject further to any latent defects in the Premises or Building which
- ---
are not reasonably ascertainable by a visual inspection of Tenant. In addition,
Landlord shall deliver the Premises to Tenant with all cabling of prior tenants
removed (unless otherwise requested by Tenant). The taking of possession of the
Premises by Tenant shall be conclusive evidence that the Premises and the
Building were in good condition and suitable for Tenant's intended use at the
time possession was taken, except for any latent defects in the Premises or
Building not reasonably ascertainable by a visual inspection of Tenant,
provided, however, Tenant agrees to provide Landlord notice promptly following
Tenant's discovery of any latent defects.
(c) Common Areas. Tenant shall have the nonexclusive right to use in
------------
common with other tenants in the Building and in connection with Tenant's
business at the Premises the following areas ("Common Areas") appurtenant to the
Premises:
i) The Building's common entrances, lobbies, restrooms, elevators,
stairways and accessways, loading docks, ramps, drives and platforms and any
passageways and serviceways thereto, and the common pipes, conduits (excluding
Landlord's fiber optic conduit), wires and appurtenant equipment serving the
Premises;
ii) Loading and unloading areas, trash areas, parking areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas and
similar areas and facilities appurtenant to the Building;
iii) The Building's common facilities made available for or for the
benefit of all tenants within Newport Corporate Center including, without
limitation, landscaping, roadways, pedestrian walkways and parking areas;
iv) Other areas within Newport Corporate Center that are not
intended for lease and which are designated (which designation may be changed
from time to time) by Landlord as Common Areas set aside for the common and
joint use and benefit of the occupants of Newport Corporate Center.
Landlord reserves the right from time to time without cost to Tenant
(except as allowed under the terms of this Lease) and unreasonable interference
with Tenant's use and, if Tenant's use of the Premises or Common Areas will be
interfered with, then upon reasonable prior written notice to Tenant
v) To install, use, maintain, repair and replace pipes, ducts,
conduits, wires and appurtenant meters and equipment for service to other parts
of the Building above the ceiling surfaces, below the floor surfaces, within the
walls and in the central core areas, and to relocate any pipes, ducts, conduits,
wires and appurtenant meters and equipment included in the Premises which are
located in the Premises or located elsewhere outside the Premises, and to expand
the Building;
vi) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces (as long as the parking ratio for Tenant stated in
Section 1(g) is maintained unless a reduction on Landlord's overall parking
ratio for the Building is required by law), parking areas, loading and unloading
areas, ingress, egress, direction of traffic, landscaped areas and walkways;
vii) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available and
maintenance is started promptly and diligently pursued to completion, provided
that Tenant shall notify Landlord if Tenant believes such maintenance is not
being diligently pursued to completion;
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viii) To designate other land outside but adjacent to the boundaries
of the Building or Land to be a part of the Common Areas;
ix) To add additional buildings and improvements to the Common
Areas;
x) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Building, or any portion thereof so
long as reasonable access to the Premises remains available;
xi) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas or the Building as Landlord may, in
the exercise of sound business judgment, deem to be appropriate; and
xii) To establish, modify or change reasonable rules governing the
move-in and move-out procedures of Tenant's furniture, equipment, and fixtures.
(d) Exclusive Option to Expand. Subject to the terms of this subsection
--------------------------
2(d) and to the existing rights of the current tenant, Tenant shall have the
exclusive right to lease the approximately 23,529 rentable and 21,485 usable
square feet of space located on the first (1st) floor of the Building in the
location identified on Exhibit "A-1" attached hereto (the "Expansion Space").
-------------
Landlord shall notify Tenant in writing ("Landlord's Notice") of the estimated
date on which the Expansion Space will be available and delivered to Tenant for
installing Tenant's tenant improvements (the "Expansion Space Availability
Date"), which Landlord's Notice shall be provided to Tenant at least five (5)
months but not more than seven (7) months prior to the Expansion Space
Availability Date (unless Landlord and Tenant agree, in writing, to a different
notice period prior to the date Landlord's Notice is due). Tenant shall have
twenty (20) business days from receipt of Landlord's Notice to notify Landlord
that Tenant elects to lease the Expansion Space. If Tenant fails to notify
Landlord within such twenty (20) business day period that Tenant elects to lease
the Expansion Space, Tenant's rights hereunder to lease the Expansion Space
shall expire and Landlord shall be entitled to lease the Expansion Space to any
third party or third parties. If Tenant notifies Landlord of Tenant's election
to lease the Expansion Space within such twenty (20) business day period, the
Expansion Space shall become part of the Premises and Tenant shall commence
paying Rent for such Expansion Space on the date which is the earlier of (1)
forty-five (45) days after Landlord actually tenders possession thereof to
Tenant for purposes of installing Tenant's tenant improvements, or (2) the date
Tenant opens for business in any part of the Expansion Space (the earlier of
which is hereafter referred to as the "Expansion Space Commencement Date").
Landlord estimates that the Expansion Space will be available for Lease to
Tenant sometime between November, 2000, and February, 2001. Except as otherwise
provided in this Section 2(d), if Landlord is unable to deliver possession of
the Expansion Space as provided herein for any reason, Landlord shall not be
subject to any liability for the failure to deliver possession but in such event
Tenant shall not be liable for any Rent related to the Expansion Space until
Landlord tenders possession of the Expansion Space to Tenant. No such failure
to deliver possession as provided herein shall in any other respect affect the
validity of this Lease or the obligation of Tenant hereunder; provided, however,
subject to delays caused by an event of force majeure (as defined in Section 31
and specifically including, without limitation, delays in Landlord's completion
of the Five Newport Building for reasons beyond the control of Landlord) or
delays caused by construction related changes requested by a tenant of the Five
Newport Building, if the Expansion Space is not available to Tenant to commence
construction of the Tenant Improvements on the date which is the earlier of (1)
within sixty (60) days after the Expansion Space Availability Date set forth in
Landlord's Notice, or (2) May 1, 2001 (regardless of whether or when Landlord's
Notice was given), and at such time Tenant does not sublease space from
Attachmate in the Four Newport Building, then per diem liquidated damages
payable by Landlord shall accrue in favor of Tenant in the amount of one day of
free Basic Rent with respect to the Expansion Space for each day which damages
shall continue until the actual Expansion Space Availability Date.
Notwithstanding anything in this Lease to the contrary, the parties agree that
the actual damages that Tenant would suffer as a consequence of a delay in the
delivery of the Expansion Space beyond the earlier of such dates are too
difficult to quantify. Tenant shall have the right to offset any such accrued
liquidated damages against Basic Rent first due under this Lease with respect to
the Expansion Space. The Expansion Space Availability Date shall not be deemed
to have occurred until Tenant is actually given unencumbered access to the
Expansion Space to construct tenant improvements, or so long as any person or
entity claims a leasehold or other possessory interest in the Expansion Space.
Basic Rent for the Expansion Space shall be equal to the then current market
rate, which shall be determined in accordance with the procedures of Section
3(b)(iii) below and shall take into
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consideration the Expansion Space Allowance (as defined below). Landlord shall
provide Tenant with a tenant improvement allowance with respect to the Expansion
Space in the amount of $12.00 per useable square foot multiplied by a fraction,
the denominator of which is sixty (60) and the numerator of which is the number
of months left in the initial Term at the time of the Expansion Space
Commencement Date (the "Expansion Space Allowance"). All tenant improvements to
the Expansion Space, as well as the disbursement of the Expansion Space
Allowance, shall be performed substantially in accordance with the Work Letter
Agreement attached hereto as Exhibit "C". Except as to any latent defects in the
-----------
Expansion Space which are not reasonably ascertainable by a visual inspection of
Tenant and subject to Landlord's obligations under Exhibit "C", Tenant shall
-----------
accept the Expansion Space in its "as is" condition as of the actual Expansion
Space Availability Date; provided, however, Tenant shall notify Landlord
promptly upon Tenant's discovery of any latent defects in the Expansion Space.
Beginning on the date Tenant notifies Landlord of its election to lease the
Expansion Space, Landlord and Tenant shall promptly and diligently work to amend
and supplement Exhibit "C" so as to conform it to include the Expansion Space
-----------
and the necessary obligations and deadlines to be imposed on each party for
preparing the space plan, work schedule, construction documents and other steps
necessary to construct the Expansion Space to meet Tenant's requirements. The
parties agree to use the structure and process set forth in Exhibit "C" for
-----------
construction of the tenant improvements in the Expansion Space. The Expansion
Space shall be measured, and any disputes regarding such measurement shall be
resolved, as provided in Section 2(a) regarding the Third and Second Floors.
Notwithstanding anything contained above to the contrary, Tenant shall not be
entitled to exercise its option to lease the Expansion Space if, at the time of
such exercise, Tenant is in default under this Lease beyond any applicable cure
period. In addition, Tenant's exercise of its option with respect to the
Expansion Space shall, at Landlord's election, be void if Tenant is in default
under this Lease beyond any applicable cure period at any time after the date
Tenant exercises its option and prior to the commencement of Tenant's lease of
the Expansion Space. Within fifteen (15) days after Tenant notifies Landlord of
Tenant's election to lease the Expansion Space, Landlord and Tenant shall enter
into an amendment to this Lease adding the Expansion Space to the Premises upon
all terms and conditions of this Lease, which amendment shall include the
amended and supplemented Exhibit C. Except with respect to assignments of this
Lease to a Permitted Assignee (as defined in Section 10), this option to expand
is personal to Tenant and may not be exercised or be assigned, voluntarily or
involuntarily, by or to any person or entity other than Tenant and shall
automatically terminate upon the assignment or other transfer of Tenant's
interest in this Lease.
(e) Right of First Offer. Subject to the existing rights of existing
tenants in the Building or Newport Corporate Center, and provided that Tenant is
not in default under the terms and conditions of this Lease beyond any
applicable cure period at the time Tenant accepts the terms of a First Offer
Notice (defined below), Tenant shall have, during the initial Term, a one time
right of first offer to lease all space (other than the Premises) located in the
Building (the "First Offer Space"). Except as set forth in the following
sentence, at least sixty (60) days, but not more than one hundred twenty (120)
days, prior to offering any First Offer Space for lease in the market, Landlord
will provide Tenant with written notice (the "First Offer Notice") of the intent
to offer the First Offer Space for lease in the market, and shall offer to lease
the First Offer Space to Tenant on terms specified by Landlord in such First
Offer Notice, which terms Landlord shall represent are the then market terms for
a lease of the First Offer Space. Notwithstanding the preceding sentence to the
contrary, Landlord shall not be required to give Tenant the First Offer Notice
at least sixty (60) days prior to offering any First Offer Space for lease in
the market (but Tenant shall still have five business days to respond to such
notice as described below) and Landlord may give Tenant such notice immediately
prior to offering the space for lease in the market if the First Offer Space
covered by such notice comes available for lease through a means other than the
natural expiration of an existing lease term. The First Offer Notice shall
specify: (i) the location and rentable area of the space which Landlord intends
to lease; (ii) the date upon which Landlord estimates such space shall be
available for occupancy; (iii) the annual rate of base rent per square foot of
rentable area which Landlord intends to charge for such space, including all
fixed and/or indexed adjustments to said rate; (iv) and all other economic terms
which Landlord intends to offer with respect to such space. Such notice may
include terms that Landlord believes are market for various lease terms (e.g.,
the market terms for a three-year lease, a five-year lease, or a ten-year lease)
and may include terms that Landlord believes are market for various sized
premises (e.g. the market terms for a partial floor tenant or a full floor
tenant). Tenant will then have five (5) business days from the date of the
First Offer Notice to express in writing an interest in leasing such space on
the terms offered and an additional twenty (20) days (after the expiration of
such initial five (5) day period) to complete a mutually acceptable amendment to
this Lease adding to the Premises the space which is the subject of the First
Offer Notice under the terms and conditions specified in the First Offer Notice.
If Tenant elects not to accept the
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terms offered by Landlord, or if a mutually acceptable lease amendment is not
executed within the time limits set forth above, then Landlord may lease the
First Offer Space to another party or parties at final terms that are within
ninety-five percent (95%) of what Landlord offered to Tenant. Should Landlord
not complete a lease with another party within six (6) months after Tenant
rejects Landlord's offers, then Tenant's Right of First Offer will be renewed.
If Tenant leases the First Offer Space described in the First Offer Notice, then
Landlord shall tender such First Offer Space, as provided above, to Tenant in
its then "as is" condition (and otherwise in accordance with the terms of the
First Offer Notice), except for any latent defects not reasonably ascertainable
from a visual inspection by Tenant; provided, however, Tenant shall promptly
notify Landlord upon Tenant's discovery of any such latent defects. This Right
of First Offer is personal to Tenant and may not be exercised or be assigned,
voluntarily or involuntarily, by or to any person or entity other than Tenant or
any Permitted Assignee (as defined in Section 10) and shall automatically
terminate upon the assignment or other transfer of Tenant's interest in this
Lease.
________________________________________________________________________________
3. TERM
________________________________________________________________________________
(a) Term. The term of this Lease shall be for the period designated in
-----
Section 1 above (the "Term") unless the Term shall be sooner terminated as
hereinafter provided. The term "Term" shall include any exercised "Renewal
Term" (defined below). The Term as well as the Tenant's obligation to pay Rent
(as defined in Section 5 below) with respect to the Premises (but excluding the
Second Floor) shall commence upon the date (the "Commencement Date") which is
the earlier of:
i) Substantial Completion (as defined in Exhibit "C") of the Tenant
-----------
Improvements described in the Work Letter Agreement for the portion of the
Premises located on the Third Floor, or
ii) The date that Tenant opened for business in any portion of the
Premises located on the Third Floor, or
iii) Forty-five (45) days after the tender of possession of the
portion of the Premises located on the Third Floor to Tenant for the purposes of
commencing work on said Tenant Improvements (such date of tender of possession
being referred to as the "Third Floor Availability Date").
In the event the Commencement Date does not occur on the first day of the month,
Tenant shall pay Rent for the fractional month on a per diem basis (calculated
on the basis of a thirty-day month) until the first day of the following month.
The Term, as well as Tenant's obligation to pay Rent (as defined in Section 5
below) with respect to the Second Floor, shall commence upon the date (the
"Second Floor Commencement Date") which is the earlier of:
iv) Substantial Completion (as defined in Exhibit "C") of the Tenant
-----------
Improvements described in the Work Letter Agreement for the Second Floor, or
v) The date that Tenant opened for business in any portion of the
Second Floor, or
vi) Forty-five (45) days after the tender of possession of the Second
Floor to Tenant for the purpose of commencing work on said Tenant Improvements
(such date of tender of possession being referred to as the "Second Floor
Availability Date").
Except as provided below in Section 3(b), the Term shall terminate at midnight
on the last day of the sixtieth (60th) full month after the Second Floor
Commencement Date. In the event the Second Floor Commencement Date does not
occur on the first day of the month, Tenant shall pay Rent for the Second Floor
for the fractional month on a per diem basis (calculated on the basis of a
thirty-day month) until the first day of the following month. Upon the
Commencement Date and the Second Floor Commencement Date, the parties shall
execute a written letter agreement setting forth the precise commencement and
termination dates of this Lease as of the execution date of said written letter
agreement. Said letter agreement shall be generally in the form attached hereto
as Exhibit "D". Failure to execute such letter agreement, however, shall not
-----------
affect Tenant's liability hereunder.
7
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(b) Option to Extend.
----------------
i) Landlord hereby grants Tenant the right and option to renew and
extend the Term of this Lease for two (2) consecutive periods of five (5) years
each (such renewal and extension periods are hereinafter referred to as a
"Renewal Term" or as the "First Renewal Term" and "Second Renewal Term", as
applicable) on the same terms and conditions contained in the Lease, except that
a) Basic Rent for each Renewal Term shall be as set forth
hereinbelow,
b) Except as expressly provided in this Section 3, Tenant shall
not be entitled to any lease concessions with respect to a Renewal Term
including, without limitation, commissions or allowances, free parking rights,
or storage space, and
c) No additional options to renew and extend shall apply
following the expiration of the Second Renewal Term.
Written notice (the "Tenant's Election") of Tenant's exercise of its option to
renew and extend ("Option to Renew") the Term of this Lease for a Renewal Term
must be given to Landlord no less than ten (10) months prior to the date the
then current Term of the Lease would otherwise expire. The Tenant's Election
shall be binding upon Tenant and shall set forth the name of the Landlord and
Tenant, the Lease date, and the Renewal Term dates.
ii) Notwithstanding anything to the contrary set forth in this
Section, at Landlord's option, Tenant shall not have the right to exercise an
Option to Renew:
a) During the time commencing from the date Landlord gives to
Tenant a written notice that Tenant is in default under any provisions of this
Lease, and continuing until the default alleged in said notice is cured; or
b) Under any of the following circumstances:
(1) If Tenant leases between three (3) to four (4) floors in
the Building at the time Tenant exercises its Option to Renew, Tenant does not
occupy at least two (2) of such floors or has entered into subleases for in
excess of 44,000 rentable square feet; or
(2) If Tenant leases less than three (3) floors but more than
one (1) floor in the Building at the time Tenant exercises its Option to Renew,
Tenant does not occupy at least one (1) of such floors or has entered into
subleases for in excess of 22,000 rentable square feet; or
(3) If Tenant leases one (1) floor in the Building or less,
Tenant shall not have the right to exercise a second Option to Renew.
The period of time within which an Option to Renew may be exercised
shall not be extended or enlarged by reason of Tenant's inability to exercise an
Option to Renew because of the foregoing provisions and/or restrictions. At
Landlord's election, all rights of Tenant under the provisions of this Option
shall terminate and be of no further force or effect even after Tenant's due and
timely exercise of the Option, if after such exercise, but prior to the
commencement date of the new term,
c) Tenant fails to pay to Landlord a monetary obligation of
Tenant for a period of thirty (30) days after Tenant's receipt of written notice
from Landlord that such obligation is past due; or
d) Tenant fails to commence to cure a default within thirty (30)
days after the date Landlord, during the term of this Lease, gives written
notice to Tenant of such default.
8
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Notwithstanding the above to the contrary, at Landlord's option, (1)
Tenant shall not be entitled to exercise an Option to Renew with respect to any
portion of the Premises in excess of 5,000 rentable square feet which is either
not occupied by Tenant or which is sublet to a third party on the date Tenant
otherwise attempts to exercise its Option to Renew, and (2) Tenant shall not
have the right to lease any portion of the Premises in excess of 5,000 square
feet with respect to which Tenant has already exercised an Option to Renew for a
Renewal Term if Tenant does not occupy such space on the Renewal Term
commencement date or has sublet such space to any third party on the Renewal
Term commencement date.
(iii) In the event Tenant validly exercises an Option to Renew the
Term of this Lease as herein provided, Basic Rent shall be adjusted as of the
commencement date of the applicable Renewal Term as follows:
a) Commencing within ten (10) days after Landlord's receipt of
Tenant's Election, Landlord and Tenant shall attempt to agree upon Basic Rent
for the Premises for the applicable Renewal Term, such Basic Rent to equal the
estimated fair market rental value of the Premises for the applicable Renewal
Term. If the parties are unable to agree upon the Basic Rent within thirty (30)
days after Landlord's receipt of Tenant's Election, then within thirty (30) days
thereafter each party, at its own cost and by giving written notice to the other
party, shall appoint a real estate appraiser with at least five (5) years full-
time commercial real estate appraisal experience in the area in which the
Premises are located to appraise and set Basic Rent for the applicable Renewal
Term. If a party does not appoint an appraiser within ten (10) days after the
other party has given written notice of the name of its appraiser, the single
appraiser appointed shall be the sole appraiser and shall set Basic Rent for the
applicable Renewal Term. If each party shall have so appointed an appraiser,
the two appraisers shall meet promptly and attempt to set the Basic Rent for the
applicable Renewal Term. If the two appraisers are unable to agree within
thirty (30) days after the second appraiser has been appointed, they shall
attempt to select a third appraiser meeting the qualifications herein stated
within ten (10) days after the last day the two appraisers are given to set
Basic Rent. If the two appraisers are unable to agree on the third appraiser
within such ten (10) day period, either of the parties to this Lease, by giving
five (5) days written notice to the other party, may apply to the then presiding
judge of the Superior Court of King County for the selection of a third
appraiser meeting the qualifications stated in this paragraph. Each of the
parties shall bear one-half (1/2) of the cost of appointing the third appraiser
and of paying the third appraiser's fee. The third appraiser, however selected,
shall be a person who has not previously acted in any capacity for either party.
b) Within thirty (30) days after the selection of the third
appraiser, a majority of the appraisers shall set Basic Rent for the applicable
Renewal Term. If a majority of the appraisers are unable to agree upon the
Basic Rent within the stipulated period of time, the three appraisals shall be
added together and their total divided by three (3). The resulting quotient
shall be the Basic Rent for the Premises during the applicable Renewal Term.
If, however, the low appraisal and/or the high appraisal is/are more than five
percent (5%) lower and/or higher than the middle appraisal, the low appraisal
and/or the high appraisal shall be disregarded. If only one (1) appraisal is
disregarded, the remaining two (2) appraisals shall be added together and their
total divided by two (2), and the resulting quotient shall be Basic Rent for the
Premises during the applicable Renewal Term.
c) For purposes of determining the Basic Rent for a Renewal
Term, including the determination of Basic Rent by the appraisers, the "fair
market rental value" shall be based on the actual rental rates which ready and
willing tenants (including renewal tenants) are paying or would pay, as of the
applicable Renewal Term commencement date, as annual rent for a primary premises
(as distinguished from the rent payable for a sublet premises or with respect to
an assignment of an interest in an existing lease) to a ready and willing
landlord of such primary premises for space comparable to the amount then leased
by Tenant and comparable to the Premises, Building and Newport Corporate Center
in terms of quality, design, and location on the I-90 corridor; provided,
however, the "fair market rental value" shall not be increased as a result of
any special improvements Tenant has made at its expense and shall be determined
as if the Premises were improved with Landlord's Building standard tenant
improvements. Determination of fair market rental value will take into
consideration all relevant factors including, without limitation, any
concessions or inducements (e.g., rent abatement, tenant improvement and other
allowances) then being offered by landlords to prospective tenants, or then
being offered by tenants to landlords, for comparable space. Rental rates quoted
or used under sublease agreements shall be considered rates of special
circumstances and shall be excluded from the definition of "fair market rental
value" under this Section 3.
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d) If Landlord and Tenant are unable to agree upon the Basic Rent
for the Renewal Term prior to the commencement of such Renewal Term, Tenant
will, during such Renewal Term, pay Basic Rent at a rate equivalent to the Basic
Rent in effect immediately prior to the Renewal Term in question until the
parties agree upon the new Basic Rent, or until the Basic Rent is determined
pursuant to this Subsection. The amount of the new Basic Rent for the applicable
Renewal Term will be applied retroactively to the beginning of such Renewal
Term, and any rent adjustment will be made in connection with the next
installment of Basic Rent due, following the determination of Basic Rent
pursuant to this Subsection.
(iv) The Option to Renew is granted for Tenant's or any Permitted
Assignee's personal benefit and may not be assigned or transferred by Tenant or
a Permitted Assignee, either voluntarily or by operation of law, in any manner
whatsoever, except to a Permitted Assignee.
(v) In the event Tenant timely and properly exercises an Option to
Renew, Landlord and Tenant shall within fifteen (15) days after the
determination of rent for the Renewal Term, execute an amendment to this Lease
extending the Lease Term on the terms and conditions set forth in this Section 3
and otherwise upon all terms and conditions of this Lease.
________________________________________________________________________________
4. DELIVERY OF PREMISES; DELAY IN POSSESSION
________________________________________________________________________________
(a) Third Floor. Landlord shall tender possession of the Third Floor to
-----------
Tenant for the purposes of commencing work on the Tenant Improvements related to
the Third Floor on the Third Floor Availability Date, which is estimated to be
on or after April 10, 2000, and Tenant shall not be obligated to accept
possession of the Third Floor prior to April 10, 2000. The Third Floor
Availability Date shall not be deemed to have occurred until Tenant is actually
given unencumbered access to the Third Floor to construct tenant improvements
(regardless of whether or not Tenant has a tenant improvement permit). Except
as otherwise provided in this Section 4(a), if Landlord is unable to deliver
possession of the Third Floor as provided herein for any reason, Landlord shall
not be subject to any liability for the failure to deliver possession but in
such event Tenant shall not be liable for any Rent until Landlord tenders
possession of the Third Floor to Tenant and the provisions of Section 3(a)
relating to the Third Floor have been satisfied. No such failure to deliver
possession as provided herein shall in any other respect affect the validity of
this Lease or the obligation of Tenant hereunder; provided, however, subject to
delays caused by an event of force majeure (as described in Section 31) if the
Third Floor is not available to Tenant to commence construction of the Tenant
Improvements by July 15, 2000, Tenant shall thereafter have the right to
terminate this Lease by giving Landlord written notice of such termination on or
before July 24, 2000. If Tenant elects to terminate this Lease, all Rent,
deposits and any other sums paid to Landlord by Tenant shall be refunded and
paid to Tenant within five (5) days of such termination. Tenant shall have
access to the Third Floor at least two (2) weeks prior to Landlord's estimated
date of Substantial Completion of the Tenant Improvements on the Third Floor for
the purpose of installing Tenant's furniture, fixtures and equipment.
(b) Second Floor. Landlord shall tender possession of the Second Floor to
------------
Tenant for the purposes of commencing work on the Tenant Improvements related to
the Second Floor on the Second Floor Availability Date, which shall be no sooner
than October 31, 2000 (unless otherwise agreed by Landlord and Tenant). The
Second Floor Availability Date shall not be deemed to have occurred until Tenant
is actually given unencumbered access to the Second Floor to construct tenant
improvements (regardless of whether or not Tenant has a tenant improvement
permit). Landlord shall use its best reasonable efforts provide Tenant with
five (5) months' prior written notice of the actual Second Floor Availability
Date, which Landlord currently estimates will be January 1, 2001. Landlord
shall also provide Tenant with written notice of any change in the estimated
Second Floor Availability Date set forth in Section 1(b). Except as otherwise
provided in this Section 4(b), if Landlord is unable to deliver possession of
the Second Floor as provided herein for any reason, Landlord shall not be
subject to any liability for the failure to deliver possession but in such event
Tenant shall not be liable for any Rent related to the Second Floor until
Landlord tenders possession of the Second Floor to Tenant and the provisions of
Section 3(a) relating to the Second Floor have been satisfied. No such failure
to deliver possession as provided herein shall in any other respect affect the
validity of this Lease or the obligation of Tenant hereunder; provided, however,
subject to delays caused by an event of force majeure (as defined in Section 31
and specifically including, without limitation, delays in Landlord's completion
of the Five Newport
10
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Building for reasons beyond the control of Landlord) or delays caused by
construction related changes requested by a tenant of the Five Newport Building,
if the Second Floor is not available to Tenant to commence construction of the
Tenant Improvements by May 1, 2001, and at such time Tenant actually occupies
all of the Third Floor and all of the space Tenant subleases (if any) from
Attachmate in the Four Newport Building, then per diem liquidated damages
payable by Landlord shall accrue in favor of Tenant in the amount of one day of
free Basic Rent with respect to the Second Floor for each day which damages
shall continue until the actual Second Floor Availability Date. Notwithstanding
anything in this Lease to the contrary, the parties agree that the actual
damages that Tenant would suffer as a consequence of a delay in the delivery of
the Second Floor beyond May 1, 2001, are too difficult to quantify. Tenant shall
have the right to offset any such accrued liquidated damages against Basic Rent
first due under this Lease. Landlord's failure to provide the five (5) month's
prior written notice required under this Section 4(b) shall in no way alter,
modify or diminish the liquidated damage provisions of this Section 4(b). Tenant
shall have access to the Second Floor at least two (2) weeks prior to Landlord's
estimated date of Substantial Completion of the Tenant Improvements on the
Second Floor for the purpose of installing Tenant's furniture, fixtures and
equipment.
________________________________________________________________________________
5. RENT
________________________________________________________________________________
(a) Monthly Basic Rent. Tenant shall pay to Landlord as Basic Rent for the
------------------
Premises the sum set forth in subsection 1(c) (as may be adjusted through the
execution of Exhibit D), as applicable, which shall be payable in equal monthly
---------
installments. The first installment (equal to the first month's Basic Rent)
shall be payable upon the execution of this Lease and the remaining installments
shall be paid, in advance, on the first day of each and every calendar month
during the Term. Rent for any partial month shall be prorated based on the
actual number of days in such month.
(b) Definition of Rent. All amounts due from Tenant to Landlord under this
------------------
Lease other than Basic Rent shall be due as "Additional Rent". The terms "Rent"
and "Rental" as used in this Lease shall mean all amounts to be paid hereunder
by Tenant whether those sums are designated as Basic Rent or Additional Rent or
otherwise and as adjusted by the terms of this Lease. Failure by Tenant to pay
any sum of Rent due under this Lease shall entitle Landlord to pursue any or all
remedies specified in this Lease as well as remedies specified in RCW Chapter
59.12 or otherwise allowed by law.
(c) Payment of Rent - No Deduction or Offset. Tenant shall pay Rent to
-----------------------------------------
Landlord, at the address of Landlord set forth in Section 1, without demand and
without deduction, setoff or counterclaim, except as otherwise provided in this
Lease. If Landlord shall at any time or times accept Rent after it shall become
due and payable, such acceptance shall not excuse delay upon subsequent
occasions, or constitute, or be construed as a waiver of any or all of
Landlord's rights hereunder. In addition to any late charges which may be
incurred under Section 22, Tenant shall pay interest at the rate of twelve
percent (12%) per annum compounded on all late payments of Rent thirty (30) or
more days past due.
________________________________________________________________________________
6. OPERATING COSTS
________________________________________________________________________________
(a) Acknowledged Net Terms. Tenant acknowledges that this Lease is, in all
-----------------------
respects, considered to be a net Lease and it is the intent of the parties that
Tenant and the other tenants of the Building collectively pay for all of the
Operating Costs (as defined in subsection 6(c)) relating to the Building, the
Common Areas, and the Land.
(b) Tenant Percentage. Tenant shall, for each calendar year of the Term, or
------------------
any extension thereof, pay to Landlord, as Additional Rent, Tenant's Percentage
of the Building of the Operating Costs (defined below) of the Building and Land
and Tenant's Percentage of Newport Corporate Center of the Operating Costs of
the Common Areas (as such percentages are defined in subsection 2(a) above, and
as the same may be adjusted through the execution of Exhibit D). If an
---------
Operating Cost is not attributable to one hundred percent (100%) of the
Building, then Tenant shall pay its reasonable proportionate share thereof.
Except as otherwise provided in this Lease, Tenant shall pay one hundred percent
(100%) of any Operating Costs directly allocable to Tenant's Premises.
11
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(c) Operating Costs Definition. Except as otherwise provided below, the
--------------------------
Operating Costs are hereby defined as all costs related to the ownership,
administration, management, maintenance and operation of the Building, Common
Areas, and the Land, including but not limited to:
i) Real estate taxes, installments of assessments attributable to
the Lease Term, and appeals to taxes and assessments on the Land, Common Area
and Building and personal property taxes associated with personal property used
in the operation of the Land, Common Area and Building;
ii) The total annual net costs and expenses of all insurance
required to be carried by Landlord pursuant to Section 14(c)(I) and (ii),
specifically including earthquake, and with such coverage and deductibles and in
such amounts as the Landlord may from time to time determine;
iii) Special taxes, licenses (other than taxes on income or profits)
and permits and inspection fees from time to time payable by the Landlord with
respect to the Land, Premises or the Building;
iv) Salaries and wages (including employee benefits, worker's
compensation, pension plan contributions, fringe benefits, severance pay,
termination payments and similar payments and contributions) paid or payable to
all personnel, including supervisory personnel and managers, and all costs of
obtaining such personnel, to the extent that they are employed in connection
with the operation or maintenance of the Land, Building, Common Areas or the
Premises and further including the cost of building and cleaning supplies, tools
and equipment, employee uniforms, dry cleaning expenses and communication
devices related to such personnel or employees, together with the costs of
independent service contracts incurred in cleaning, maintenance and operation of
the Building and Common Areas including without limitation policing, security,
supervision, traffic control, janitorial, window cleaning, waste collection,
recycling, snow removal and gardening services, maintenance of mechanical and
electrical systems, elevators (if applicable), fire and life safety systems;
v) Lighting, electricity, public utilities, loudspeakers, public
address and musical broadcasting systems, telephone answering service facilities
and systems and information facilities and systems used in or serving the Land,
Building, Common Areas or the Premises, including the cost of any electricity,
fuel, water, telephone, steam, gas, sewage disposal, heating, ventilating, air
conditioning or other utilities and services and the cost of replacing Building
and Common Areas standard electric light fixtures, ballasts, tubes, starters,
lamps, light bulbs and controls;
vi) The cost and charges of the rental and any contract for the
rental of any equipment and signs used by the Landlord in the operation or
maintenance of the Land, Building, Common Areas or the Premises;
vii) All repairs and replacements to and maintenance and operation of
the Land, Building, Common Areas or the Premises including, without limitation,
building exteriors (including painting) signs and directories, repairing roofs,
walls and the systems, facilities and equipment serving the Land, Building,
Common Areas and the Premises, save for the cost of repairing or replacing any
inherent structural or latent defects or weaknesses;
viii) Depreciation or amortization as reasonably determined by the
Landlord in accordance with accounting principles generally accepted in the
State of Washington consistently applied of:
a) The costs and expenses, including repair and replacement,
incurred in or attributable to the repairing or replacing of all fixtures,
equipment and facilities serving or comprising the Building and Common Areas or
which are reasonably responsive to requirements imposed with respect to any
applicable health, safety, fire, nondiscrimination or similar law or regulation
unless they are, in accordance with generally accepted accounting principles,
charged fully in the year in which they are incurred and unless they result from
any governmental final, penalties or interest incurred because Landlord violated
any laws, regulations or rules of any governmental authority with jurisdiction
over the Land, Building or Common Areas; and
b) In any given period a portion of the capital cost of and
installation cost of any machinery, equipment or devices installed in, or
utilized in connection with, the Building or Common Areas for the purpose of
saving energy or effecting other savings in the Operating Costs thereafter,
whether installed in the
12
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Building or Common Areas in the first instance as part of its original design,
or thereafter, which portion shall be determined by the Landlord amortizing the
cost over the reasonable expected life of same as reasonably determined by the
Landlord;
ix) Interest calculated at the average prime commercial lending
rate of the Landlord's bank (which shall be a major bank in the State of
Washington) existing at the end of each calendar month and calculated on an
annual basis upon the undepreciated or unamortized portion of the costs referred
to in (vii) above;
x) Attorney fees, accounting and systems costs and audit fees
related to the ordinary operation and maintenance of the Building;
xi) The fair market rental value (having regard to rent being
charged for similar space including Additional Rent as defined herein) of
premises used by the Landlord or its property manager, acting reasonably, in
respect of the operation, maintenance, administration or management of the Land,
Building, Common Areas or the Premises; and
xii) An administration fee or actual management fees and/or
management agent fees, together with the administrative charges of a management
company, if any, for the Building or any part of it, provided that if the
Landlord chooses to manage the Building and Common Areas, itself, the Landlord
shall be entitled to charge a management fee in an amount which would be charged
by a first-class real estate management company for management of an
office/retail complex similar to the Building and Common Areas;
Notwithstanding anything in this Lease to the contrary, Operating Costs shall
not include:
xiii) Depreciation or amortization save as expressly set out
above;
xiv) Payments of principal or interest on debt or capital
retirement of debt or on any mortgages, deeds of trust, ground leases or other
monetary encumbrances upon the Building or Land;
xv) All costs incurred in connection with the original
construction of the Building;
xvi) Debt service costs;
xvii) Except as provided in Section 26, any taxes on the income or
profits of the Landlord or any franchise taxes or other taxes on Landlord's
business;
xviii) Any real estate excise taxes arising on or from the sale or
transfer of any ownership of or interest in the Building, Land or Common Areas;
xix) Real estate taxes allocable to the leasehold improvements of
other tenants in the Building;
xx) Costs incurred by the Landlord in leasing the Building,
including without limitation commissions, legal costs, advertising costs and
tenant inducement payments;
xxi) Expenses for replacements of the structural portions of the
roof, foundation, or structure of the Building;
xxii) Except as otherwise provided in viii) above, any capital
improvements, replacements and expenditures which under accounting principles
generally accepted in the State of Washington consistently applied would be
classified as capital;
xxiii) Expenses for the repair or replacement of any equipment or
other item to the extent covered under any warranty;
13
<PAGE>
xxiv) Cost of repair of the Building caused by fire or other
casualty or due to the exercise of the right of eminent domain (but not
excluding insurance deductibles);
xxv) Any expense for which Landlord is compensated through
proceeds of insurance (but excluding any deductible);
xxvi) Finance charges for any future capital expenditures;
xxvii) Fees, costs or expenses incurred in refinancing the
Building;
xxviii) Legal, accounting or auditing fees and expenses incurred in
connection with (A) lease negotiations with prospective tenants, (B) any default
by or dispute with a tenant, (C) any default proceedings or eviction action
against any tenant, (D) any other action or proceeding which relates only to a
particular tenant of the Building, (E) any sale, financing or attempted sale or
financing of the Building, or (F) environmental remediation at the Building,
Land or Common Areas (but not excluding routine environmental testing, such as
routine air quality tests);
xxix) Any bad debt, rent loss, or reserves for bad debts or rent
loss;
xxx) Expenses and costs (including permit, license and inspection
fees) incurred in the renovating, improving, decorating, painting, or
redecorating other tenants' space in the Building;
xxxi) Costs (including increased insurance premiums) incurred
because Landlord or another tenant violated the terms of this Lease or any other
lease for space in the Building;
xxxii) Items and services for which Tenant reimburses Landlord or
that Landlord provides selectively to one or more tenants of the Building other
than Tenant without reimbursement;
xxxiii) Costs resulting directly from the gross negligence or
willful misconduct of Landlord, its employees, agents and/or contractors, except
the extent of Landlord's insurance deductible;
xxxiv) Intentionally omitted;
xxxv) Costs or fees relating to the defense of Landlord's title to
or interest in the Building, the Land, or any part thereof;
xxxvi) Unreasonable consulting fees, market study fees or
advertising and marketing expenditures for the Building;
xxxvii) Costs incurred to test, survey, cleanup, contain, abate,
remove, or otherwise remedy hazardous wastes or asbestos-containing materials
from the Building or Land, unless the hazardous wastes or asbestos-containing
materials were in or on the Building or Land because of Tenant's negligence or
intentional acts;
xiv) Amounts charged to interest on debt or capital retirement of
debt;
xv) Initial capital costs of constructing the Building;
xvi) Debt service costs;
xvii) Any taxes on the income or profits (other than on rents) of
the Landlord to the extent that the same are not imposed in lieu of real estate
taxes; or
14
<PAGE>
xviii) Costs incurred by the Landlord in leasing the Building,
including commissions, legal costs, advertising costs and tenant inducement
payments; and further provided that there shall be credited against Operating
Costs all net proceeds from policies of insurance, warranties or guarantees to
the extent (but only to the extent) that such proceeds reimburse the Landlord
for costs of repair and replacement which have previously been included in the
calculation of Operating Costs.
If any facilities, services, systems or utilities:
i) For the operation, maintenance, administration, management,
repair or replacement of the Building and/or the Land are provided from another
building or buildings owned or operated by the Landlord or its agent; or
ii) For the operation, maintenance, administration, management,
repair or replacement of another building or buildings owned or operated by the
Landlord or its agent are provided from the Building and/or the Land, the costs,
charges and expenses therefor shall for the purpose of calculation of Operating
Costs be allocated by the Landlord between the Building and/or Land and the
other building or buildings on a reasonable basis.
In computing Operating Costs for any fiscal period, if less than one
hundred percent (100%) of the Rentable Square Feet of the Building is occupied
by tenants during that period, then the variable Operating Costs for such year
shall be apportioned among the tenants as if the Building had been one hundred
percent (100%) occupied during such year by such Tenants. For example, if there
were only two tenants occupying an equal amount of space in the Building during
one year, but they occupied less than the entire building, each tenant would pay
50% of the variable Operating Costs.
(d) Operating Cost and Adjustment. Before the commencement of each
------------------------------
calendar year of the Term, or as soon thereafter as practicable, Landlord will
notify Tenant in writing of Landlord's estimate of Operating Costs, for the next
succeeding year (until the following December 31) and the amount of Tenant's
percentage share thereof as set forth in subsection 1(a). Effective January 1
and each month thereafter, Tenant shall pay to Landlord as Additional Rent one-
twelfth (1/12) of Tenant's percentage share of said estimated Operating Costs.
On the next succeeding January 1, or as soon thereafter as possible or upon
sooner termination of the Term, Landlord will compute Tenant's percentage share
of the total Operating Costs for such previous year or portion thereof if
applicable, based on the actual Operating Costs and, shall provide Tenant with a
written statement showing the actual Operating Costs and Tenant's percentage
share of said costs. Landlord shall use its best efforts to deliver such
statement to Tenant by March 31. Such statement shall provide an itemized
breakdown of the actual Operating Costs and shall be in generally the form
attached hereto as Exhibit "E". If the total amount of Tenant's percentage
-----------
share of Operating Costs paid for such previous year or portion thereof is less
than Tenant's percentage share of actual Operating Costs, then Tenant shall pay
Landlord any deficiency. If the total amount paid by Tenant for such previous
year or portion thereof exceeds the Tenant's percentage share of actual
Operating Costs, then Landlord shall credit such excess to the payment of Rent
which may thereafter become due. Any adjustment payment required to be made
pursuant to this subsection 6(d) shall be made within thirty (30) days after
Landlord has notified Tenant thereof in writing. If this Lease commences at a
time other than at the commencement of a calendar year, or expires at a time
other than the expiration of the calendar year, Landlord shall estimate Tenant's
percentage share of Operating Costs for that portion of the calendar year
contained in the Term and Tenant shall pay such charge in equal monthly
installments on the first day of those months of that calendar year which are in
the Term. If at any time Landlord obtains or receives additional information
regarding the actual amount of the Tenant's percentage share of Operating Costs,
Landlord may, at its election, adjust the amount of the monthly installments due
during the balance of the calendar year of the Term to reflect such additional
information.
Even though the term has expired and Tenant has vacated the Premises, when
the final determination is made of Tenant's percentage share of Operating Costs
for the year in which this Lease terminates, Tenant shall pay within thirty (30)
days of written notice any increase due over the estimated expenses paid and,
conversely, if Tenant has otherwise complied with all other terms and conditions
of this Lease, Landlord shall refund any excess (any over-
15
<PAGE>
payment in the event said expenses decrease) to Tenant within thirty (30) days
following the expiration or termination date of this Lease.
(e) Tenant's Right to Audit Operating Costs.
---------------------------------------
(i) Tenant shall have the right, upon fulfillment of the
conditions set forth below, to conduct one (1) audit of the Landlord's books and
records covering the Operating Costs for each particular calendar year, or
portion thereof as the case may be, to verify the accuracy of the Landlord's
determination of the Tenant's percentage of such Operating Costs. In the event
Tenant does not elect to conduct an audit of the Landlord's books and records
for a particular calendar year as set forth herein, then the Landlord's
statement of Operating Costs for that particular calendar year shall be deemed
conclusive and binding for all purposes. The conditions which must be met before
Tenant shall have the right to audit the books and records of a particular
calendar year are as follows:
a) Tenant must provide Landlord not less than fifteen (15)
days' prior written notice of the Tenant's election to audit (the "Tenant's
Notice of Audit"); provided, however, Tenant's audit may only cover the
preceding two (2) calendar years.
b) Tenant's audit must be undertaken and completed by
Tenant or its agents at reasonable times during Landlord's normal business hours
at the place where the Landlord's records are normally kept. Said audit must be
completed within ninety (90) days of Landlord's receipt of Tenant's Notice of
Audit.
c) Tenant shall not be entitled to withhold Rent pending
the outcome of any audit.
d) At the time the Tenant delivers its Tenant's Notice of
Audit to Landlord, the Tenant shall also provide evidence reasonably acceptable
to the Landlord that the audit will be a "fair and true audit." For the purposes
hereof, the term "fair and true audit" shall mean that the review of the subject
books and records shall be undertaken and completed by the Tenant, its officers
or employees, or by an independent accounting firm or property management firm
and that in no event will the party auditing the books (or that party's employer
or principal) directly or indirectly base the compensation or fees for such
audit work upon a percentage of the savings found or the return due the Tenant
by reason of that audit.
(ii) The Tenant's rights to audit the Landlord's books and
records shall be strictly limited to the right set forth above and the Tenant
shall have no right to audit any of the Landlord's books or records for any
calendar year before or after the Lease Term or for any calendar year other than
the immediately two (2) preceding calendar years as set forth above. All costs
and expenses of the audit shall be borne solely by the Tenant, except as set
forth below.
(iii) A true and correct copy of the audit shall be delivered to
the Landlord within fifteen (15) days of the completion of such audit. Any
underpayment shown by the Tenant's audit shall be paid in cash to Landlord
within thirty (30) days of the date of the audit. Any overpayment shown by such
audit shall be subject to the Landlord's prompt verification and, upon such
verification, shall be given to the Tenant in cash or as a credit against Rent
next falling due. If Landlord and Tenant are unable to agree upon any
adjustments Landlord or Tenant request as a result of an audit within thirty
(30) days after such request, the issues shall be resolved through binding
arbitration in Seattle, Washington, in accordance with the Commercial
Arbitration rules of the American Arbitration Association. If such audit
discloses an error in Landlord's determination of actual Operating Costs
allocable to the Premises in Landlord's favor in excess of five percent (5%) of
Tenant's percentage of actual annual Operating Costs (i.e., resulting in payment
or reimbursement by Landlord to Tenant), then all reasonable costs of Tenant's
audit shall be borne by Landlord.
________________________________________________________________________________
7. SECURITY DEPOSIT
________________________________________________________________________________
Within thirty (30) days after the execution of this Lease, Tenant
shall deposit with Landlord a clean, irrevocable and unconditional standby
letter of credit in a form reasonably acceptable to Landlord and Tenant
16
<PAGE>
(the "Letter of Credit") issued by a bank reasonably approved by Landlord
(hereinafter referred to as the "Bank") in favor of Landlord, in the amount of
One Million Dollars ($1,000,000.00). The Letter of Credit shall have a term
which expires no sooner than the date which is four (4) years from the
Commencement Date, or alternatively Tenant may deliver a one (1) year Letter of
Credit which by its terms automatically renews for successive one (1) year
periods until the date which is four (4) years from the Commencement Date unless
the Bank provides no less than thirty (30) days written notice to Landlord that
such Letter of Credit shall not be renewed. If the Bank provides Landlord
written notice that the Letter of Credit shall not be renewed, Landlord shall
have the right to draw down the entire amount of the Letter of Credit unless
Tenant substitutes, prior to the expiration of such Letter of Credit, a new
Letter of Credit which meets the requirements of this Section 7. If Tenant is
not in default of this Lease for the failure to pay Basic Rent beyond any
applicable cure period and has not previously been in default in the payment of
Basic Rent beyond any applicable cure period more than two (2) times in any
preceding twelve (12) month period on the date which is two (2) years from the
Commencement Date, then on such date or the immediately succeeding date on which
such conditions have been satisfied, (A) the amount of the Letter of Credit may,
in Tenant's sole discretion, be reduced to Five Hundred Thousand Dollars
($500,000.00), or (B) if the Bank has paid any sums to Landlord based upon the
Letter of Credit and Landlord still holds such sums or any portion thereof, then
Landlord shall return a portion of such sums to Tenant such that Landlord shall
retain only Five Hundred Thousand Dollars ($500,000.00). The Letter of Credit
shall be held by Landlord as security for the faithful performance and
observance by Tenant of the terms, conditions and provisions of this Lease. If
Tenant defaults in any of the terms, conditions or provisions of this Lease
including, but not limited to, the payment of Rent, and Tenant fails to cure any
such default after any required notice and within any applicable cure period
hereunder (i) Landlord shall have the right to require the Bank to make payment
to Landlord or its designee of the entire proceeds of the Letter of Credit, and
(ii) Landlord may, at the option of Landlord (but Landlord shall not be required
to) apply or retain the whole or any part of such sum so paid to it by Tenant or
the Bank to the extent required for the payment of any Rent or any other
reasonable sums incurred by Landlord as a result of such default, and (iii)
Landlord shall hold the remainder of such sum paid to it by the Bank or Tenant,
if any, for Landlord's benefit, as security for the faithful performance and
observance by Tenant of the terms, covenants, and conditions of this Lease on
Tenant's part to be observed and performed, with the same rights as hereinabove
set forth to apply or retain the same in the event of any further default by
Tenant under this Lease; provided that if Tenant, on its own accord at any time
thereafter or within ten (10) business days after written demand by Landlord,
shall deposit with Landlord or its designee the amount so applied or retained so
that Landlord or its designee shall have the full deposit on hand, then Landlord
shall immediately return the entire deposit to the Bank provided that the Bank
or such other Bank reasonably acceptable to Landlord issues, simultaneously with
Landlord's return of such deposit, a substitute letter of credit which meets the
requirements of this Section 7, which substitute letter of credit shall then be
the Letter of Credit. Tenant's failure to deposit with Landlord the amount so
applied or retained so that the Landlord or its designee shall have the full
deposit on hand within ten (10) business days of Landlord's written demand shall
constitute a breach of this Lease.
In the event of a transfer, sale or lease of Landlord's interest in the
Building, Landlord shall transfer or cause to be transferred both the Letter of
Credit and any sums collected thereunder by Landlord, together with any other
sums then held by Landlord or its designee as such security, to the transferee,
and Landlord thereupon shall be released by Tenant from all liability under this
Section. Tenant agrees to look solely to the new landlord for the return of the
Letter of Credit or any sums collected thereunder and any other security.
Tenant further covenants that it shall not assign or encumber, or attempt to
assign or encumber, any part of such security and that neither Landlord nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment, or attempted encumbrance. Landlord shall not be required
to exhaust its remedies against Tenant before having recourse to the Letter of
Credit or such cash security held by Landlord. Recourse by Landlord to the
Letter of Credit or such security shall not affect any remedies of Landlord
which are provided in this Lease or which are available to Landlord in law or
equity.
In the event that Tenant is not in default of this Lease in the payment of
Basic Rent beyond any applicable cure period and has not previously been in
default in the payment of Basic Rent beyond any applicable cure period more than
two (2) times in any preceding twelve (12) month period on the date which is
four (4) years from the Commencement Date, then on such date, or the immediately
succeeding date on which such conditions have been satisfied, the Letter of
Credit or any sums held by Landlord as a result of a payment to Landlord by the
Bank under the Letter of Credit, except as the same may have been applied by
Landlord in accordance with this Lease, shall be
17
<PAGE>
returned to Tenant; provided, however, Tenant shall have deposited with Landlord
on or before such date a cash security deposit in the amount of the last months'
Basic Rent, which shall be held by Landlord as a cash security deposit in lieu
of the Letter of Credit and Landlord and Tenant shall have the same rights and
obligations with respect thereto as they had with respect to the Letter of
Credit except that upon termination of this Lease Landlord shall refund or
credit to Tenant (or Tenant's successor) the unused portion of the cash security
deposit, provided that a reasonable amount of the deposit may be retained by
Landlord until Tenant has vacated the Premises and the final Operating Costs
reconciliation under Section 6 has been completed, at which time the balance
shall be promptly refunded to Tenant.
________________________________________________________________________________
8. UTILITIES AND SERVICES
________________________________________________________________________________
(a) Landlord's Duties. Provided that Tenant is not in default under this
-----------------
Lease beyond any applicable cure period, Landlord will provide the following
services:
(i) Maintain normal and usual Building business hours, Monday
through Friday, from 6:00 a.m. to 6:00 p.m. and on Saturday from 8:00 a.m. to
1:00 p.m.; Sundays and holidays excepted (the "Building Business Hours").
(ii) Furnish utilities to provide for lighting, convenience
power, and heat and air conditioning during such Building Business Hours for the
comfortable occupancy of the Premises. Such utilities shall also be available
after Building Business Hours provided that utilities used by Tenant during
other than the Building Business Hours shall be billed to Tenant at the hourly
rate charged by Landlord (but without profit to Landlord). Tenant agrees to
cooperate fully at all times with Landlord, and to abide by all reasonable
regulations and requirements which Landlord may prescribe for the proper
function and protection of said air conditioning system. Tenant agrees not to
connect any apparatus, device, conduit or pipe to the Building chilled and hot
water air conditioning supply lines. Tenant further agrees that neither Tenant
nor its servants, employees, agents, visitors, licensees or contractors shall at
any time enter mechanical installations or facilities of the Building or adjust,
tamper with, touch or otherwise in any manner affect said installations or
facilities. The cost of maintenance and service calls to adjust and regulate the
air conditioning system shall be charged to Tenant if the need for maintenance
work results from either Tenant's adjustment of room thermostats or Tenant's
failure to comply with its obligations under this Section 8.
(iii) Provide twenty-four (24) hour per day, three hundred sixty-
five (365) day per year access to the Building and Premises without prior notice
to Landlord. Landlord shall provide Tenant with sufficient keys or access
devices for Tenant's employees. The cost of such keys or access devices shall be
paid as provided in Section 9(l).
(iv) Provide non-attended passenger elevator facilities (if
applicable) during all working days (Saturday, Sunday and holidays one elevator
subject to call).
(v) Provide janitorial service to the Premises five (5) days per
week (Sunday through Thursday, except national holidays) in accordance with the
Janitorial Standards described in Exhibit "H", provided the same are kept
-----------
reasonably in order by Tenant. Any and all additional janitorial service
desired by Tenant shall be contracted for by Tenant directly with Landlord's
janitorial agent, and the cost and payment thereof shall be Tenant's
responsibility.
(vi) Provide water for drinking, lavatory and toilet purposes
drawn through fixtures installed by Landlord.
(vii) Payment for all services rendered under this Section 8 shall
be in accordance with Section 8 of this Lease.
(viii) Utilities or services provided to Tenant in excess of the
services provided herein, or other than during the Building Business Hours
described herein, shall be charged to Tenant as Additional Rent at reasonable
rates established by Landlord as to services and as set forth in Section 8(a)ii)
as to utilities, and shall be payable monthly.
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(ix) Except as provided in Section 9(p), Landlord shall, as of
the Commencement Date and throughout the entire term of this Lease, comply with
the provisions of the Americans with Disabilities Act ("ADA") as regards the
Building, Land and Common Areas. Landlord reserves the right to object to and
appeal any determination that it must take any specific action to comply with
the ADA; provided Landlord shall hold Tenant harmless from any adverse effects
or cost of such objection or appeal.
(b) Interruption. It is understood that Landlord does not warrant that
------------
any of the services referred to above will be free from interruption by virtue
of a strike or a labor trouble or any other cause beyond Landlord's reasonable
control. Except as otherwise provided in this Lease, such interruption of
service shall not be deemed an eviction or disturbance of Tenant's use or
possession of the Premises, or any part thereof, nor shall it render Landlord
liable to Tenant for damages, by abatement or reduction of Rent or otherwise,
nor shall it relieve Tenant from performance of Tenant's obligations under this
Lease, nor shall Tenant be relieved from the performance of any covenant or
agreement in this Lease because of such failure or interruption. Landlord
reserves the right to stop service of the elevator, plumbing, ventilation, air-
conditioning, and electrical systems, when necessary, by reason of accident or
emergency, or for repairs, alterations or improvements, which are in the
reasonable judgment of Landlord desirable or necessary, until said repairs,
alterations or improvements shall have been completed; provided, Landlord shall
use its good faith efforts to minimize interruption to Tenant's business
operations.
(c) Self-Help Rights. If an interruption of services or utilities which is
----------------
caused by the intentional or negligent act or omission of Landlord materially
interferes with the conduct of Tenant's business in the Premises for three (3)
consecutive business days after notice thereof from Tenant to Landlord, Rent
shall be abated thereafter in proportion to the extent of the interference until
such services or utilities are restored and, if such services or utilities are
not restored within such three (3) day period, Tenant shall have the right,
after giving Landlord at least 24 hours prior written notice of the actions
Tenant proposes to take, to take such reasonable actions as may be necessary to
remedy the situation. Landlord shall, within thirty (30) days of receipt of
evidence thereof, reimburse Tenant for Tenant's reasonable out-of-pocket costs
incurred in connection with Tenant's corrective actions taken pursuant to this
Section.
________________________________________________________________________________
9. CARE OF PREMISES
________________________________________________________________________________
Tenant agrees that it shall:
(a) Not use or occupy the Premises in violation of law or of the
certificate of occupancy issued for the Building, and shall, upon written notice
from Landlord, discontinue any use of the Premises which is declared by any
governmental authority having jurisdiction to be a violation of law or of said
certificate of occupancy. Tenant shall comply with any direction of any
governmental authority having jurisdiction which shall, by reason of the nature
of Tenant's use or occupancy of the Premises, impose any duty upon Tenant or
Landlord with respect to the Premises or with respect to the use or occupancy
thereof.
(b) Give Landlord access to the Premises at all reasonable times, without
charge or diminution of Rent, to enable Landlord to examine the same and to make
such repairs, additions and alterations as Landlord reasonably may deem
advisable, including, upon reasonable advance notice, the right to show the
Premises for the purpose of a potential sale or lease; provided, Landlord shall
only have the right to show the Premises to a prospective tenant during the last
ten (10)months of the Lease Term and, provided further, that any third party
which Landlord shows the Premises to shall be accompanied by a Tenant
representative and shall required to sign a non-disclosure agreement in a form
reasonably acceptable to Tenant prior to such third party entering Tenant's
server room or any other confidential areas. If Landlord gives notice to Tenant
and Tenant fails to respond to Landlord within twenty-four (24) hours then
Landlord shall have the right to enter the Premises.
(c) At Tenant's own cost and expense and without liens, keep, repair,
maintain and replace the Premises, and every part thereof, including all
fixtures, equipment and Tenant Improvements, in first class order, condition and
repair and shall make all replacements necessary to keep the same in such
condition, ordinary wear and tear and damage caused by Landlord, casualty or
condemnation excepted; provided that Landlord shall keep, maintain, repair
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and replace in good condition and repair (1) the structural elements of the
Building (including without limitation the foundations, exterior walls, roof and
roof membrane) and the gutters and downspouts of the Building, (2) the sewer,
water, gas, telephone and power lines and meters serving the Premises, and (3)
the plumbing, heating, ventilating, air conditioning, elevator and electrical
system installed or furnished by Landlord; provided further that Landlord shall
make such repairs to the Premises as may be required or become necessary because
of any latent defects not ascertainable from a visual inspection by Tenant
within a reasonable time after Landlord receives notice of such defects. If
Tenant shall fail to commence to so repair and maintain the Premises after five
(5) days notice from Landlord to do so (or such shorter period as Landlord, in
the exercise of its good faith business judgment, may decide that the
circumstances warrant), Landlord may, but in no event shall be obligated to,
make the repairs and Tenant shall pay the reasonable cost thereof to Landlord
within five (5) days after written demand as Additional Rent. Except to the
extent they are excluded from Operating Costs under Section 6, maintenance and
repair costs incurred by Landlord with respect to the structural elements of the
Building and the plumbing, heating, ventilating, air conditioning, elevator and
electrical system installed or furnished by Landlord shall be part of the
Operating Costs defined in Section 6; provided that, except to the extent
Landlord has waived its right of recovery against Tenant in Section 15, if such
maintenance and repairs are caused in part or in whole by the act, neglect, or
omission by Tenant, its agents, employees, sublessees, licensees, or invitees,
Tenant shall pay to Landlord, as Additional Rent, that portion of the cost of
such maintenance and repairs which, in Landlord's good faith business judgment,
is reasonably attributable to the act, neglect, or omission by Tenant, its
agents, employees, sublessees, licensees, or invitees.
(d) Recognize that improvements attached to the Premises (excluding all
property that shall remain the property of Tenant as provided in Section 25(c))
become the property of the Building and may not be removed without approval of
Landlord which approval shall not be unreasonably withheld, unreasonably
conditioned or unreasonably delayed, except that such approval may be subject to
the Tenant's paying for the cost of repairs resulting from the removal of such
improvements.
(e) Upon the termination of this Lease in any manner whatsoever, remove
Tenant's property and those of any other person claiming under Tenant, and quit
and deliver up the Premises to Landlord peaceably and quietly in as good order
and condition as the same is as of the Commencement Date (as to the Third Floor)
or as of the Second Floor Commencement Date (as of the Second Floor) or
hereafter may be put in by Landlord or Tenant, reasonable use, wear and tear
thereof, damage by Landlord, casualty or condemnation, and permitted alterations
or improvements not required to be removed at the time of the installation of
the same as provided in Section 25(c) excepted. Any and all reasonable costs
incurred by Landlord to restore the Premises to such good order and condition
will be billed to Tenant, and property not removed by Tenant at the termination
of this Lease, however terminated, shall be considered abandoned and Landlord
may dispose of the same as it deems expedient with reasonable cost thereof to be
billed to the Tenant.
(f) Except as may otherwise be provided in this Lease, not place signs on
the Premises except as authorized and approved by Landlord, such authorization
and approval not to be unreasonably withheld, unreasonably conditioned or
unreasonably delayed, and subject to all applicable governmental rules and
restrictions, as well as the "Building Rules and Regulations" as set forth in
Exhibit "F".
- -----------
(g) Except as expressly provided in this Lease, not make any alteration
of, improvements to, or addition to the Premises without the prior written
approval of Landlord, which approval shall not be unreasonably withheld,
unreasonably conditioned or unreasonably delayed; provided that Tenant shall
have the right to install an electronic security system within the Premises,
serving only the Premises, as its sole cost and expense, and Tenant shall, upon
the expiration or earlier termination of this Lease, remove such security system
and repair any damage caused by such removal and restore the portion of the
Premises affected thereby to its original condition as it existed as of the
Commencement Date.
(h) Not install or authorize the installation of more than six (6) coin
operated vending machines without obtaining prior written consent from Landlord,
which consent shall not be unreasonably withheld, unreasonably conditioned or
unreasonably delayed; provided, however, that Tenant shall obtain Landlord's
prior approval of the location of all vending machines and such machines shall
be located in an area with sufficient structural support.
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(i) Not do or permit anything to be done in or about the Premises which
will in any way unreasonably obstruct or interfere with the rights of other
tenants or occupants of the Building, or injure or annoy them, or use or allow
the Premises to be used for any unlawful purpose, nor shall Tenant cause,
maintain or permit any nuisance in, on or about the Premises. Tenant shall not
commit or suffer to be committed any waste in or upon the Premises.
(j) Not do or permit to be done anything which will invalidate or increase
the cost of any fire, extended coverage or any other insurance policy covering
the Building and/or property located therein, unless Tenant agrees, after
Landlord gives thirty (30) days' prior written notice to Tenant of the cost
thereof, to reimburse Landlord for any increase in the cost of such insurance
and subject to Landlord's lender's approval. Tenant shall promptly, upon
demand, reimburse Landlord for any additional premium charges for such policy by
reason of Tenant's failure to comply with the provisions of this subsection
9(j).
(k) Observe the "Building Rules and Regulations" described in Exhibit "F",
-----------
which may be modified by Landlord from time to time upon reasonable written
notice from Landlord to Tenant; provided that the same or any such modifications
thereto are reasonable and do not discriminate against any tenant of the
Building.
(l) Monitor issuance of keys. Unless specifically provided otherwise in
the Lease, all keys and/or Building security card devices for access to the
Premises and Building are provided at Tenant's cost after Tenant receives its
initial allotment of two (2) keys and/or Building security card devices per
1,000 square feet of useable square feet in the Premises. Any re-keying of the
Premises and/or Building due to lost or missing keys shall be at Tenant's cost.
No additional locks shall be placed upon any doors without the written consent
of Landlord. Additional keys and/or Building security card devices shall be
furnished at Tenant's cost. Upon termination of this Lease, all keys and
Building security card devices shall be surrendered to Landlord.
(m) Install Tenant's communications equipment and cabling in accordance
with Landlord's Building Rules and Regulations.
(n) Remove, upon Landlord's request, all cabling provided in Tenant's
Premises, at Tenant's sole cost, upon Lease termination.
(o) Not place any other equipment of any kind or nature whatsoever which
will or may necessitate any changes, replacements or additions to or require the
use of the water system, plumbing system, heating system, air conditioning
system or the electrical system of the Premises or Building without the prior
written consent of Landlord, which consent shall not be unreasonably withheld,
unreasonably conditioned or unreasonably delayed, unless Tenant agrees, after
Landlord gives thirty (30) days' prior written notice to Tenant of the actual
cost of such changes, replacements or additions or the actual usage costs of
such systems, to reimburse Landlord for any such actual costs.
All heating, ventilation and air conditioning (HVAC) equipment
installed in the Premises for Tenant's specific requirements, separate or in
addition to the Building HVAC system, shall be maintained at Tenant's sole cost
and expense. Any maintenance contractor hired by Tenant to maintain or repair
Tenant's separate HVAC equipment must have Landlord's written approval in
advance of any work, which approval shall not be unreasonably withheld,
unreasonably conditioned or unreasonably delayed.
(p) Comply with the Americans Disabilities Act with respect to Tenant's
use and occupancy of the Premises.
________________________________________________________________________________
10. ASSIGNMENT AND SUBLETTING
________________________________________________________________________________
(a) Except as specifically provided otherwise in this Section 10, Tenant
shall not, either voluntarily or by operation of law, assign, hypothecate or
transfer this Lease, or sublet the Premises or any part thereof, without the
prior written consent of Landlord in each instance, which consent shall not be
unreasonably withheld, unreasonably conditioned, or unreasonably delayed.
21
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(b) In the event Tenant desires to assign, hypothecate or otherwise
transfer this Lease or sublet the Premises, then at least fifteen (15) days
prior to the date when Tenant desires the assignment or sublease to be effective
(the "Assignment Date"), Tenant shall give Landlord a written notice (the
"Assignment Notice"), which shall set forth the name, address and business of
the proposed assignee or sublessee, information (including references)
concerning the character, ownership, and financial condition of the proposed
assignee or sublessee, the Assignment Date, any ownership or commercial
relationship between Tenant and the proposed assignee or sublessee, and the
consideration and all other material terms and conditions of the proposed
assignment or sublease, all in such detail as Landlord shall reasonably require.
Within five (5) business days after Landlord's receipt of Tenant's Assignment
Notice, Landlord shall notify Tenant of whether or not Landlord consents to the
proposed transfer (but Landlord shall not be required to actually execute
transfer documents within such five day period) or if Landlord needs additional
detail. If Landlord requests additional detail, the Assignment Notice shall not
be deemed to have been received until Landlord receives such additional detail
and Landlord may withhold consent to any assignment or sublease until such
information is provided to it. Without limiting Landlord's right to withhold
consent to a proposed sublease for other reasons, Landlord shall have the right
to withhold consent to a proposed sublease which is a "Qualifying Transfer" as
defined in subsection 10(f) below if, in Landlord's reasonable judgment, the
proposed sublease is on terms and conditions which are below the then current
fair market terms and conditions for comparable space in a comparable building.
(c) The subletting of substantially all of the Premises for all or any
part of the remaining Term of this Lease shall be deemed an assignment rather
than a sublease for purposes of this clause. Notwithstanding the foregoing,
Landlord shall consent to the assignment or transfer, if the Assignment Notice
states that Tenant desires to assign the Lease to any entity into which Tenant
is merged, with which Tenant is consolidated, with which Tenant completes a
share exchange, or which acquires all or substantially all of the assets of
Tenant or all or substantially all of the outstanding shares of capital stock of
Tenant (a "Permitted Assignee"), provided that the assignee first executes,
acknowledges and delivers to Landlord an agreement whereby the assignee agrees
to be bound by all of the covenants and agreements in this Lease which Tenant
has agreed to keep, observe or perform, that the assignee agrees that the
provisions of this Section 10 shall be binding upon it as if it were the
original Tenant hereunder and that the assignee shall have a net worth
(determined in accordance with generally accepted accounting principles
consistently applied) immediately after such assignment which is at least equal
to the net worth (as so determined) of Tenant at the time this Lease was entered
into.
(d) If Tenant shall sublet all or any portion of the Premises, then one-
half (1/2) of any consideration paid by the sublessee for the portion of the
Premises being sublet that exceeds the Basic Rent and rental adjustments
provided by this Lease for such portion of the Premises being sublet shall be
due, owing and payable from Tenant to Landlord when paid or owing by the
sublessee under the sublease without any deduction or adjustment whatsoever for
costs incurred by Tenant in connection with the sublease. All costs incurred in
connection with any sublease including, without limitation, brokers fees and
tenant improvement costs, shall be paid by Tenant.
(e) Any sale, assignment, hypothecation or transfer of this Lease or
subletting of the Premises that is not in compliance with the provisions of this
Section 10 shall be void and shall, at the option of Landlord, terminate this
Lease. The consent by Landlord to any assignment or subletting shall not be
construed as relieving Tenant or any assignee of this Lease or sublessee of the
Premises from obtaining the express written consent of Landlord to any further
assignment or subletting, or as releasing Tenant or any assignee or sublessee of
Tenant from any liability or obligation hereunder whether or not then accrued.
Tenant shall pay Landlord as Additional Rent a reasonable fee for costs incurred
in connection herewith, including but not limited to costs for attorneys,
accountants, architects, Tenant Improvement oversight and administration at the
time Tenant requests in writing that Landlord consent to any assignment or
subletting of the Lease. At a minimum, Landlord shall charge a fee of Five
Hundred and No/100 Dollars ($500.00) for all assignments and subleases which
require or do not require Landlord's consent, whether or not an assignment or
sublease is executed. This Section 10 shall be fully applicable to all further
sales, hypothecations, transfers, assignments and subleases of any portion of
the Premises by any successors or assignee of Tenant, or any sublessee of the
Premises.
(f) For the purposes of this Section 10, a "Qualifying Transfer" shall
mean (i) any proposed assignment of this Lease, (ii) any proposed sublease of
any portion of the Premises with a term expiring within one year of the
expiration date of the Lease Term, (iii) any proposed sublease of any portion of
the Premises with a term of more than
22
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two (2) years, (iv) if Tenant leases two or more floors in the Building, any
proposed sublease of a portion of the Premises which exceeds one full floor, or
(v) if Tenant leases less than two floors in the Building, any proposed sublease
of any portion of the Premises. Notwithstanding any provisions of this Section
10 to the contrary, after the Landlord receives a request from Tenant to consent
to any Qualifying Transfer, Landlord shall have the option, to be exercised by
written notice within thirty (30) days after the receipt of such request, to
terminate this Lease and the Term hereof with respect to the portion of the
Premises covered by the proposed assignment or sublease on not less than thirty
(30) days and not more than ninety (90) days notice to the Tenant. If the
Landlord elects to terminate this Lease as aforesaid, the Tenant shall have the
right, to be exercised by written notice to the Landlord within ten (10) days
after receipt of such notice of termination, to withdraw the request for consent
to the proposed assignment or sublease, in which case the Tenant shall not
proceed with such assignment or sublease, the notice of termination shall be
null and void and this Lease shall continue in full force and effect in
accordance with its terms. In the event Landlord elects to terminate this Lease
as provided herein, then Landlord shall have the additional right to negotiate
directly with Tenant's proposed assignee or subtenant and to enter into a direct
lease with such party on such terms as shall be acceptable to Landlord in its
sole and absolute discretion, and Tenant hereby waives any claims against
Landlord related thereto, including, without limitation, any claims for any
compensation or profit related to such lease. In addition, in the event Landlord
elects to terminate this Lease as provided herein, then upon the applicable
termination date Tenant shall pay to Landlord, as Additional Rent, a termination
fee equal to Landlord's unamortized costs incurred in connection with this Lease
including, without limitation, brokerage fees, tenant improvement allowances,
free rent, and any other concessions granted by Landlord in connection with this
Lease.
The term "assign," as used herein, shall include an assignment of a part of
interest in this Lease, as well as any assignment from one co-tenant to another;
and an assignment to any prior owner of the Tenant's interest herein or part
thereof.
________________________________________________________________________________
11. DAMAGE OR DESTRUCTION
________________________________________________________________________________
(a) In the event the Building and/or the Premises is damaged by fire or
other perils covered by Landlord's insurance, Landlord shall:
i) In the event of a partial destruction of the Building and/or
the Premises, to an extent not exceeding twenty-five percent (25%) of the full
insurable value thereof, and if the damage thereto is such that the Building
and/or the Premises may be repaired, reconstructed or restored within a period
of one hundred twenty (120) days from the date of the happening of such casualty
and if Landlord will receive insurance proceeds sufficient to cover the cost of
such repairs, then Landlord shall commence and proceed diligently with the work
of repair, reconstruction or restoration and this Lease shall continue in full
force and effect;
ii) If such repair, reconstruction, or restoration shall require
a period longer than one hundred twenty (120) days or exceeds twenty-five
percent (25%) of the full insurable value thereof, or if said insurance proceeds
will not be sufficient to cover the cost of such repairs, then Landlord either
may elect to so repair, reconstruct or restore and the Lease shall continue in
full force and effect or Landlord may elect not to repair, reconstruct, or
restore and the Lease shall then terminate; and
iii) Under any of the conditions of this subsection 11(a) or
subsection 11(e), Landlord shall give written notice to Tenant of its intention
within ninety (90) days after the occurrence of such damage or destruction. If
Landlord fails to provide such written notice within such ninety (90) day
period, then Landlord shall be deemed to have elected not to restore the
Building and/or Premises. In the event Landlord elects not to restore the
Building and/or the Premises, this Lease shall be deemed to have terminated as
of the date of such partial destruction. In the event Landlord elects to
restore the Building and/or the Premises, but it is reasonably estimated that
such restoration will take longer than ten (10) months from the date of the
casualty, then Tenant may terminate this Lease on written notice to Landlord.
Notwithstanding anything contained in this Section 11(a) to the contrary,
provided that Tenant leases at least fifty percent (50%) of the Building, if any
casualty does not render the Premises untenantable, regardless of the amount
23
<PAGE>
of damage or destruction to the remainder of the Building, then Landlord shall
not have the right to terminate this Lease under this Section 11(a).
(b) Upon any termination of this Lease under any of the provisions of this
Section 11, the parties shall be released without further obligation to the
other from the date possession of the Premises is surrendered to Landlord except
for items which have theretofore accrued and are then unpaid; provided that
Landlord shall, upon such termination, return to Tenant any unearned Rent or
other unearned sums paid to Landlord.
(c) In the event of repair, reconstruction, or restoration by Landlord as
herein provided, the Rental payable under this Lease shall be abated
proportionately with the degree to which Tenant's use of the Premises is
impaired during the period of such repair, reconstruction or restoration.
Tenant's recovery for damages, if any, is limited to Rental abatement. Tenant
shall not be entitled to any compensation or damages for loss in the use of the
whole or any part of the Premises and/or any inconvenience or annoyance
occasioned by any damage, repair, reconstruction or restoration.
(d) Tenant shall not be released from any of its obligations under this
Lease except to the extent and upon the conditions expressly stated in this
Section 11 or as otherwise provided in this Lease. Notwithstanding anything to
the contrary contained in this Section 11, if Landlord is delayed or prevented
from repairing or restoring the damaged Premises within one year after the
occurrence of such damage or destruction by reason of acts of God, war,
governmental restrictions, inability to procure the necessary labor or materials
after diligent efforts to obtain such labor or materials, or other cause beyond
the reasonable control of Landlord, Landlord shall be relieved of its obligation
to make such repair or restoration and Tenant shall be released from its
obligations under this Lease as of the end of said one year period and this
Lease shall be deemed terminated.
(e) If damage is due to any cause other than fire or other peril covered
by extended coverage insurance, Landlord may elect to terminate this Lease.
(f) If Landlord is obligated to or elects to repair or restore as herein
provided, Landlord shall be obligated to make repair or restoration only of
those portions of the Building and/or the Premises which were originally
provided at Landlord's expense, and the repair and restoration of items not
provided at Landlord's expense shall be the obligation of Tenant.
(g) Notwithstanding anything to the contrary contained in this Section 11,
Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises when the damage resulting from any casualty covered under
this Section 11 occurs during the last twelve (12) months of the then current
Term of this Lease. However, if Landlord chooses not to restore, Tenant may
elect to terminate this Lease.
________________________________________________________________________________
12. INDEMNIFICATION
________________________________________________________________________________
(a) Tenant shall indemnify, defend and hold Landlord harmless from all
claims arising from Tenant's use of the Premises or the conduct of its business
or from any activity, work, or thing done, permitted or suffered by Tenant in or
about the Premises. Tenant shall further indemnify, defend and hold Landlord
harmless from all claims arising from any breach or default in the performance
of any obligation to be performed by Tenant under the terms of this Lease, or
arising from any act, neglect, fault or omission of Tenant or of its agents or
employees, and from and against all costs, reasonable attorneys' fees, expenses,
and liabilities incurred in or about such claim or any action or proceeding
brought thereon. In case any action or proceeding shall be brought against
Landlord by reason of any such claim, Tenant upon notice from Landlord shall
defend the same at Tenant's expense by counsel approved in writing by Landlord;
provided that the foregoing provision shall not be construed to make Tenant
responsible for loss, damage, liability or expense resulting from injuries to
third parties caused by the negligence of Landlord, or its officers,
contractors, agents or employees.
(b) Landlord shall indemnify, defend and hold Tenant harmless from all
claims arising from any activity, work or thing done or permitted by Landlord in
or about the Building, Land or Common Area. Landlord shall further indemnify,
defend and hold Tenant harmless from all claims arising from any breach or
default in the performance of
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any obligation to be performed by Landlord under the terms of this Lease, or
arising from any act, neglect, fault or omission of Landlord or of its agents or
employees, and from and against all costs, reasonable attorneys' fees, expenses,
and liabilities incurred in or about such claim or any action or proceeding
brought thereon. In case any action or proceeding shall be brought against
Tenant by reason of any such claim, Landlord, upon notice from Tenant, shall
defend the same at Landlord's expense by counsel approved in writing by Tenant;
provided that the foregoing provision shall not be construed to make Landlord
responsible for loss, damage, liability or expense resulting from injuries to
third parties caused by the negligence of Tenant, or its officers, contractors,
agents or employees.
(c) Notwithstanding anything contained above in this Section, in the event
of concurrent negligence of Tenant, its agents, employees or contractors, on the
one hand, and that of Landlord, its agents, employees or contractors on the
other hand, which concurrent negligence results in injury or damage to persons
or property, either party's obligation to indemnify the other as set forth in
this Section shall be limited to the extent of the negligence of the
indemnifying party and that of its agents, employees or contractors, including
the indemnifying party's proportional share of costs, attorneys' fees and
expenses incurred in connection with any claim, action or proceeding brought
with respect to such injury or damage.
________________________________________________________________________________
13. DAMAGE TO TENANT'S PROPERTY
________________________________________________________________________________
Notwithstanding anything in this Lease to the contrary, Landlord or its
agents shall not be liable for any damage to Tenant's property which is caused
by the following:
(a) Any damage to any property entrusted to employees of the Landlord;
(b) Loss or damage to any property by theft or otherwise unless caused by
Landlord's or Landlord's employees' negligence or willful misconduct and not
covered by Tenant's insurance;
(c) Any injury or damage to property resulting from fire, explosion,
falling plaster, steam, gas, electricity, water or rain which may leak from any
part of the Building or the pipes, appliances or plumbing work therein or from
the roof, street or sub-surface or from any other place or resulting from
dampness unless caused by Landlord's or Landlord's employees' negligence or
willful misconduct and not covered by Tenant's insurance; and
(d) Landlord or its agents shall not be liable for interference with light
or other incorporeal hereditaments, nor shall Landlord be liable for any latent
defect in the Premises or in the Building; provided that nothing in this Section
13(d) shall release Landlord from its duties under this Lease to repair any
latent defects in the Premises or Building within a reasonable time after
receiving notice of such defects.
Tenant shall give prompt notice to Landlord in case of fire or accidents in
the Premises or in the Building or of defects therein or in the fixtures or
equipment.
________________________________________________________________________________
14. INSURANCE
________________________________________________________________________________
(a) Tenant shall, during the term hereof and any other period of
occupancy, at its sole cost and expense, keep in full force and effect
Commercial General Liability Insurance insuring Tenant against any liability
arising out of lease, use, occupancy or maintenance of the Premises and all
areas appurtenant thereto. Such insurance shall be in the amount of not less
than Three Million and No/100 Dollars ($3,000,000.00) Combined Single Limit for
injury to, or death of one or more persons in an occurrence, and for damage to
tangible property (including loss of use) in an occurrence. The policy shall
insure the hazards of Premises and operations, independent contractors,
contractual liability (covering the indemnity contained in Section 12 hereof)
and shall (1) name Landlord as an additional insured, and (2) contain a
provision that "the insurance provided Landlord hereunder shall be primary and
non-contributing with any other insurance available to Landlord."
(b) Landlord shall, during the term hereof any other period of occupancy
by Tenant, keep in full force and effect the following insurance:
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i) Commercial General Liability Insurance insuring Landlord
against any liability arising out of Landlord's use, occupancy or maintenance of
the Building and Land and all areas appurtenant thereto. Such insurance shall be
in the amount of not less than Three Million and No/100 Dollars ($3,000,000.00)
Combined Single Limit for injury to, or death of one or more persons in an
occurrence, and for damage to tangible property (including loss of use) in an
occurrence. The policy shall insure the operations of the Building and Land and
of independent contractors, and include contractual liability (covering the
indemnity contained in Section 12 hereof) and shall contain a provision that
"the insurance provided Tenant hereunder shall be primary and non-contributing
with any other insurance available to Tenant."
ii) Property insurance together with coverage for earthquake
(excluding any property which Tenant is obligated to insure), for the full
replacement value of the Building, and all improvements and betterments to the
Building, with a deductible not to exceed twenty thousand dollars ($20,000.00).
(b) All policies shall be written in a form satisfactory to Landlord and
shall be taken out with insurance companies holding a General Policyholders
Rating of "A" and a Financial Rating of "A5" or better, as set forth in the most
current issue of Bests Insurance Guide. Within five (5) days after occupancy of
the Premises, Tenant shall deliver to Landlord certificates evidencing the
existence of the amounts and forms of coverage required above. No such policy
shall be cancelable or reducible in coverage except after thirty (30) days prior
written notice to Landlord. Tenant shall within ten (10) days prior to the
expiration of such policies, furnish Landlord with renewals or "binders"
thereof, or Landlord may order such insurance and charge the cost thereof to
Tenant as Additional Rent. If Landlord obtains any insurance that is the
responsibility of Tenant under this Section 14, Landlord shall deliver to Tenant
a written statement setting forth the cost of any such insurance and showing in
reasonable detail the manner in which it has been computed.
________________________________________________________________________________
15. WAIVER OF SUBROGATION AND RELEASE
________________________________________________________________________________
Notwithstanding anything to the contrary contained in this Lease, Landlord
and Tenant, for themselves and their respective insurers, each release the other
from liability and waive any and all rights to recover against the other for any
loss or damage to the property of such waiving party, both real and personal and
including without limitation earnings derived from such property,
notwithstanding that any such loss or damage may be due to or result from the
negligence of either of the parties hereto or their respective employees or
agents; provided, that this waiver shall not affect or relieve Tenant of its
obligation to maintain the Premises, or the right of Landlord to recover against
Tenant the amount of any deductible under Landlord's insurance where Tenant
causes the damage covered by Landlord's insurance. Each party shall make
reasonable attempts to obtain a written consent to the waiver of subrogation
contained in this Section from its insurer.
________________________________________________________________________________
16. EMINENT DOMAIN
________________________________________________________________________________
If more than twenty-five percent (25%) of the Building shall be taken or
condemned for public or quasi-public use, under any statute or by right of
eminent domain, or private purchase in lieu thereof, by any competent authority,
Tenant shall have no claim against Landlord and shall not have any claim or
right to any portion of the amount that may be awarded as damages or paid as a
result of any such condemnation. All rights of the Tenant to damages therefore
are hereby assigned by the Tenant to Landlord; provided, nothing contained in
this Section 16 shall be deemed to give Landlord any interest in any award made
to Tenant for the taking of personal property and fixtures belonging to Tenant
or for any relocation costs provided to Tenant, and Tenant shall have the right
to claim the same from such condemning authority. Upon such condemnation or
taking, at the option of either Landlord or Tenant, the term of this Lease shall
cease and terminate from the date such governmental agency takes possession, and
the Tenant shall have no claim against Landlord for the value of any unexpired
term of the Lease. If less than twenty-five percent (25%) of the Building shall
be so taken, but if such taking shall substantially affect the Premises or the
means of access thereto, or if such taking shall be of a material part of the
Premises, Landlord or Tenant shall have the right, by delivery of notice in
writing to the other party, to terminate this Lease as of the date when
possession shall be so taken. If neither party shall so elect, this Lease shall
be and remain unaffected by such taking except that, effective as of the date
26
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when possession shall be so taken, the Rent payable hereunder shall be
diminished by an amount which shall bear the same ratio to the rent as the area
of the part of the Premises taken bears to the area of the Premises before such
taking.
________________________________________________________________________________
17. BANKRUPTCY
________________________________________________________________________________
If Tenant shall file a petition in bankruptcy under any provision of the
Bankruptcy Code as then in effect, or if Tenant shall be adjudicated bankrupt in
involuntary bankruptcy proceedings and such adjudication shall not have been
vacated within thirty (30) days from the date thereof, or if a receiver or
trustee shall be appointed of Tenant's property and the order appointing such
receiver or trustee shall not be set aside or vacated within sixty (60) days
after the entry thereof, or if Tenant shall assign Tenant's estate or effects
for the benefit of creditors, or if this Lease shall, by operation of law or
otherwise, pass to any person or persons other than Tenant, then in any such
event Landlord may terminate this Lease, if Landlord so elects, with or without
notice of such election and with or without entry or action by Landlord. In
such case, notwithstanding any other provisions of this Lease, Landlord, in
addition to any and all rights and remedies allowed by law or equity, shall,
upon such termination, be entitled to recover damages in the amount provided for
by Section 18 of this Lease. Neither Tenant nor any person claiming through or
under Tenant or by virtue of any statute or order of any court shall be entitled
to possession of the Premises but shall surrender the Premises to Landlord.
Nothing contained herein shall limit or prejudice the right of Landlord to
recover damages by reason of any such termination equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved; whether or not such amount
is greater, equal to, or less than the amount of damages recoverable under the
provisions of this Section 17.
________________________________________________________________________________
18. DEFAULT AND REMEDIES
________________________________________________________________________________
(a) The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant:
i) The abandonment of the Premises by Tenant. Abandonment is
herein defined to include, but is not limited to, any absence by Tenant from the
Premises for ten (10) business days or longer while Tenant is in default of any
provisions or term of this Lease.
ii) The failure by Tenant to make any payment of Rent or any
other payment required to be made by Tenant hereunder within ten (10) days after
written notice from Landlord that such payment is overdue.
iii) The failure by Tenant to observe or perform any of the
express or implied covenants or provisions of this Lease to be observed or
performed by Tenant, other than as specified in (i) or (ii) above, where such
failure shall continue for a period of ten (10) days after written notice
thereof from Landlord to Tenant. If the nature of Tenant's default is such that
more than ten (10) days are reasonably required for its cure, then Tenant shall
not be deemed to be in default if Tenant shall commence such cure within said
ten (10) day period and thereafter diligently prosecute such cure to completion,
which completion shall occur not later than sixty (60) days from the date of
such notice from Landlord.
iv)
a) The making by Tenant of any general assignment for the
benefit of creditors;
b) The filing by or against Tenant of a petition to have
Tenant adjudged a bankrupt or a petition for reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within sixty (60) days);
c) The appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where possession is not restored to Tenant
within sixty (60) days; or
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d) The attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease where such seizure is not discharged within sixty (60)
days.
(b) In the event of any such default by Tenant, in addition to any other
remedies available to Landlord at law or in equity, Landlord shall have the
immediate option to terminate this Lease and all rights of Tenant hereunder. In
the event that Landlord shall elect to so terminate this Lease then Landlord may
recover from Tenant:
i) The amount of any unpaid Rent which had been earned at the
time of such termination; plus
ii) The amount by which the unpaid Rent which would have been
earned after termination and for the present value at the time of the award of
the amount by which the unpaid Rent for the balance of the Lease Term exceeds
the amount of such Rental loss that Tenant proves could have been reasonably
avoided; plus
iii) Any interest charged on delinquent Rent; plus
iv) The reasonable costs incurred by Landlord in reletting the
Premises which costs shall include, but not be limited to, real estate broker's
fees incurred by Landlord, the reasonable costs of repairing the Premises and
putting the same into a tenantable condition, and an amount equal to the
difference between the Basic Rent as specified in this Lease and the basic rent
payable by the replacement tenant(s) (provided such basic rent is substantially
similar to fair market rent for such space),, but shall exclude the cost of
tenant improvements, alterations, renovations and decorating the Premises for
the new tenant(s), any allowances or credits which Landlord grants such new
tenant(s), any expenses or costs related to any assumption by Landlord of the
lease of such replacement tenant(s);, and the attorneys' fees and costs incurred
by Landlord; plus
v) Any other amount necessary to compensate Landlord for all
the actual damages proximately caused by Tenant's failure to perform Tenant's
obligation under this Lease.
(c) In the event of any such default by Tenant, and in addition to all
other remedies, Landlord shall also have the right, with or without terminating
this Lease, to re-enter the Premises and remove all persons and property from
the Premises; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant. Landlord shall be
entitled to hold and sell Tenant's property in a commercially reasonable manner
as specified in the Uniform Commercial Code as enacted in the State of
Washington. No re-entry or taking possession of the Premises by Landlord
pursuant to this Section 18 shall be construed as an election to terminate this
Lease unless a written notice of such intention is given to Tenant or unless the
termination thereof is decreed by a court of competent jurisdiction.
(d)
i) In the event of any such default by Tenant and in the event
that Landlord shall elect to re-enter as provided above or shall take possession
of the Premises pursuant to legal proceeding or pursuant to any notice provided
by law, Landlord may from time to time, without terminating this Lease, and
without waiving its right to recover all Rent as it becomes due, relet the
Premises or any part thereof for the Term of this Lease on terms and conditions
as Landlord in its sole discretion may deem advisable with the right to make
alterations and repairs to the Premises.
ii) In the event that Landlord shall elect to so relet, then
Rentals received by Landlord from such reletting shall be applied; first, to the
payment of any cost of such reletting (including the costs described in
subsection 18(b)(iv) above); second, to the payment of the cost of any
alterations and repairs to the Premises; third, to the payment of an
indebtedness other than Rent due hereunder from Tenant to Landlord; and fourth,
to the payment of Rent due and unpaid hereunder, and the residue, if any, shall
be held by Landlord and applied to payment of future Rent as the same may become
due and payable hereunder. Should the portion of such Rentals received from such
reletting during any month, which is applied to the payment of Rent hereunder,
be less than the Rent payable during
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that month by Tenant hereunder, then Tenant shall pay such deficiency to
Landlord immediately upon demand therefor by Landlord.
(e) Tenant acknowledges that certain benefits or concessions provided by
Landlord are conditioned upon Tenant's timely, full and faithful performance of
each and every obligation, covenant, representation and warranty of this Lease
throughout the entire Term, even though such benefits or concessions may be
realized by Tenant over less than the entire Term. Accordingly, notwithstanding
anything to the contrary contained herein, in the event Landlord brings an
action against Tenant for default under this Lease, Landlord shall become
immediately entitled to receive from Tenant as Additional Rent the amount of all
such benefits and concessions allocable to the balance of the Lease term on a
pro rata basis, including, without limitation,
i) any amounts theretofore paid by Landlord to Tenant or to any
third party or any amounts credited to Tenant or to any third party, for or on
account of
a) any moving, tenant improvement, decorating or other
allowance or credit granted to Tenant,
b) any real estate commission paid on account of this
Lease,
c) any expenses or costs related to assumption by Landlord
of any other lease, plus
ii) Rent for any period for which this Lease provides any zero
or nominal Rent, including any period of early occupancy of the Premises prior
to the commencement of the Term of this Lease, plus
iii) The amount spent by Landlord for any tenant improvements to
the Premises.
(f) All rights, options and remedies of either party contained in this
Lease shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other, and the parties shall have the right to pursue any one
or all of such remedies or any other remedy or relief which may be provided by
law, whether or not stated in this Lease. No waiver of any default of either
party hereunder shall be implied from any acceptance by the non-defaulting party
of any Rent or other payments due hereunder or any omission by the non-
defaulting party to take any action on account of such default if such default
persists or is repeated, and no express waiver shall affect defaults other than
as specified in said waiver. The consent or approval of Landlord to or of any
act by Tenant requiring Landlord's consent or approval shall not be deemed to
waive or render unnecessary Landlord's consent or approval to or of any
subsequent similar acts by Tenant.
(g) Landlord shall be in default under this Lease if Landlord fails to
make any payment required to be made by Landlord hereunder within ten (10) days
after written notice from Tenant that such payment is overdue. Landlord shall
also be in default in the performance of any non-monetary obligation required to
be performed by Landlord under the Lease if Landlord has failed to perform such
obligation within thirty (30) days after the receipt of notice from Tenant
specifying in detail Landlord's failure to perform; provided, however, that if
the nature of Landlord's obligation is such that more than thirty (30) calendar
days are required for its performance, then Landlord shall not be deemed in
default if it shall commence such performance within thirty (30) days and
thereafter diligently pursues the same to completion.
(h) Notwithstanding anything herein to the contrary, both Landlord and
Tenant shall have the obligation to take reasonable steps to mitigate their
damages caused by any default under this Lease.
(i) Except with respect to actions by Landlord to recover possession of
the Premises through an unlawful detainer or similar procedure, and except with
respect to emergency matters for which a restraining order or other similar
equitable relief is necessary, the parties agree to attempt to resolve any
disputes under this Lease as follows: both parties covenant to provide a person
authorized and empowered to resolve any dispute that may arise to meet face to
face with the person from the other party upon ten (10) days prior notice at a
mutually convenient place. Such persons shall negotiate in good faith to attempt
to resolve the dispute for as long as either party so desires and in
29
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good faith believes progress can be made, but no party shall be obligated to
continue negotiations for longer than ten (10) days. Failing a resolution of the
dispute by this method, the parties shall submit to non-binding mediation of the
dispute with a mediator of their choice with experience in mediating commercial
disputes. Both parties shall pay an equal share of the fees of the mediator
prior to the commencement of the mediation. Otherwise the parties shall each pay
their own costs and expenses of such mediation. Failing resolution of the
dispute by this method, the parties shall resort to any other remedies provided
at law.
________________________________________________________________________________
19. SUBORDINATION, QUIET ENJOYMENT
________________________________________________________________________________
(a) Without the necessity of any additional document being executed by
Tenant for the purpose of effective subordination, and at the election of
Landlord or any mortgagee or beneficiary of a deed of trust with a lien on the
Building, Common Areas, or Land or any ground lessor (collectively referred to
in this Lease as "Mortgagee"), this Lease shall be subject and subordinate at
all times to:
i) All ground leases or underlying leases which may now exist
or hereafter be executed affecting the Building, Common Areas or the Land or
both; and
ii) The lien of any mortgage or deed of trust which may now
exist or hereafter be executed in any amount for which the Building, Common
Areas, Land, ground leases or underlying leases, or Landlord's interest or
estate in any of said items is specified as security (collectively referred to
as "Mortgages").
(b) Notwithstanding the foregoing, Landlord shall have the right to
subordinate or cause to be subordinated any such ground leases or underlying
leases or Mortgages to this Lease.
(c) In the event that any ground lease or underlying lease terminates for
any reason or any Mortgage is foreclosed or a conveyance in lieu of foreclosure
is made for any reason, Tenant shall, notwithstanding any subordination, attorn
to and become the Tenant of the successor-in-interest to Landlord, at the option
of such successor-in-interest. Tenant covenants and agrees to execute and
deliver, upon demand by Landlord and in the form reasonably requested by
Landlord, any reasonable additional documents evidencing the priority of
subordination of this Lease with respect to any such ground leases or underlying
leases or the lien of any such Mortgage. Should Tenant fail to sign and return
any such documents within twenty (20) business days of such request, Tenant
shall, at Landlord's election, be in default under this Lease.
(d) The provisions of subsections (a) and (c) of this Section are
conditioned upon Landlord obtaining and delivering to Tenant a nondisturbance
agreement in which any Mortgagee currently or hereafter holding a Mortgage to
which this Lease is to be subordinate agrees to recognize this Lease upon
foreclosure, trustee's sale or deed in lieu thereof so long as Tenant is not in
default under this Lease; provided that, even if Landlord has not obtained such
a nondisturbance agreement, in the event of any such subordination of this Lease
by operation of law or otherwise, Tenant's possession of the Premises shall
remain undisturbed and Tenant's rights under this Lease shall be recognized and
shall not be adversely affected so long as Tenant is not in default under this
Lease, including upon any foreclosure, trustee's sale or deed in lieu thereof.
________________________________________________________________________________
20. ESTOPPEL CERTIFICATES
________________________________________________________________________________
Tenant shall, from time to time, upon written request of Landlord, execute,
acknowledge and deliver to Landlord or its designee a written statement stating:
the date this Lease was executed; the Term Commencement Date, as well as the
date of Term expiration; the date Tenant entered into occupancy of the Premises;
the amount of minimum monthly Rental and the date through which such Rental has
been paid; and certifying to the extent true: that this Lease is in full force
and effect and has not been assigned, modified, supplemented or amended in any
way (or specifying the date of the agreement so affecting this Lease); that this
Lease represents the entire agreement between the parties as to this leasing;
that all conditions under this Lease to be performed by Landlord have been
satisfied; that all required contributions by Landlord to Tenant on account of
Tenant's improvements have been received; that on this date there are no
existing defenses or offsets which the Tenant has against the enforcement of
this Lease by Landlord, and that not more than one month's Rental has been paid
in advance; and such other matters as Landlord may reasonably request. It
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is intended that any such statement delivered pursuant to this paragraph may be
relied upon by a prospective purchaser of Landlord's interest or a mortgagee of
Landlord's interest or assignee of any mortgage upon Landlord's interest in the
Building. If Tenant shall fail to respond within ten (10) business days of
receipt by Tenant of a written request by Landlord as herein provided, Tenant
shall be deemed to have given such certificate as above provided without
modification and shall be deemed to have admitted the accuracy of any
information supplied by Landlord to a prospective purchaser or mortgagee, that
this Lease is in full force and effect, that there are no uncured defaults in
Landlord's performance, that the Security Deposit is as stated in this Lease,
and that not more than one month's Rental has been paid in advance.
________________________________________________________________________________
21. ATTORNEYS' FEES
________________________________________________________________________________
(a) Payment to Prevailing Party. If either party shall bring an action or
---------------------------
proceeding (including, without limitation, any cross-complaint, counterclaim or
third party claim) against any other party by reason of the breach or alleged
violation of any covenant, term or obligation hereof, or for the enforcement of
any provision hereof, or to interpret the Lease, or for any other claim
otherwise arising out of this Lease, the Prevailing Party (as defined below) in
such action or proceeding shall be entitled to its costs and expenses of suit,
including but not limited to reasonable attorneys' fees, which shall be payable
whether or not such action is prosecuted to judgment. "Prevailing Party" within
the meaning of this Section 21 shall include, without limitation, a party who
dismisses an action for recovery hereunder in exchange for payment of the sums
allegedly due, performance of covenants allegedly breached or consideration
substantially equal to the relief sought in the action.
(b) Attorneys' Fees in Third Party Litigation. If either party is
-----------------------------------------
required to initiate or defend any action or proceeding with a third party
(including, without limitation, any cross-complaint, counterclaim or third party
claim) because of the other party's breach of this Lease, or otherwise arising
out of this Lease, and such party is the Prevailing Party in such action or
proceeding, then the party so initiating or defending shall be entitled to
reasonable attorneys' fees from the other party.
(c) Scope of Fees. Attorneys' fees under this Section 21 shall include
-------------
attorneys' fees on any appeal, attorney fees on any confirmation of an
arbitration award or in enforcing any judgment on an arbitration award, and, in
addition, a party entitled to attorneys' fees shall be entitled to all other
reasonable costs and expenses occurred in connection with such action.
________________________________________________________________________________
22. LATE CHARGES
________________________________________________________________________________
Tenant acknowledges that a late payment of Rent or other sums due hereunder
will cause Landlord to incur costs not contemplated by this Lease, the exact
amount of which is difficult to ascertain. Such costs may include, but not be
limited to, processing and accounting charges, and penalties imposed by terms of
any contracts, mortgages or deeds of trust covering the Building. Therefore, in
the event Tenant should fail to pay any installment of Rent or any sum due
hereunder within five (5) days after written notice from Landlord that such
amount is due, then Tenant shall pay Landlord as Additional Rent, a late charge
equal to five percent (5%) of the amount owing. Notwithstanding the above,
nothing contained in this Section 22 shall be deemed to preclude Landlord from
exercising any other right or remedy Landlord may have under this Lease in law
or equity, in addition to or in lieu of the above late charges. Tenant shall
also pay Landlord an "NSF" fee of Fifty and No/100 Dollars ($50.00) for all
checks of Tenant returned for insufficient funds.
________________________________________________________________________________
23. NOTICES
________________________________________________________________________________
Any notice required or permitted to be given hereunder must be in writing
and may be given by personal delivery, overnight air courier or by mail, and if
given by mail shall be mailed by certified mail, return receipt requested,
addressed to Tenant or to Landlord at the addresses designated in subsection
1(h). Notice shall be deemed sufficiently given
(a) When tendered, if written notice is personally delivered; or
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(b) On the date delivered (or on the date delivery is refused) if sent by
overnight air courier; or
(c) If mailed, forty-eight (48) hours after deposit of the above-described
certified mail with the United States Postal Service. Either party may specify
a different address for notice purposes by written notice to the other.
________________________________________________________________________________
24. HOLDING OVER
________________________________________________________________________________
Should Tenant continue to occupy the Premises after expiration or
termination of the Term or any renewal or renewals thereof with Landlord's
written consent, such tenancy shall be from month-to-month at a monthly Rent
equal to one hundred fifty percent (150%) of the Rent and Additional Rent paid
for the last month of the Term of this Lease and all other charges due hereunder
for each month or any part thereof of any such holdover period. In the event of
any unauthorized holding over by Tenant, Tenant shall indemnify Landlord against
all claims for damages by any other tenant to whom Landlord may have leased all
or any part of the Premises covered hereby effective upon termination of this
Lease.
________________________________________________________________________________
25. ALTERATIONS
________________________________________________________________________________
(a) Approval Process.
----------------
i) Interior Finishes or Structural Work. Tenant shall not make
------------------------------------
or cause to be made interior finish work (alterations, additions or
improvements) to the Premises or structural interior alterations (structural
interior alterations include but are not limited to alterations involving the
Building electrical, mechanical, plumbing, fire safety, life or other Building
systems), without the prior written approval of Landlord, which approval shall
not be unreasonably withheld, unreasonably conditioned or unreasonably delayed.
All contractors used by Tenant shall be licensed and bonded and approved by
Landlord in writing and in advance of any work. In addition, Tenant and
Tenant's contractor shall comply with the terms and conditions provided in the
Construction Rules and Regulations attached hereto as Exhibit "G." Tenant
-----------
shall provide Landlord with written notice of its intent to make changes at
least thirty (30) days prior to the start of any proposed work. Notice shall
include detailed information concerning the following items:
(a) General description of the changes to be made including
the description of any demolition work;
(b) List of proposed licensed and bonded contractors to do
the work (Tenant is required to select from Landlord's third-party contractors
for architectural, electrical, mechanical, fire or life safety systems work.);
all contractors shall provide Landlord with a certificate of insurance complying
with Landlord's insurance requirements prior to commencement of any work;
(c) Estimate of the cost of work;
(d) Intended work schedule including duration and
indicating whether the work will be accomplished during "normal Building hours"
or on an off-hours basis; and
(e) Plans and specifications for the work, including all
cabling and mechanical/electrical plans (unless work involves, e.g., decorating,
floorings, wall coverings, carpeting, painting, where plans and specifications
are not applicable).
Notwithstanding the above to the contrary, in the event any proposed
alterations are estimated by Landlord to cost in excess of $15,000.00, Landlord
shall have the right, in Landlord's sole discretion, to contract directly with
the approved contractor for the installation of the alterations. If Landlord
contracts directly with the approved contractor for the installation of the
alterations, (1) Tenant shall reimburse Landlord for the costs of installation,
as Additional Rent, within ten (10) days of Tenant's receipt of an invoice for
such costs and/or, at Landlord's election, Tenant shall deposit with Landlord
prior to the commencement of installation of the alterations up to one hundred
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percent (100%) of the estimated costs of installation, which Landlord shall
apply toward such costs upon completion of the alterations, and (2) Tenant shall
pay Landlord a construction management fee equal to two percent (2%) of the
total cost of designing and installing the alterations, inclusive of taxes,
permit fees, design fees, and construction fees.
(b) Work at Tenant's Risk. Tenant shall complete any work done by Tenant
---------------------
pursuant to subsection 25(a) at Tenant's sole risk, cost and expense in
accordance with the Construction Rules and Regulations attached hereto as
Exhibit "G." Tenant shall keep the Premises, Building and Land free and clear
- -----------
of liens of any kind. If any such liens are filed, Tenant shall have thirty
(30) days (or ten (10) days if Landlord is in the process of refinancing) from
the receipt of notice from Landlord informing Tenant of such filing to either
remove such liens or to provide a bond in the amount of one hundred fifty
percent (150%) of the lien claim indemnifying Landlord as security for the
removal or certification thereof. At Landlord's option, Landlord may reasonably
require a lien search on the Land at Tenant's cost and expense. Tenant
covenants and agrees that all work done shall comply with the requirements of
all governmental agencies, offices and boards having jurisdiction over the
Premises. Further, Tenant shall provide to Landlord, within thirty (30) days of
completion of any work, copies of all as-builts and plans and specifications
(including all cabling and electrical plans), as applicable. Tenant agrees to
hold harmless and indemnify Landlord in the event of any breach of Tenant's
obligations.
(c) Title to Property. Landlord shall notify Tenant in writing prior to
-----------------
the commencement of any improvements under this Section 25 if Tenant will be
required to remove such additions, alterations or improvements at the end of the
Lease term and restore the Premises to the same condition it was in prior to
such installation, reasonable wear and tear and damage by Landlord, casualty or
condemnation excepted. Notwithstanding the foregoing sentence, Tenant shall be
obligated to remove, at Tenant's cost, all cabling within the Premises, and to
restore the Premises to the condition it was in prior to the installation of
such cabling, reasonable wear and tear excepted. At the expiration or earlier
termination of this Lease, all alterations, additions or improvements made by
Tenant after the Commencement Date shall, at Tenant's option (unless otherwise
required by Landlord) either be removed and the Premises returned to their
original configuration (normal, reasonable wear and tear and damage due to or
caused by fire or other casualty, condemnation or Landlord excepted), or shall
become the property of Landlord, free and clear of liens, claims and
encumbrances, to remain upon and be surrendered with the Premises.
Notwithstanding anything to the contrary herein, all movable partitions,
business and trade fixtures, machinery and equipment, communications equipment
and office equipment affixed to or located within the Premises, which can be
removed without damage to the Building, shall remain the property of Tenant;
provided, Tenant shall promptly repair any damage to the Premises and Building
upon their removal. Furniture, furnishings and other articles of personal
property owned by Tenant and located in the Premises shall be and remain the
property of Tenant and may be removed by Tenant at any time during the Term and
any extensions thereof.
All alterations to the Premises with or without Landlord's written approval
shall be made in accordance with Landlord's Construction Rules and Regulations
attached hereto as Exhibit "G." Landlord reserves the right to modify such
----------
rules and regulations as Landlord determines in its sole discretion; provided
such modifications are reasonable and do not discriminate against any tenant of
the Building.
________________________________________________________________________________
26. RENT TAX
________________________________________________________________________________
If, during the Term of this Lease, any tax be imposed upon the privilege of
renting the space leased hereunder or upon the amount of Rentals collected
therefore, Tenant will pay as Additional Rent each month a sum equal to such tax
or charge that is so imposed, but nothing herein shall be taken to require
Tenant to pay any federal income tax imposed upon Landlord.
________________________________________________________________________________
27. PRIOR AGREEMENT, AMENDMENTS
________________________________________________________________________________
Neither party hereto has made any representations or promises except as
contained herein or in some further writing signed by the party making such
representation or promises. No agreement hereinafter made shall be effective to
change, modify, discharge or effect an abandonment of this Lease, in whole or in
part, unless such agreement is in
33
<PAGE>
writing and signed by or on behalf of the party against whom enforcement of the
change, modification, discharge or abandonment is sought.
- --------------------------------------------------------------------------------
28. PERSONAL PROPERTY TAXES
- --------------------------------------------------------------------------------
Tenant shall pay, or cause to be paid, before delinquency, any and all
taxes levied or assessed which become payable during the term hereof upon all
Tenant's Tenant Improvements, equipment, furniture, fixtures and personal
property located in the Premises; except that which has been paid for by
Landlord and is standard in the Building. In the event any of the Tenant's
Tenant Improvements, equipment, furniture, fixtures and personal property shall
be assessed and taxed with the Building, Tenant shall pay to Landlord its share
of such taxes within thirty (30) days after delivery to Tenant by Landlord of a
statement in writing setting forth the amount of such taxes applicable to
Tenant's property; provided, however, Tenant shall have the right to contest
such taxes at Tenant's sole cost and expense and, if requested by Tenant,
Landlord shall pay such taxes under protest to preserve Tenant's rights to
contest them.
- --------------------------------------------------------------------------------
29. SUCCESSORS
- --------------------------------------------------------------------------------
All of the covenants, agreements, terms and conditions contained in this
Lease shall apply to and be binding upon Landlord and Tenant and their
respective heirs, executors, administrators, legal representatives, successors
and assigns and upon any person or persons coming into ownership or possession
of any interest in the Premises by operation of law or otherwise.
- --------------------------------------------------------------------------------
30. RIGHT TO PERFORM
- --------------------------------------------------------------------------------
If Tenant shall fail to pay any sum of money, other than Basic Rent and
Additional Rent required to be paid by it hereunder, or shall fail to perform
hereunder, and such failure shall continue for ten (10) business days after
written notice thereof by Landlord, Landlord may, but shall not be obligated so
to do, and without waiving or releasing Tenant from any obligations of Tenant,
make any such payment or perform any such other act on Tenant's part to be made
or performed as provided in this Lease. Landlord shall have (in addition to any
other right or remedy of Landlord) the same rights and remedies in the event of
nonpayment of sums due under this Section 30 as in the case of default by Tenant
in the payment of Rent.
- --------------------------------------------------------------------------------
31. FORCE MAJEURE
- --------------------------------------------------------------------------------
Whenever performance is required of either party hereunder, that party
shall use all due diligence to perform and shall take all necessary measures in
good faith to perform; provided, however, that , except with respect to Tenant's
obligation to pay Rent or any other charges due under this Lease, if completion
of performance shall be delayed at any time by reason of acts of God, war, civil
commotion, riots, strikes, picketing, or other labor disputes, governmental
actions, Landlord's inability to obtain permits or other governmental approvals,
inability to obtain materials, or damage to work in progress by reason of fire
or other casualty, or other cause beyond the reasonable control of said party
(except to the extent of such party's negligence), then the time for performance
as herein specified shall be appropriately extended by the amount of the delay
actually so caused. The provisions of this Section 31 shall not apply to a
damage or destruction covered by Section 11 (Damage or Destruction).
- --------------------------------------------------------------------------------
32. LIMITATION ON LIABILITY
- --------------------------------------------------------------------------------
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that, in the event of any actual or
alleged failure, breach or default hereunder by Landlord:
(a) The sole and exclusive remedy shall be against Landlord's interest in
the Building and all proceeds therefrom;
34
<PAGE>
(b) No general or limited partner of any partnerships who have any
interest in the property, or member or manager of Landlord shall be sued or
named as a party in any suit or action (except as may be necessary to secure
jurisdiction of the partnership or limited liability company);
(c) No service of process shall be made against any general or limited
partner of any partnerships who have any interest in the property, or member or
manager of Landlord (except as may be necessary to secure jurisdiction of the
partnership or limited liability company);
(d) No general or limited partner of any partnerships who have any
interest in the property, or member or manager of Landlord shall be required to
answer or otherwise plead to any service or process;
(e) No judgment will be taken against any general or limited partner of
any partnerships who have any interest in the property, or member or manager of
Landlord;
(f) Any judgment taken against any general or limited partner of any
partnerships who have any interest in the property, or member or manager of
Landlord may be vacated and set aside at any time nunc pro tunc;
(g) No writ of execution will ever be levied against the asset of any
general or limited partner of any partnerships who have any interest in the
property, or member or manager of Landlord; and
(h) These covenants and agreements are enforceable both by Landlord and
also by any partner of any partnerships who have any interest in the property,
or member or manager of Landlord.
- --------------------------------------------------------------------------------
33. Intentionally Omitted.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
34. MISCELLANEOUS
- --------------------------------------------------------------------------------
(a) Accord and Satisfaction. No payment by Tenant or receipt by Landlord
-----------------------
of a lesser amount than any installment or payment of the Rent due shall be
deemed to be other than on account of the amount due, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment as
Rent be deemed an accord and satisfaction. Landlord's right to recover the
balance of such Rent or any installment, or to pursue any other remedy provided
in this Lease, shall be unaffected by said payment, endorsement or statement.
Landlord reserves the right, in the absence of instructions to the contrary, to
apply payment received from Tenant in whatever manner Landlord chooses.
(b) Authority.
---------
i) Tenant. If Tenant is a corporation, each individual executing
------
this Lease on behalf of said corporation represents and warrants that she/he is
duly authorized to execute and deliver this Lease on behalf of said corporation
in accordance with a duly adopted resolution of the Board of Directors of said
corporation in accordance with the Bylaws of said corporation, and that this
Lease is binding upon said corporation in accordance with its terms.
Concurrently with the execution of this Lease, Tenant shall deliver to Landlord
a certified copy of a resolution of the Board of Directors of said corporation
authorizing the execution of this Lease. If Tenant is a partnership, each
individual executing this Lease on behalf of said partnership represents and
warrants that she/he is duly authorized to execute and deliver this Lease on
behalf of said partnership and that this Lease is binding upon said partnership
in accordance with its terms, and concurrently with execution of this Lease,
Tenant shall deliver to Landlord such evidence of authorization as Landlord may
require. If Tenant is a marital community, or a member of a marital community,
both members of the marital community shall execute this Lease, or concurrently
with execution of this Lease, Tenant shall deliver to Landlord such evidence as
Landlord may require that the member signing this Lease has the authority to
sign on behalf of the marital community or, with Landlord's prior written
consent, that Tenant's interest in this Lease is to be the separate estate of
the signing member.
35
<PAGE>
ii) Landlord. The individual executing on behalf of Landlord
--------
represents and warrants that she/he is duly authorized to execute and deliver
this Lease on behalf of Landlord and that this Lease is binding upon said
Landlord.
(c) Brokerage Commissions. Tenant represents and warrants to Landlord
---------------------
that it has not engaged any broker, finder or other person who would be entitled
to any commission or fees in respect to the negotiation, execution or delivery
of this Lease with the exception of Tenant's broker identified in subsection
1(f). Tenant shall indemnify and hold harmless Landlord against any loss, cost,
liability or expense, including reasonable attorneys' fees and costs, incurred
by Landlord as a result of any claim asserted by any broker, finder or other
person, except Tenant's broker identified in subsection 1(f), on the basis of
any arrangement or agreements made or alleged to have been made by or on behalf
of Tenant. The provisions of this subsection 34(c) shall not apply to brokers
with whom Landlord has an express written brokerage agreement.
(d) Intentionally omitted.
(e) Captions. The captions of the paragraphs in this Lease are inserted
--------
and included solely for convenience and shall never be considered or given any
effect in construing or interpreting the provisions hereof if any question of
intent should arise.
(f) Construction. This Lease shall be construed in accordance with the
------------
laws of the State of Washington.
(g) Definition of "Landlord". The term "Landlord", as used in this Lease,
-----------------------
so far as covenants or obligations on the part of Landlord are concerned, shall
be limited to mean and include only the owner or owners, at the time in
question, of the fee title of the Premises or the lessees under any master
lease, if any. In the event of any transfer, assignment or other conveyance or
transfers of any such title, Landlord herein named (and in case of any
subsequent transfers or conveyances, the then grantor) shall be automatically
freed and relieved from and after the date of such transfer, assignment or
conveyance of all liability as respects the performance of any covenants or
obligations on the part of Landlord contained in this Lease thereafter to be
performed, provided that the transferee of such title assumes and agrees to
observe and perform any and all obligations and liabilities of Landlord
hereunder, during its ownership of the Premises. Landlord may transfer its
interest in the Premises without the consent of the Tenant and such transfer or
subsequent transfer shall not be deemed a violation on Landlord's part of any of
the terms and conditions of this Lease.
(h) Definition of "Tenant". The word "Tenant", wherever used in this
---------------------
Lease, shall be construed to mean tenants in all cases where there is more than
one tenant, and the necessary grammatical changes required to make the
provisions hereof apply to corporations, partnerships or individuals, men or
women, shall in all cases be assumed as though in each case fully expressed.
Each provision hereof shall extend to and shall, as the case may require,
obligate or inure to the benefit of Landlord and Tenant and their respective
agents and employees.
(i) Examination of Lease. Submission of this instrument for examination
--------------------
or signature by Tenant does not constitute a reservation of or option of Lease,
and it is not effective as a Lease or otherwise until execution by and delivery
to both Landlord and Tenant.
(j) Exhibits. All exhibits attached to this Lease are incorporated herein
--------
by reference.
(k) Light and Air. This Lease does not grant any right of access to
-------------
light, air, or view, over the property, and Landlord shall not be liable for any
diminution of such light, air, or view by an adjacent structure and/or
vegetation. Tenant agrees and covenants that no diminution of light, air or
view by any structure which may hereafter be erected shall entitle Tenant to any
reduction in Basic or Additional Rent under this Lease, result in any liability
or obligation of Landlord to Tenant, or in any way affect this Lease or Tenant's
obligations hereunder.
36
<PAGE>
(l) Merger. This Lease supersedes any and all other agreements, either
------
oral or in writing between the parties hereto with respect to the Premises and
contains all of the covenants, agreements and other obligations between the
parties with respect to the Premises.
(m) Name. Tenant shall not, without the written consent of Landlord,
----
which consent shall not be unreasonably withheld, unreasonably conditioned, or
unreasonably delayed, use the name of the Building for any purpose other than as
the address of the business to be conducted by Tenant in the Premises, and in no
event shall Tenant acquire any rights in or to such names.
(n) Parking. Tenant shall have the right to the non-exclusive,
-------
non-specific use of four (4) parking stalls per 1,000 Usable Square Feet of
space in the Premises, as the Premises may be expanded as provided herein, which
parking stalls shall be located in the parking garage under the Building. The
initial parking rates shall be Fifty-five Dollars ($55) per parking stall per
month, which rate shall remain fixed for the first twenty-four (24) months of
the Term. From the twenty-fifth (25th) month of the Term through the end of
the Term, as the same may be extended, the monthly rate for such parking stalls
shall be the market rate for underground parking stalls in buildings located in
the Bellevue I-90 corridor; provided that such rate shall be adjusted no more
than one time each year during such period. Such parking shall be subject to
such reasonable rules, regulations, and codes as may from time to time be
established by Landlord and/or governing authorities. If a parking
administration program needs to be implemented at the Building, Tenant and
Landlord agree to cooperate in the program implementation and Tenant
acknowledges that Landlord costs associated with the program will be borne by
Tenant on a pro rata basis as an Operating Cost.
(o) Partial Invalidity. If any term, covenant or condition of this Lease
------------------
is held invalid or unenforceable, the validity and enforceability of the Lease
shall not be affected thereby; all remaining terms, covenants or conditions of
this Lease shall be valid and be enforceable to the fullest extent of the law.
(p) Recording. Neither Landlord nor Tenant shall record this Lease.
----------
Simultaneously with the signing of this Lease and upon the request of either
party thereafter , the parties shall execute and cause to be properly recorded a
short form memorandum of this Lease, with the cost of recording to be paid by
the party requesting it.
(q) Severability. Any provision of this Lease which shall prove to be
------------
invalid, void or illegal in no way affects, impairs, or invalidates any other
provision hereof, and such other provisions shall remain in full force and
effect.
(r) Signage. Tenant shall have the right to install one exterior, lighted
-------
sign with Tenant's name on the Building facing I-90 at its sole cost, subject to
Landlord's prior approval of the design and location, which shall not be
unreasonably withheld, unreasonably conditioned, or unreasonably delayed, and
subject to all applicable codes, ordinances, and regulations of the City of
Bellevue. Unless required by the City of Bellevue, Landlord will not require
the size of the exterior sign to be smaller than the existing "VoiceStream"
building sign. Additionally, Landlord shall provide Tenant with one (1)
directory and one (1) interior building sign at Landlord's cost. Tenant's
rights under this section shall be personal to Tenant and any Permitted
Assignee, and no other party shall be entitled to the sign rights granted to
Tenant hereunder.
(s) Time. Time is of the essence of this Lease with respect to the
----
performance of every provision of this Lease in which time or performance is a
factor.
(t) Transportation Management Program. Tenant shall cooperate, to the
---------------------------------
extent reasonable, with Landlord in meeting the objectives and complying with
the terms and conditions of any transportation management plan applicable to the
Building or Newport Corporate Center. Landlord will provide Tenant with a copy
of any such transportation management plan now or hereafter in effect. In
addition, Tenant will cooperate with and participate in any and all recycling
programs now or hereafter in place with respect to the Building or the Park.
(u) Waivers. The waiver by Landlord of any breach of any term, covenant
--------
or condition herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant or condition herein
contained, nor shall any custom or practice which may grow up between the
parties in the
37
<PAGE>
administration of the terms hereof be deemed a waiver of or in any way affect
the right of Landlord to insist upon the performance by Tenant in strict
accordance with said terms. The subsequent acceptance of Rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease, other than the failure of Tenant
to pay the particular Rent so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such Rent.
(v) Communications Equipment. Subject to Landlord and Tenant agreeing on
------------------------
a reasonably monthly fee for the use thereof, Tenant, at its sole cost and
expense, shall have the non-exclusive right (it being understood that Landlord
may grant, extend or renew similar rights to others provided that the exercise
of any rights which are granted after Tenant has installed its Dish do not
interfere with the rights granted to Tenant hereunder) to install, maintain, and
from time to time replace certain satellite dishes, PCS antennas and related
equipment (collectively, a "Dish") on the roof of the Building, provided that
prior to commencing any installation or maintenance, Tenant shall (i) obtain
Landlord's prior approval of the proposed size, weight and location of the Dish
and method for fastening the Dish to the roof, (ii) such installation and/or
replacement shall comply strictly with all laws and the conditions of any bond
or warranty maintained by Landlord on the roof, (iii) use the Dish solely for
its non-revenue producing use, and (iv) obtain, at Tenant's sole cost and
expense, any necessary federal, state, and municipal permits, licenses and
approvals, and deliver copies thereof to Landlord. Landlord may supervise or
perform any roof penetration related to the installation of a Dish, and Landlord
may charge the reasonable, out-of-pocket cost thereof to Tenant. Tenant agrees
that all installation, construction and maintenance shall be performed in a
neat, responsible, and workmanlike manner, using generally acceptable
construction standards, consistent with such reasonable requirements as shall be
imposed by Landlord. Tenant further agrees to label each cable or wire placed by
Tenant in the telecommunications pathways of the Building, with identification
information as required by Landlord. Tenant shall repair any damage to the
Building caused by Tenant's installation, maintenance, replacement, use or
removal of the Dish. The Dish shall remain the property of Tenant, and Tenant
may remove the Dish at its cost at any time during the Term. Tenant shall
remove the Dish at Tenant's cost and expense upon the expiration or termination
of this Lease. Tenant agrees that the Dish, and any wires, cables or
connections relating thereto, and the installation, maintenance and operation
thereof shall in no way interfere with the use and enjoyment of the Building, or
the operation of communications (including, without limitation, other satellite
dishes) or computer devices by Landlord or by other tenants or occupants of the
Newport Corporate Center. If such interference shall occur, Landlord shall give
Tenant written notice thereof and Tenant shall correct the same within twenty-
four (24) hours of receipt of such notice. Landlord reserves the right to
disconnect power to any Dish if Tenant fails to correct such interference within
twenty-four (24) hours after such notice. Landlord makes no warranty or
representation that the Building or any portions thereof are suitable for the
use of a Dish, it being assumed that Tenant has satisfied itself thereof.
Tenant shall protect, defend, indemnify and hold harmless Landlord from and
against claims, damages, liabilities, costs and expenses of every kind and
nature, including reasonable attorneys' fees, incurred by or asserted against
Landlord arising out of Tenant's installation, maintenance, replacement, use or
removal of the Dish.
(w) Data Center and Power Supply. Tenant shall have the right to install
----------------------------
and construct a data center in the Premises to be located within the "Lab Room"
identified on Exhibit "A". Electricity to the data center shall be separately
metered and Tenant shall pay all electricity costs in connection therewith. In
connection with such data center, Tenant shall have the right to construct and
install in the Building parking garage (or such other location as Landlord and
Tenant may mutually agree upon) an uninterrupted power supply. Tenant's
installation and construction of said data center and uninterrupted power supply
shall be in accordance with Section 25 hereof.
- --------------------------------------------------------------------------------
35. HAZARDOUS MATERIALS
- --------------------------------------------------------------------------------
(a) "Hazardous Material" means any substance, waste or material which is
deemed hazardous, toxic, a pollutant or a contaminate, under any federal, state,
or local statute, law, ordinance, rule regulation, or judicial or administrative
order or decision, now or hereafter in effect.
(b) Tenant shall not cause or permit any Hazardous Material to be brought
upon, kept or used in or about the Premises, Building and/or Land by Tenant, its
agents, employees, contractors, or invitees without the prior written consent of
Landlord. In order to obtain Landlord's consent, Tenant must demonstrate to
Landlord's reasonable satisfaction that such Hazardous Material is necessary or
useful to Tenant's business and will be used, kept, stored and
38
<PAGE>
disposed of in a manner that complies with all laws regulating any such
Hazardous Material so brought upon or used or kept in or about the Premises.
Provided, Tenant shall not be in violation of the foregoing by its use and
storage of standard office products, otherwise defined as hazardous, which
products are used by Tenant with due care and in accordance with the
instructions of the product manufacturer, in the reasonable and prudent conduct
of Tenant's business on the Premises, Building and/or Real Property.
(c) Tenant shall be liable to Landlord for any and all clean-up costs and
any and all other charges, fees, and penalties imposed by any governmental
authority with respect to Tenant's use, disposal, transportation, generation
and/or sale of hazardous materials or other waste materials in or about the
Property. Tenant shall indemnify, defend and save Landlord harmless from any
and all costs, fees, penalties and charges assessed against or imposed upon
Landlord as a result of Tenant's use, disposal, transportation, generation
and/or sale of hazardous substances or other waste materials.
(d) Landlord represents and warrants that, to the best of Landlord's
knowledge, (1) no Hazardous Materials have been dumped, stored or manufactured
on or are now being dumped, stored or manufactured on the Premises, Building or
Land, and (2) there currently exists no environmental liability relating to any
environmental contamination on the Premises, Building or Land. Landlord shall
indemnify, defend and save Tenant harmless from any and all costs, fees,
penalties and charges assessed against or imposed upon Tenant as a result of
Landlord's use, disposal, transportation, generation and/or sale of hazardous
substances or other waste materials.
- --------------------------------------------------------------------------------
36. RIDERS
- --------------------------------------------------------------------------------
Clauses, plats and riders, if any, signed by Landlord or Tenant and affixed
to this Lease are a part hereof.
IN WITNESS WHEREOF, the respective parties hereto have executed this Lease
or caused this Lease to be executed by their duly authorized representatives the
day and year first hereon written.
<TABLE>
<CAPTION>
LANDLORD TENANT
<S> <C>
Bentall Newport Centre L.L.C., a Mercata, Inc., a
Washington limited liability company Delaware corporation
By: Bentall U.S. L.L.C., a
Washington limited liability company
its Manager
/s/ Gary J. Carpenter /s/ Tom Van Horn
- ----------------------------------------- -----------------------------
By: Gary J. Carpenter By: Tom Van Horn
Its: Chief Operating Officer Its: President and Chief Executive Officer
/s/ Lisa C. Rowe
- -----------------------------------------
By: Lisa C. Rowe
Its: Director of Leasing
</TABLE>
39
<PAGE>
- --------------------------------------------------------------------------------
Landlord's Acknowledgment
- --------------------------------------------------------------------------------
STATE OF WASHINGTON )
)
COUNTY OF KING )
On this 22nd day of February, 2000, before me, a Notary Public in and
for the State of Washington, personally appeared Gary J. Carpenter and
Lisa C. Rowe to me known to be the Chief Operating Officer and Director of
Leasing, respectively, of Bentall U.S. L.L.C., a Washington limited liability
company, the Manager of Bentall Newport Centre L.L.C., a Washington limited
liability company, the limited liability company that executed the within and
foregoing instrument, and acknowledged the said instrument to be the free and
voluntary act and deed of said limited liability company, for the uses and
purposes therein mentioned, and on oath stated that they were authorized to
execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
/s/ Ellen L. Martin
--------------------------------------------------
Printed Name: Ellen L. Martin
------------------------------------
NOTARY PUBLIC in and for the State of Washington,
residing at: Seattle
-------------------------------------
My commission expires: 7-23-03
40
<PAGE>
- --------------------------------------------------------------------------------
Mercata, Inc.'s Acknowledgment
- --------------------------------------------------------------------------------
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 18th day of February, 1999, before me the undersigned, a Notary
Public in and for the State of Washington, duly commissioned and sworn,
personally appeared Tom Van Horn, to me known to be the President and Chief
Executive Officer of Mercata, Inc., a Delaware corporation, the entity that
executed the foregoing instrument, and acknowledged the same instrument to be
the free and voluntary act and deed of Mercata, Inc. for the uses and purposes
therein mentioned, and on oath stated that they are authorized to execute said
instrument.
IN WITNESS WHEREOF my hand and official seal hereto affixed the day and
year in this instrument above written.
/s/ Craig A. Fielden
-------------------------------------------------
[SEAL] Printed Name: Craig A. Fielden
-----------------------------------
NOTARY PUBLIC in and for the State of Washington,
residing at Fall City
-------------------------------------
My commission expires: 5-26-02
--------------------------
41
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "A"
FLOOR PLAN OF PREMISES
(Show existing Lab Room)
- --------------------------------------------------------------------------------
This exhibit is a continuation of that certain Lease dated February 17, 2000,
between Bentall Newport Centre L.L.C., a Washington limited liability company
and Mercata, Inc., a Delaware corporation on real property in King County,
Washington, and by this reference shall become part of that agreement.
Exhibit A
42
[Architect's Rendering of Second
Floor Plan of One Newport]
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "A-1"
FLOOR PLAN OF EXPANSION SPACE
- --------------------------------------------------------------------------------
This exhibit is a continuation of that certain Lease dated February 17, 2000,
between Bentall Newport Centre L.L.C., a Washington limited liability company
and Mercata, Inc., a Delaware corporation on real property in King County,
Washington, and by this reference shall become part of that agreement.
Exhibit A
43
[Architect's Rendering of First
Floor Plan of One Newport]
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "B"
LEGAL DESCRIPTION OF LAND
- --------------------------------------------------------------------------------
This exhibit is a continuation of that certain Lease dated February 17, 2000,
between Bentall Newport Centre L.L.C., a Washington limited liability company
and Mercata, Inc., a Delaware corporation on real property in King County,
Washington, and by this reference shall become part of that agreement.
ONE NEWPORT
- -----------
LOT 1 OF SHORT PLAT NO. 487008, ACCORDING TO THE SHORT PLAT RECORDED UNDER KING
COUNTY RECORDING NO. 8809220297;
TOGETHER WITH EASEMENTS FOR INGRESS, EGRESS AND PARKING OVER COMMON AREAS AS
DESCRIBED IN INSTRUMENT RECORDED UNDER KING COUNTY RECORDING NO. 9012040117;
AND TOGETHER WITH THOSE EASEMENT RIGHTS AS DESCRIBED IN INSTRUMENTS RECORDED
UNDER KING COUNTY RECORDING NOS. 9102120210, 9102130456 AND 9211232100;
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
44
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "B-1"
LEGAL DESCRIPTION OF NEWPORT CORPORATE CENTER
- --------------------------------------------------------------------------------
This exhibit is a continuation of that certain Lease dated February 17, 2000,
between Bentall Newport Centre L.L.C., a Washington limited liability company
and Mercata, Inc., a Delaware corporation on real property in King County,
Washington, and by this reference shall become part of that agreement.
ONE NEWPORT
- -----------
LOT 1 OF SHORT PLAT NO. 487008, ACCORDING TO THE SHORT PLAT RECORDED UNDER KING
COUNTY RECORDING NO. 8809220297;
TOGETHER WITH EASEMENTS FOR INGRESS, EGRESS AND PARKING OVER COMMON AREAS AS
DESCRIBED IN INSTRUMENT RECORDED UNDER KING COUNTY RECORDING NO. 9012040117;
AND TOGETHER WITH THOSE EASEMENT RIGHTS AS DESCRIBED IN INSTRUMENTS RECORDED
UNDER KING COUNTY RECORDING NOS. 9102120210, 9102130456 AND 9211232100;
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
TWO NEWPORT
- -----------
LOT 4 OF REVISED SHORT PLAT NO. 278125, ACCORDING TO THE SHORT PLAT RECORDED
UNDER KING COUNTY RECORDING NO. 8112079004, BEING A REVISION OF SHORT PLATS
RECORDED UNDER RECORDING NO. 8101270743 AND 7809200912;
TOGETHER WITH AN EASEMENT FOR INGRESS, EGRESS AND UTILITIES, 30 FEET IN WIDTH
DESCRIBED AS EASEMENT "X" AS DELINEATED ON SHORT PLAT NO. 278125 REVISION,
RECORDED UNDER RECORDING NO. 8112079004;
AND TOGETHER WITH AN EASEMENT FOR INGRESS, EGRESS AND UTILITIES, 30 FEET IN
WIDTH DESCRIBED AS EASEMENT "Y" AS DELINEATED ON SHORT PLAT NO. 278125 REVISION,
RECORDED UNDER RECORDING NO. 8112079004;
AND TOGETHER WITH ACCESS EASEMENTS AS DESCRIBED IN PARAGRAPH 1.1 AND EXHIBITS
"E" AND "F" OF DECLARATION RECORDED UNDER KING COUNTY RECORDING NO. 9102130456;
AND TOGETHER WITH THOSE EASEMENT RIGHTS GRANTED IN DOCUMENTS RECORDED UNDER
RECORDING NOS. 9012040117 AND 9211232100;
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
NEWPORT TOWER
- -------------
LOT 3 OF SHORT PLAT NO. 487008, ACCORDING TO THE SHORT PLAT RECORDED UNDER KING
COUNTY RECORDING NO. 8809220297;
45
<PAGE>
TOGETHER WITH AN EASEMENT FOR INGRESS, EGRESS AND UTILITIES OVER, ACROSS AND
THROUGH TRACTS "X" AND "Y" OF SHORT PLAT NO. 278125, ACCORDING TO THE SHORT PLAT
RECORDED UNDER KING COUNTY RECORDING NO. 7809200912 AND REVISED UNDER RECORDING
NOS. 8101270743 AND 8112079004;
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
NEWPORT HEIGHTS
- ---------------
LOT B OF SHORT PLAT NO. 83-24, ACCORDING TO THE SHORT PLAT RECORDED UNDER KING
COUNTY RECORDING NO. 8407179002;
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
NEWPORT TERRACE
- ---------------
LOT 2 OF SHORT PLAT NO. 487008, ACCORDING TO THE SHORT PLAT RECORDED UNDER KING
COUNTY RECORDING NO. 8809220297;
TOGETHER WITH A PORTION OF LOT 4 OF SHORT PLAT NO. 487008, ACCORDING TO THE
SHORT PLAT RECORDED UNDER KING COUNTY RECORDING NO. 8809220297 BEING A REVISION
OF SHORT PLAT RECORDED UNDER RECORDING NO. 8809200141 AND DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHERLY MOST NORTHEAST CORNER OF SAID LOT 4;
THENCE SOUTH 01 degrees 26'03" WEST 96.00 FEET;
THENCE NORTH 89 degrees 00'20" WEST 194.90 FEET;
THENCE NORTH 01 degrees 23'24" EAST 97.34 FEET;
THENCE SOUTH 88 degrees 36'36" EAST 194.97 FEET TO THE TRUE POINT OF BEGINNING;
ALSO TOGETHER WITH A PORTION OF LOT 2 OF REVISED SHORT PLAT NO. 278125 ACCORDING
TO THE SHORT PLAT RECORDED UNDER KING COUNTY RECORDING NO. 8112079004 (VOLUME 29
OF SURVEYS, PAGE 299) BEING A REVISION OF SHORT PLATS RECORDED UNDER RECORDING
NOS. 8101270743 AND 7809200912 DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHEAST CORNER OF SAID LOT 2;
THENCE SOUTH 01 degrees 23'24" WEST 200.46 FEET;
THENCE SOUTH 88 degrees 36'36" EAST 28.00 FEET TO A POINT ON THE EAST LINE OF
SAID LOT 2 AND THE TRUE POINT OF BEGINNING;
THENCE SOUTH 01 degrees 23'24" WEST 268.35 FEET;
THENCE NORTH 89 degrees 00'20" WEST 15.05 FEET;
THENCE NORTH 01 degrees 23'24" EAST 268.45 FEET;
THENCE SOUTH 88 degrees 36'36" EAST 15.05 FEET TO THE TRUE POINT OF BEGINNING;
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
FOUR NEWPORT
- ------------
LOT 4 OF SHORT PLAT NO. 487008, ACCORDING TO THE SHORT PLAT RECORDED UNDER KING
COUNTY RECORDING NO. 8809220297, BEING A REVISION OF SHORT PLAT RECORDED UNDER
KING COUNTY RECORDING NO. 8809200141;
Exhibit "B-1"
46
<PAGE>
EXCEPT THAT PORTION THEREOF DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHERLY MOST NORTHEAST CORNER OF SAID LOT 4;
THENCE SOUTH 01 degrees 26' 03" WEST 96.00 FEET;
THENCE NORTH 89 degrees 00' 20" WEST 194.90 FEET;
THENCE NORTH 01 degrees 23' 24" EAST 97.34 FEET;
THENCE SOUTH 88 degrees 36' 36" EAST 194.97 FEET TO THE POINT OF BEGINNING;
(BEING KNOWN AS LOT B OF KING COUNTY LOT LINE ADJUSTMENT NO. 8812002, RECORDED
UNDER RECORDING NO. 9105200930.)
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
Exhibit "B-1"
47
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "C"
WORK LETTER AGREEMENT
- --------------------------------------------------------------------------------
This exhibit is a continuation of that certain Lease dated February 17, 2000,
between Bentall Newport Centre L.L.C., a Washington limited liability company
and Mercata, Inc., a Delaware corporation on real property in King County,
Washington, and by this reference shall become part of that agreement.
This Work Letter Agreement is entered into upon the date this Lease is fully
executed by and between Landlord and Tenant.
RECITALS
A. Concurrently with the execution of this Work Letter Agreement,
Landlord and Tenant have entered into a lease (the "Lease") covering certain
premises (the "Premises") more particularly described in the Lease.
B. In order to induce Tenant to enter into the Lease (which is hereby
incorporated by reference to the extent that the provisions of this Work Letter
Agreement may apply thereto) and in consideration of the mutual covenants herein
after contained, Landlord and Tenant hereby agree:
1. Space Plan and Related Requirements.
-----------------------------------
(a) Landlord and Tenant have agreed upon standard Building
specifications (the "Uniform Building Specifications") for the tenant
improvements to be constructed in the Premises. The Uniform Building
Specifications are attached hereto as Exhibit "C-2". On or before February 25,
------------
2000, Tenant shall submit to Landlord for its review and approval a proposed,
preliminary space plan (the "Space Plan") for the Tenant Improvements to be
constructed on the Third Floor showing the location of demising walls,
partitions, doors, electrical devices, communication devices and indicating in
general, the improvements to be done in Premises pursuant to this Work Letter
Agreement (which improvements are hereafter referred to as the "Tenant
Improvements"). The Preliminary Space Plan shall be attached to this Lease as
"Exhibit C-1". Tenant shall submit a preliminary Space Plan for the Second
-----------
Floor on or before a date which is three (3) months prior to the Second Floor
Delivery Date. Tenant shall submit a preliminary Space Plan for the Expansion
Space on or before a date which is three (3) months prior to the Expansion Space
Availability Date. The term "Tenant Improvements" shall include the tenant
improvements to be installed in the Second Floor and Expansion Space.
(b) Within seven (7) calendar days following the date Tenant submits
the preliminary Space Plan to Landlord, Tenant shall approve the preliminary
Space Plan and shall furnish to Landlord any final adjustments to the
preliminary Space Plan, including final location of partitions, doors, ceiling
devices, and final specifications for materials and finishes, electrical
devices, electrical loads, heat loads, extraordinary floor loads, special
equipment and all other requirements (all of which must be in conformance with
the Uniform Building Specifications). Final adjustments to the preliminary
Space Plan shall not materially change the defined scope of the Tenant
Improvements set forth in Exhibit "C-1" attached hereto. Any increases in cost
------------
due to Tenant's changes not covered by the Tenant Improvement Allowance shall be
paid for by Tenant as Additional Rent. Tenant agrees to meet and cooperate with
Landlord's architects and engineers and provide complete information as
requested. Landlord shall be entitled, in all respects, to rely upon
information so supplied by Tenant's Representative (defined below). If Tenant
does not provide Landlord with any adjustments to the preliminary Space Plan
within the seven (7) day period referenced above, the preliminary Space Plan
attached hereto as Exhibit "C-1" shall be the final Space Plan.
------------
(c) All space plans and related requirements referred to herein above
shall be subject to Landlord's prior approval, which approval shall not be
unreasonably withheld, unreasonably conditioned or unreasonably delayed, except
to the extent there are variations from the Uniform Building Specifications, in
which case Landlord may withhold its approval in Landlord's sole discretion.
48
<PAGE>
(d) Tenant shall be allowed up to a maximum of three (3) adjustments
to the preliminary Space Plan. Any adjustments beyond the first three (3) shall
be at Tenant's sole cost and expense.
(e) Landlord appoints Sam Buckingham ("Landlord's Representative") to
act for Landlord in all matters associated with this Work Letter Agreement.
Tenant appoints Laurel Vanek of TenantWorks ("Tenant's Representative") to act
for Tenant in all matters associated with this Work Letter Agreement. All
inquiries, requests, instructions, authorizations and other communications with
respect to the matters covered by this Work Letter Agreement will be made to
Landlord's Representative or Tenant's Representative, as the case may be.
Neither party will make any inquiries of or requests to, and neither party will
give any instructions or authorizations to, any employee or agent of the other
party, including without limitation Tenant's architect, engineers and
contractors working at the Building, or any of their agents or employees, with
regard to matters associated with this Work Letter Agreement without providing
notice of the same to the respective Landlord's Representative or Tenant's
Representative. Either party may change its Representative at any time by
providing three (3) days' prior written notice to the other party of the name,
address, and contact numbers of the new Representative.
2. Work Schedule.
-------------
Provided Tenant does not delay in providing any final adjustments to
the Space Plan within the time period described in subsection 1(b) above, then
within ten (10) business days following the date Landlord receives the Space
Plan with any final adjustments, Landlord shall provide Tenant with a
preliminary work schedule (the "Preliminary Work Schedule") setting forth the
various items of work and duration of each task.
3. Construction Drawings and Specifications.
----------------------------------------
(a) Within five (5) business days of Tenant's approval of the final
Space Plan, Tenant shall cause its architects and engineers to prepare the
initial set of construction drawings and specifications (the "Construction
Drawings") detailing the complete scope of the Tenant Improvements (the "Work")
based on the approved Space Plan. The Construction Drawings shall include
architectural, structural, plumbing, mechanical, electrical, and fire protection
drawings as required and shall be prepared by duly licensed or registered
architects as required by regulatory agencies, and shall utilize the Uniform
Building Specifications. Any additional drawings or revisions shall be at
Tenant's sole cost and expense.
(b) Tenant and Landlord shall approve Construction Drawings in
writing within five (5) business days from their completion, such approval not
to be unreasonably withheld, unreasonably conditioned or unreasonably delayed.
If neither party disapproves of the Construction Drawings within such five (5)
business day period, approval shall be deemed granted. If either party
disapproves of the Construction Drawings, Landlord shall cause the drawings to
be corrected within five business (5) days. After final approval, no further
changes may be made to the Construction Drawings without the prior written
approval of Tenant and Landlord, which approval not to be unreasonably withheld,
unreasonably conditioned or unreasonably delayed. Additional revisions requested
by the Tenant resulting in additional costs shall be the sole responsibility of
the Tenant. Approval of Construction Drawings shall be considered final
authorization to proceed.
(c) Landlord shall cause approved Construction Drawings to be
submitted to the appropriate governmental agencies for plan review and building
permit and attached to this Lease as Exhibit "C-3." Revisions which may be
------------
required by governmental agencies as a result of the plan review process shall
be reviewed by Tenant and Landlord and modifications reflecting same shall be
mutually agreed upon in a timely manner so as not to delay progress of the Work.
The final work schedule and Substantial Completion date shall be extended as
required to reflect time lost, if any, to incorporate any such revisions.
(d) Tenant shall be allowed up to a maximum of three (3) adjustments
to the approved Construction Drawings. Any adjustments beyond the first three
(3) shall be at Tenant's sole cost and expense.
EXHIBIT "C"
49
<PAGE>
4. Construction of Tenant Improvements.
-----------------------------------
After the Construction Drawings have been prepared and approved,
Landlord shall submit for a building permit for the Tenant Improvements.
Landlord shall obtain three (3) competitive bids, on an open book basis, from
Landlord's preferred contractor list. Landlord and Tenant shall approve one (1)
bid within three (3) days from Landlord's notice to Tenant of the bids. Upon
approval, Landlord shall enter into a construction contract with its contractor
for the installation of Tenant Improvements in accordance with the Construction
Drawings. The construction contract shall be a guaranteed maximum price
contract and shall not be signed until approved by Tenant, which approval shall
not be unreasonably withheld, unreasonably conditioned or unreasonably delayed.
Landlord shall include a provision in its contracts with the contractors and
subcontractors who perform the Work that Tenant is a direct third party
beneficiary of all warranties provided to Landlord. All such warranties shall
be for the longest period the Landlord can obtain. Within five (5) business
days from the date Landlord enters into the construction contract Landlord shall
obtain from the contractor a final work schedule (the "Final Work Schedule")
which shall replace the Preliminary Work Schedule. Landlord shall supervise the
completion of the Work and shall use its reasonable best efforts to secure
completion of the Work by the date which is forty-five (45) days after the Third
Floor Availability Date provided that Tenant meats all required time lines and
such completion date is reasonably possible. Tenant shall pay to Landlord a fee
for overhead and coordination of the Work equal to two percent (2%) of the gross
value (less any sales taxes and other amounts paid by Tenant directly to any
vendor) of the amount of the general contractor's final application for payment
related to such Work. The scope of the services provided by Landlord shall
include without limitation the services listed on Exhibit "C-4".
------------
5. Payment for Tenant Improvements.
-------------------------------
(a) Landlord shall provide Tenant with an allowance of up to $14.00 per
usable square foot of space on the Second Floor and $10.00 per useable square
foot of space on the Third Floor (the "Tenant Improvement Allowance") towards
the cost of the installation of the Tenant Improvements excluding Tenant's
furniture, fixtures and equipment. Tenant shall have the right to allocate all
or any portion of the total Tenant Allowance between the Tenant Improvements on
the Second Floor and Third Floor as Tenant deems necessary in its sole
discretion. Landlord shall have no additional responsibility or obligation to
pay any amount in excess of the Tenant Improvement Allowance. All costs or
expenses incurred by Landlord in excess of the Tenant Improvement Allowance
shall be the sole and exclusive responsibility of Tenant and shall be payable to
Landlord as Additional Rent within thirty (30) days of Tenant receipt of an
invoice for such costs or expenses, but not prior to Landlord's substantial
completion of the Work. Tenant shall have the right to apply the Tenant
Improvement Allowance to the costs of purchasing, designing and constructing the
following, in Tenant's sole discretion: (i) all costs of constructing the Tenant
Improvements; (ii) all construction manager costs and fees, including the costs
and fees of Tenant's Representative; (iii) all permit and governmental fees;
(iv) any applicable sales taxes; (v) the costs of any as-built plans; and (vi)
architect and engineering costs.
(b) Design Allowance. Upon Landlord's receipt of copies of paid invoices
----------------
from Tenant's design professionals, Landlord provided Tenant with a design
allowance (the "Design Allowance") of up to $0.15 per useable square foot of
space on the Second and Third Floors, which may be used by Tenant for space
planning costs for the Second and Third Floors. Tenant shall have the right to
allocate all or any portion of the total Design Allowance between the design
planning for the Second Floor and Third Floor as Tenant deems necessary in its
sole discretion. Landlord shall pay all invoices from Tenant's design
professionals no later than thirty (30) days after receipt.
6. Additional Work.
---------------
(a) Any changes to the Tenant Improvements requested by the Tenant
after final approval of the Space Plan ("Additional Work") shall be made in
writing to Landlord. Thereafter, Landlord shall submit to Tenant a written cost
estimate of the Additional Work, at Tenant's sole cost and expense, including
costs associated with: (i) revisions to the Space Plan and/or Construction
Drawings; (ii) construction of the Additional Work; (iii) required permits,
governmental fees, and inspections; (iv) Washington State sales tax; (v) as-
built record documentation; and
50
<PAGE>
(vi) delay of the Final Work Schedule. Upon written approval thereof by Tenant,
Landlord shall authorize its contractor, architect, engineer and/or vendor to
proceed with the Additional Work, and to submit actual costs by Change Order to
the construction contract for invoicing to Tenant. Failure by Tenant to approve
the cost estimate or Final Work Schedule within (5) days receipt thereof shall
be deemed a withdrawal of request and contractor shall proceed with the Work as
defined prior to such Change Order. Under no circumstances shall the Substantial
Completion Date or the Rent Commencement Date change as a result of Tenant's
Additional Work.
(b) Tenant shall pay to Landlord a fee for overhead and coordination
of the Additional Work equal to two percent (2%) of the gross value (less any
sales taxes and other amounts paid by Tenant directly to any vendor) of the
amount of the general contractor's final application for payment related to such
Additional Work.
(c) Tenant shall utilize Uniform Building Specifications as defined
in Exhibit "C-2" to the extent such finishes and materials are applicable to the
------------
scope of the Additional Work. Tenant shall be responsible for all costs related
to the proper design, operation and maintenance of the Additional Work whether
or not installed by Landlord's contractor at Tenant's request.
(d) All Additional Work referred to herein above shall be subject to
Landlord's approval, which approval shall not be unreasonably withheld,
conditioned or delayed.
7. Substantial Completion and Commencement of Term.
-----------------------------------------------
(a) The terms "Substantial Completion," "Substantially Complete" and
words of similar import as used herein, shall mean the date on which both the
Landlord's work as described in this Work Letter Agreement is substantially
complete, except for punch list items, Additional Work and/or Change Orders, and
a temporary certificate of occupancy for the Premises has been issued.
(b) Notwithstanding the provisions of Paragraph 6(a) above, if there
is a delay in Substantial Completion as a result of:
i) Tenant's failure to approve any item or to perform any other
obligation by the date specified in the Work Letter;
ii) Tenant's request for materials, finishes or methods of
construction not readily available; or
iii) Tenant's request for Additional Work (whether or not
agreeable to Landlord),
such a delay shall cause the Commencement Date to accelerate by the number of
days delayed from the date the Commencement Date would otherwise have occurred.
(c) Within three (3) days prior to the date Landlord anticipates
delivering the Premises to Tenant, Tenant will conduct a walk-through inspection
of the Premises with Landlord and prepare a punch list of items needing
additional work by Landlord. Landlord will complete all reasonable punch list
items within a reasonably time after the walk-through inspection. In addition,
Landlord shall repair any latent defects in the Work as soon as practicable
after written notification from Tenant at any time during the Term.
8. ADA Compliance; Compliance with Laws.
------------------------------------
(a) With respect to any Tenant Improvements designed and installed by
Landlord, Landlord warrants that the same shall comply with the provisions of
the Americans with Disabilities Act (ADA), Title III, "Commercial Facilities"
and all other applicable federal, state and local laws, regulations and building
codes.
(b) The Tenant shall determine and provide for reasonable
accommodation to persons with disabilities within the Premises in accordance
with the Americans with Disabilities Act (ADA) Title I, "Employment".
EXHIBIT "C"
51
<PAGE>
9. Cooperation. The parties agree to use their reasonable best efforts to
-----------
cause each of their respective consultants, architects and/or engineers to
cooperate with one another so that the Tenant Improvements are promptly,
diligently and efficiently constructed in accordance with the Work Schedule.
10. Force Majeure. Landlord shall have no liability whatsoever to Tenant
-------------
for the inability or delay of Landlord to fulfill any of Landlord's obligations
under this Work Letter Agreement on account of any cause beyond Landlord's
reasonable control including, without limiting the generality of the foregoing,
lock-outs (including lock-outs decreed or recommended for its members by a
recognized contractors' association of which the Landlord is a member or to
which the Landlord is otherwise bound), strikes, labor disputes, inability to
procure materials or services, restrictive governmental laws or regulations,
inability to procure necessary permits, fire, act of God, floods, delays in
transportation, acts of civil or military authorities, riots, insurrection,
sabotage, rebellion and war, and delays in construction caused by weather
conditions. If the Lease, this Work Letter Agreement or the Work Schedule
specifies a time period for performance of an obligation of Landlord, that time
period shall be extended by the period of any delay in Landlord's performance
caused by any of the events of force majeure described above.
EXHIBIT "C"
52
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "C-1"
SPACE PLAN
- --------------------------------------------------------------------------------
This exhibit is a continuation of that certain Lease dated February 17, 2000,
between Bentall Newport Centre L.L.C., a Washington limited liability company
and Mercata, Inc., a Delaware corporation on real property in King County,
Washington, and by this reference shall become part of that agreement.
SPACE PLAN
----------
[To be attached following Lease execution.]
EXHIBIT "C-1"
53
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "C-2"
UNIFORM BUILDING STANDARD SPECIFICATIONS
- --------------------------------------------------------------------------------
UNIFORM BUILDING STANDARD SPECIFICATIONS
----------------------------------------
Construction of the Tenant Improvements shall be per the space plan attached
herein and detailed per industry and building standard practice. All materials
and finishes shall be per the uniform Building standard specifications as
defined herein. The intent of the uniform Building standard specifications is
to achieve a uniform and consistent appearance throughout the Building.
Materials and finishes not specifically defined herein, if requested by Tenant
and approved by Landlord, shall be at Tenant's sole cost and expense and may be
subject to an additional Tenant cost to restore the premises to a uniform
Building standard condition upon termination of the Lease. Payment terms for
all items subject to restoration shall be agreed upon prior to the start of any
Work.
Partitions:
- ----------
Demising walls - 2-1/2" x 9'-0"--25 gauge--metal studs, 5/8" gypsum wall board
each side taped with smooth finish, sound attenuating blanket in wall cavity and
ceiling plenum 2'-0" each side of wall.
Partitions attach to mullions with double back tape
Interior walls - 2-1/2" x 9'-0" metal studs, 5/8" gypsum wall board each side
taped with smooth finish. All walls terminating at exterior window system shall
attach to vertical window mullion. 1/2" "Black Reveal at top of walls.
Finish - one coat latex primer, two coats latex paint with eggshell finish,
neutral colors.
Ceilings:
- --------
Existing 2' x 2' exposed suspended ceiling grid at 9'-0" A.F.F., existing lay-in
acoustical mineral fiber panels with fissured pattern finish, off-white uniform
Building standard color.
Floors:
- ------
Carpet - 30 oz. cut pile, glue down installation or similar quality as
determined by Landlord.
Vinyl composition tile - Armstrong "Excelon" 12"x12" tiles, Imperial texture
finish, neutral colors.
Doors, frames and hardware:
- --------------------------
Doors and frames - 3'-0" uniform Building standard full height 1-3/4" solid core
with 5-ply plain sliced red oak veneer, red oak throated frame.
Wood finish - uniform Building standard stain to match, sanding sealer, clear,
water based lacquer semi-gloss finish coat.
Hardware - ADA compliant commercial grade lever action passage latch set by
uniform Building standard manufacturer, 2 pair butt hinges, brushed aluminum
finish.
EXHIBIT "C-2"
54
<PAGE>
Window treatment:
- ----------------
Existing 1" mini-blinds on exterior walls, uniform Building standard color.
Millwork:
- --------
Cabinetry - prefabricated particle board modular units with standard
manufacturer's laminated finish.
Plumbing:
- --------
Stainless steel faucet and sink, Moen single lever faucet and 6 gallon electric
hot water heater in the ceiling.
Electrical, lighting and communication systems:
- ----------------------------------------------
Convenience power - one 120V/180W duplex outlet per office mounted at interior
partition and/or one 120V/20A circuit in junction box per group of eight modular
workstations mounted at plenum or interior partition.
Electrical panel must be re-labeled.
Equipment power - one dedicated 120V/20A copier circuit mounted at interior
partition.
Telephone and data - mud ring with pull string, one per office and/or one per
group of eight modular workstations mounted at interior partition. Installation
of system wiring by Tenant's vendor in accordance with Item 3 of the Building
Rules and Regulations attached hereto as Exhibit "F." Location of telephone /
----------
data processing equipment shall be in Tenant premises.
Ambient light fixtures - existing 2x4 fluorescent lay-in fixture with parabolic
louver, existing cool white lamps, quantity per Washington State Energy Code.
Approximately one (1) per 80 square feet.
Switching - one switch per office and/or open area per Washington State Energy
Code.
Mechanical systems:
- ------------------
Existing Building shell heating, ventilating and air conditioning system per
Building design standard specifications.
All 24 hour cooling must be separately metered.
Fire protection and life safety systems:
- ---------------------------------------
Type, quantity and location of devices per Fire Marshall, Uniform Fire Code and
all applicable municipal regulatory agencies.
EXHIBIT "C-2"
55
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "C-3"
CONSTRUCTION DRAWINGS
- --------------------------------------------------------------------------------
This exhibit is a continuation of that certain Lease dated February 17, 2000,
between Bentall Newport Centre L.L.C., a Washington limited liability company
and Mercata, Inc., a Delaware corporation on real property in King County,
Washington, and by this reference shall become part of that agreement.
[To be attached following Lease execution.]
EXHIBIT "C-3"
56
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "C-4"
LANDLORD'S SCOPE OF WORK
- --------------------------------------------------------------------------------
This exhibit is a continuation of that certain Lease dated February 17, 2000,
between Bentall Newport Centre L.L.C., a Washington limited liability company
and Mercata, Inc., a Delaware corporation on real property in King County,
Washington, and by this reference shall become part of that agreement.
The scope of services provided by Landlord as set forth in Section 4 of the
Work Letter Agreement will include at least the following elements:
PROJECT MANAGEMENT:
. Requests for proposals
. Value engineering
. General oversight and management
PERMITTING:
. Cooperate with Tenant's architect, who will submit for the Tenant
Improvement permit(s)
. Coordination with Tenant's architect and Representative to facilitate
and/or expedite the building permit process to the extent possible
BIDDING (PUBLIC/PRIVATE):
. Assemble bid packages/specifications
. Evaluate and make recommendation on bids
. Value engineering
CONTRACT ADMINISTRATION:
. Prepare contracts (when applicable)
. Facilitate change orders
PROJECT CLOSE OUT:
. Punchlists
. Cooperate with Tenant's architect in the preparation of as-builts
. Owner/maintenance manuals
. Assist Tenant's Representative and architect in conducting the punch list
walk-through
. Permit finals/certificate of occupancy
EXHIBIT "C-3"
57
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "D"
SAMPLE LETTER AGREEMENT
- --------------------------------------------------------------------------------
This exhibit is a continuation of that certain Lease dated February 17, 2000,
between Bentall Newport Centre L.L.C., a Washington limited liability company
and Mercata, Inc., a Delaware corporation on real property in King County,
Washington, and by this reference shall become part of that agreement. The
summary of Lease terms herein shall not vary the terms, provisions and/or
obligations of the Lease.
Date
Tenant
Suite
Address
City, State, Zip
Re: Basic Lease Terms
In accordance with Section 3 of the Lease dated February 6, 1998 by and between
Bentall Newport Tower L.L.C., and Western Wireless Corporation, a Delaware
corporation, Landlord and Tenant hereby mutually agree that the Section 1 of the
Lease is hereby deleted and replaced as follows:
(a) Premises:
---------
Building Name:
Building Address:
Floor:
Suite:
Premises Area: (Subject to subsection 2(a) below)
Rentable Square Feet: Approximately _____
Useable Square Feet: Approximately _____
Building Area: _________ Rentable Square Feet
Load Factor: _______%
Tenant's Percentage: _______%, subject to adjustment in
accordance with subsection 2(a)
below
(b) Term of the Lease: Subject to Section 3,
the term of this Lease shall be for _______________
commencing on _______________
(c) Basic Rent (Subject to Section 4 below):
----------
Basic Rent Per Rentable Square
Lease Months per Month Foot (Annual)
------------ --------- --------------------
1 to 12 $________ $______, NNN
13 to 24 $________ $______, NNN
25 to 36 $________ $______, NNN
37 to 48 $________ $______, NNN
49 to 60 $________ $______, NNN
(d) Security Deposit:
----------------
EXHIBIT "D"
58
<PAGE>
(e) N/A
(f) N/A
(g) Parking: Pursuant to the terms of subsection 32(p): ___________ parking
-------
passes per 1,000 usable square feet of leased Premises.
(h) N/A
(i) N/A
Sincerely,
Landlord's Representative
LANDLORD TENANT
(Bentall) L.L.C., a (Tenant), a ___________________
Washington limited liability company
By: Bentall U.S. L.L.C., a
Washington limited liability company
its Manager
(SAMPLE) (SAMPLE)
- ------------------------------ -------------------------------
By: By:
Its: Its:
Date: ________________________ Date: ________________________
(SAMPLE)
- ------------------------------
By:
Its:
Date: ________________________
EXHIBIT "D"
59
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "E"
OPERATING COSTS
- --------------------------------------------------------------------------------
This exhibit is a continuation of that certain Lease dated February 17, 2000,
between Bentall Newport Centre L.L.C., a Washington limited liability company
and Mercata, Inc., a Delaware corporation on real property in King County,
Washington, and by this reference shall become part of that agreement.
The following list represents the categories of the Operating Costs per
subsection 6(d) of the Lease:
Janitorial
Security and Life Safety
Utilities and Waste Disposal
Mechanical and Electrical
Signage
General Repairs and Maintenance
Insurance
Administration
Real Estate Taxes and Assessments
EXHIBIT "E"
60
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "F"
BUILDING RULES AND REGULATIONS
- --------------------------------------------------------------------------------
This exhibit is a continuation of that certain Lease dated February 17, 2000,
between Bentall Newport Centre L.L.C., a Washington limited liability company
and Mercata, Inc., a Delaware corporation on real property in King County,
Washington, and by this reference shall become part of that agreement, which
Landlord shall have the right to amend from time to time. To the extent there
are any inconsistencies between these rules and regulations and the provisions
of the Lease, the provisions of the Lease shall prevail.
1. The sidewalks, entries, passages, court corridors, stairways and
elevators shall not be obstructed by Tenant, its employees or agents, or used by
them for purposes other than ingress and egress to and from Premises.
2. Notwithstanding any of the terms and provisions of this Lease, Tenant
will refer all contractors, contractors' representatives and installation
technicians rendering any service on or to the Premises for Tenant to Landlord
for Landlord's approval and supervision before performance of any contractual
service. This provision shall apply to all work performed in the Building,
including installation of telephones, telegraph equipment, electrical devices
and attachments and installations of any nature affecting floors, walls
woodwork, trim, windows, ceilings, or any other physical portion of the
Building. Such approval, if given, shall in no way make Landlord a party to any
contract between Tenant and any such contractor, and Landlord shall have no
liability therefor. In the event a contractor is hired by Tenant, the Tenant
and the contractor shall execute Landlord's standard form Hold Harmless
Agreement, which indemnifies Landlord, its agents and invitees from any and all
liability in connection with contractors work.
3. Tenant's communication equipment, cabling, telegraphic, telephonic,
security systems or other electrical connections shall not be installed without
Landlord's prior written approval, which approval shall not be unreasonably
withheld, unreasonably conditioned, or unreasonably delayed. Tenant shall
install its phone and computer systems in Tenant's suite and Landlord will
require Tenant to label all such installations at the point of beginning to the
end point. Within thirty (30) days of final completion of any such work Tenant
shall provide Landlord a final as-built detailing the routes and locations of
such installation.
4. Except as otherwise indicated herein, no signs, advertisement or
notice shall be inscribed, painted or affixed on any part of the inside or
outside of the Building unless of such color, size and style and in such place
upon or in the Building as shall first be designated in writing by Landlord.
Except as otherwise provided in the Lease, there shall be no obligation or duty
on Landlord to allow any sign, advertisement notice to be inscribed, painted or
affixed on any part of the inside or outside of the Building. Signs on doors
will be painted for the Tenant by a sign writer approved by Landlord, the cost
of the painting to be paid by the Tenant. No furniture shall be placed in front
of the Building or in any lobby or corridor without the prior written consent of
Landlord. Landlord shall have the right to remove all other signs and furniture
without notice to Tenant at the expense of Tenant.
5. Landlord's acceptance of any name for listing on the Building
Directory will not be deemed, nor will it substitute for, Landlord's consent, as
required by this Lease, to any sublease, assignment, or other occupancy of the
Premises.
6. Tenant shall have the non-exclusive use in common with Landlord, other
tenants, their guests and invitees, of the automobile parking areas, driveways
and footways, subject to reasonable rules and regulations for the use thereof as
prescribed from time to time by Landlord. Landlord shall have the right to
designate parking areas for the use of the Building tenants and their employees,
and the tenants and their employees shall not park in parking areas not so
designated, specifically including driveways, fire lanes, load/unloading areas,
handicapped zones, walkways and building entrances. Tenant agrees that upon
written notice from Landlord, it will furnish to Landlord, within ten (10) days
from receipt of such notice, the state automobile license numbers assigned to
the automobiles of the Tenant and its employees. Landlord shall not be liable
for any vehicle of the Tenant or its employees that Landlord shall have towed
EXHIBIT "F"
61
<PAGE>
from the Premises. Landlord will not be liable for damage to vehicles in the
parking areas or for theft of vehicles, personal property from vehicles, or
equipment of vehicles. Cars parked overnight may be towed, at Tenant's expense,
unless Tenant has prior written permission from Landlord.
7. No Tenant shall do or permit anything to be done in the Premises, or
bring or keep anything therein, which will in any way increase the rate of
casualty insurance on the Building, or on property kept therein, or obstruct or
interfere with the rights of other tenants, or in any way injure or annoy them,
or conflict with the laws relating to fire, or with any regulations of the fire
department, or with any insurance policy upon said buildings or any part
thereof, or conflict with any rules and ordinances of any governmental agency or
department.
8. No windows or other openings that reflect or admit light into the
corridors or passageways, or to any other place in said Building shall be
covered or obstructed by Tenant.
9. No person shall disturb the occupants of the Building by the making of
loud or objectionable noises, or any other unreasonable or offensive conduct or
activity including, but not limited to, smoking, which is in violation of any
applicable law or as designated by Landlord. In the absence of a designated
smoking area, no person shall smoke within thirty (30) feet from any posted "No
Smoking" signs or any Building entrance. No dogs or other animals or pets of
any kind will be allowed in the Building.
10. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any damage
resulting to them from misuse, or by the defacing or injury of any part of the
Building, shall be borne by the Tenant who, or whose employees or agents shall
have caused it.
11. No bicycles or similar vehicles will be allowed in the Building (but
are allowed in the garage).
12. Nothing shall be thrown out the windows of the Building or down the
stairways or other passages.
13. Tenant shall not be permitted to use or to keep in the Building any
kerosene, gasoline or any inflammable or combustible fluids or materials,
without the prior written consent of Landlord.
14. If Tenant desires, at its cost, shades, draperies, or awnings, they
must be of such shape, color, materials and make as shall be designated by
Landlord. Any outside awning may be prohibited by Landlord. Landlord or its
agents shall have the right to enter the Premises to examine the same or to make
such repairs, alterations or additions as Landlord shall deem necessary for the
safety, preservation or improvement of the Building. Landlord or its agents may
show said Premises and may place on the windows or doors thereof, a notice "For
Rent" for six (6) months prior to the expiration of the Lease.
15. No portion of the Building shall be used for the purpose of lodging
rooms or for any unlawful purposes.
16. All glass, locks and trimmings in or about the doors and windows and
all electric fixtures belonging to the Building shall be kept whole, and
whenever broken by anyone shall be immediately replaced or repaired and put in
order by Tenant under the direction and to the satisfaction of Landlord, and on
removal shall be left whole and in good repair.
17. Landlord reserves the right at any time to take one elevator out of
service for the exclusive use by the Building management in servicing the
Building.
18. All safes, furniture or other heavy articles shall be carried up or
into the Premises only at such times and in such manner as shall be prescribed
by Landlord at Tenant's sole cost and expense. Landlord requires Common Area
walls and corners to be protected and masonite board to be installed and used in
all Common Areas for all furniture moves. Landlord shall in all cases have the
right to specify the proper weight and position of any such safe or other heavy
article. Any damage done to the Building by taking in or removing any such
equipment or from
EXHIBIT "F"
62
<PAGE>
overloading any floor in any way shall be the responsibility of the Tenant.
Defacing or injuring in any way any part of the Building by the Tenant, its
agents or employees, shall be paid for by the Tenant.
19. Landlord may waive any one or more of these Rules and Regulations for
the benefit of Tenant or any other tenant, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of Tenant or any
other tenant, nor prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the tenants of the Building.
20. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of Tenant's Lease of its Premises in the
Building.
21. Tenant shall fully cooperate in allowing, from time to time, such
examinations, tests, inspections, and reviews of the Premises as Landlord, in
its sole and absolute discretion, shall determine to be advisable in order to
evaluate any potential environmental problems. Landlord expressly reserves the
right to conduct examinations, test (including but not limited to a
geohydrologic survey of soil and subsurface conditions), inspections, and review
of the premises as Landlord in its sole and absolute discretion may determine to
be necessary.
22. Landlord reserves the right to make such other and reasonable Rules
and Regulations as, in its judgment, may from time to time be needed for safety
and security, for care and cleanliness of the Building and for the preservation
of good order therein. Tenant agrees to abide by all such Rules and Regulations
hereinabove stated and any additional rules and regulations which are adopted.
23. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, contractors, clients, customers, invitees
and guests.
24. If Tenant's use of heating, cooling or convenience power exceeds the
design load parameters of the Building and a service call is requested, then
Tenant is responsible for such service as a direct Tenant cost.
25. Tenant shall pay for all additional security costs and Landlord
maintenance personnel required in connection with Tenant's move-in or move-out.
Landlord shall have the right to establish and modify from time to time rules
governing the move-in and move-out of Tenant's furniture, fixtures and equipment
and Tenant shall fully comply with such rules as established and modified.
EXHIBIT "F"
63
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "G"
BENTALL CONSTRUCTION RULES & REGULATIONS
- --------------------------------------------------------------------------------
This exhibit is a continuation of that certain Lease dated February 17, 2000,
between Bentall Newport Centre L.L.C., a Washington limited liability company
and Mercata, Inc., a Delaware corporation on real property in King County,
Washington, and by this reference shall become part of that agreement.
1. All finishes must be matched to the building standard including doors and
frames, hardware, interior partition detail, column details, etc.
2. Any materials not reused in Tenant's alterations must be returned to
Landlord. Tenant agrees to have Tenant's contractor store such items in
the areas designated by Landlord.
3. All workmanship must be done in conformity with commercial standards in a
first class office building and in accordance with all local and federal
governmental codes including any requirements necessary to bring the
Premises into compliance therewith.
4. Building electrical panel must be labeled to show electrical changes
including but not limited to electrical outlets and lighting relocations
and additions.
5. All common areas including but not limited to entrances carpeted areas,
elevators and ceilings affected by the performance of Tenant's alterations
must be restored to their original condition immediately upon request of
Landlord. Landlord hereby states that all common areas are in excellent
condition and do not show any signs of wear and tear. Should Tenant or
Tenant's contractor notice any common areas which have an existing
condition of wear and tear, Tenant or Tenant's contractor shall notify
Landlord in writing prior to commencement of improvements.
6. Addition of any equipment which will in any way increase the consumption of
electricity beyond the building standard use or will have a significant
impact on the HVAC system, must be specified and detailed in writing to
Landlord for review and approval.
7. Any work which will affect any of the building systems including but not
limited to fire protection, mechanical and electrical shall be coordinated
with the Landlord. All systems are required to be restored at the end of
the day.
8. All work performed must not affect the structural integrity of the
Building.
9. Work performed during regular business hours must not disrupt the business
or operations of adjoining tenants. Specifically, all work which creates
disruptive noise or odors must be completed during nonbusiness hours.
Please note that the perimeter doors are locked from 6:00 pm until 7:00 am,
Monday through Friday and 24 hours per day on Saturday and Sunday. If any
work is required to be done while the doors are locked, the
contractor/Tenant must notify Bentall 24 hours in advance to arrange for
access and additional security. Any access or additional security required
as a result of Tenant's work shall be billed to Tenant as Additional Rent.
10. Tenant must obtain all governmental permits and approvals before commencing
work.
11. Tenant indemnifies, defends and holds Landlord harmless from and against
all losses, liabilities, damages, liens, costs, penalties and expenses
arising from or out of the performance of such alterations.
EXHIBIT "G"
64
<PAGE>
12. Work related to the roof of the Building:
. Access by authorized personnel only.
. No objects shall be left unattended.
. Core penetrations shall be performed by Landlord's contractor at
Tenants cost.
13. In addition to the conditions listed above, Tenant's contractor shall fully
comply with the following additional conditions:
. No smoking is allowed except in areas designated as smoking areas, or
a minimum of thirty (30) feet from any Building entrance.
. All common areas must be kept clear of contractor's supplies and
materials.
. All perimeter doors shall not be held open during non-business hours.
Violation of this condition will result in fines to Tenant and
Tenant's contractor.
. No loading or unloading of contractor's supplies or materials shall be
done during normal business hours. Loading and unloading during non-
business hours must be done with protection to the common areas of the
building. Landlord must be advised 24 hours in advance of deliveries
in or out of the Building.
. Contractor shall not use any existing lines of communication to the
building for its own use.
. Restoring the premises to the condition delivered to Tenant including
labor and materials of the suspended ceiling, lights, mechanical
systems or any other condition existing prior to the alterations.
65
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT "H"
JANITORIAL SPECIFICATIONS
- --------------------------------------------------------------------------------
Janitorial Specifications
General Areas, Offices, Lounges, & Lobby, Etc.
- ---------------------------------------------
A. Services Performed Nightly
1. Empty wastebaskets
2. Transport trash to designated areas
3. Dust all furniture including desks, chairs, etc.
4. Empty and damp clean all ashtrays
5. Dust all exposed bookcases, shelves and cabinets
6. Sanitize and clean drinking fountains
7. Low dust all horizontal surfaces to hand height (70") including walls,
baseboards, ledges, moldings, shelves, picture frames, vents, radiators,
etc.
8. Spot clean desk surfaces
9. Clean counter surfaces
10. Spot clean lobby glass including entrance doors
11. Spot interior glass in partitions and doors
12. Remove fingerprints from front doors, frames, light switches, kick and push
plates, handles, railings, and walls, etc.
13. Check and clean furniture in conference room
14. Clean and service receptacles and screens furnished by client
15. Personal papers on desks, cabinets, etc, are not to be disturbed
16. Damp clean blackboards/whiteboards if requested
17. Clean and polish bright work to hand height
18. Sweep, vacuum, and dust all carpeted stairways
19. Dust and spot clean elevators and polish interior brass
20. Clean elevator tracks on all floors
21. Spot clean "Exit" on stairwells
B. Services Performed Semi-Weekly
1. Dust all telephones
C. Services Performed Weekly
1. High dust above hand height all horizontal surfaces, ledges, shelves,
and moldings
2. Clean desk surfaces
3. Remove dust and cobwebs from ceiling
4. Sweep and clean "Exit" stairwells
D. Services Performed Monthly
1. Wash all wastebaskets
2. Dust venetian blinds
3. Vacuum diffuser outlets in ceiling and windowsills
4. Dry clean area adjacent to diffuser outlet
Washrooms
- ---------
A. Services Performed Nightly
<PAGE>
1. Clean and sanitize all toilet bowl flush rings, drain and overflow
outlets
2. Clean, sanitize and polish all vitreous fixtures, including toilet
bowls, urinals, and hand basins
3. Clean and sanitize toilet seats
4. Clean and polish all chrome fittings
5. Clean and polish all glass and mirrors
6. Wash and sanitize exterior of all receptacles
7. Empty and sanitize interior sanitary container
8. Empty all trash receptacles and containers and replace liners
9. Dust metal stall partitions
10. Spot clean stall partitions
11. Empty and damp clean all ashtrays
12. Remove fingerprints from doors, frames, light switches, kick and push
plates, handles and walls
13. Remove spots, stains, splashes from wall area and near hand basin
14. Refill all dispensers to normal limits, this includes soap, napkins,
tissue, hand towels, liners, seat cover and cup dispensers
15. Dust all furniture including tables and chairs
16. Low dust all horizontal surfaces to hand height including sills,
ledges, shelves, frames, vents, and heating outlets
17. Damp mop floors
18. Flush toilet bowls with "Bowlclene"
B. Services Performed Weekly
1. Wash and sanitize stall partitions
2. High dust above hand height all horizontal surfaces including ledges,
shelves, and moldings
C. Services Performed Monthly
1. Vacuum diffuser outlets in ceilings and/or walls
2. Machine scrub and seal (if applicable) restroom floors
D. Services Performed Quarterly
1. Dry clean are adjacent to diffuser outlet
Floors: Resilient and Hard
- --------------------------
A. Services Performed Nightly
1. Dust mop or sweep: tile, marble, terrazzo, and hardwood flooring
2. Damp mop: tile, marble and terrazzo
B. Services Performed Monthly
1. Scrub and refinish to maintain adequate protective coating
2. Strip, clean, refinish and machine polish
Carpets
- -------
A. Services Performed Nightly
1. Vacuum entire carpeted area including open areas, lobbies, leg space
under desks, tables, and other non-traffic areas
2. Inspect and remove spots and stains
B. Services Performed as requested at added cost
1. Provide service mats as requested
<PAGE>
Walls and ceilings
- ------------------
A. Services Performed Nightly
1. Remove spots, stains, and splashes to hand height
Furniture: Fabric
- -----------------
A. Services Performed Monthly
1. Services to be performed as requested at additional cost
General
- -------
A. Daily services
1. Leave notice of any observed irregularities (i.e. defective plumbing,
unlocked doors, lights left on and supply shortage)
2. All lights are to be turned off except those specified. Doors and
windows closed and locked
3. Provide owner with action request to be checked daily
B. Weekly services
1. Provide copies of action request logs to owner
C. Bi-Weekly services
1. Provide copies to walk-through reports to owner
D. Services to be provided as requested at additional cost
1. Emergency cleanup
<PAGE>
EXHIBIT 10.8
MERCATA, INC.
SUBSCRIPTION AGREEMENT
1. Subscription. In connection with an offering (the "Offering") of
Common Stock (the "Common Stock") of Mercata, Inc. (the "Company"), the
purchaser whose name appears on the signature page of this Agreement
("Purchaser"), hereby subscribes for four million (4,000,000) shares (the
"Shares") at a price of ten cents ($0.10) per share.
2. Payment. Purchaser encloses herewith its check payable to the Company
in the amount equal to the total purchase price of the shares indicated in
section 1 above.
3. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants that:
3.1 Requisite Power and Authority. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and to carry out its provisions. All action on Purchaser's part
required for the lawful execution and delivery of this Agreement have been or
will be effectively taken prior to the closing of the Offering. Upon their
execution and delivery, this Agreement will be a valid and binding obligation of
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, and (b) general
principles of equity that restrict the availability of equitable remedies.
3.2 Investment Representations. Purchaser understands that the
Shares have not been registered under the Securities Act of 1933, as amended
(the "Act"). Purchaser also understands that the Shares are being offered and
sold pursuant to an exemption from registration contained in the Act based in
part upon Purchaser's representations contained in the Agreement. Purchaser
hereby represents and warrants as follows:
(a) Acquisition Entirely for Own Account. Purchaser is acquiring
the Shares for Purchaser's own account for investment only, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and Purchaser has no present intention of selling, granting any participation
in, or otherwise distributing the same. By executing this Agreement, the
Purchaser further represents that the Purchaser does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Shares.
(b) Disclosure of Information. Purchaser has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Shares. The Purchaser further represents that it has had an
opportunity to discuss the Company's business, management and financial affairs
with the Company and to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Shares.
(c) Purchaser Can Protect Its Interest and Bear Economic Risk.
Purchaser has such knowledge and experience in financial and business matters
that it is capable
1.
<PAGE>
of evaluating the merits and risks of the investment in the Company and has the
capacity to protect its own interest in connection with the transactions
contemplated in this Agreement. Purchaser understands that it must bear the
economic risk of this investment indefinitely unless the Shares are registered
pursuant to the Act, or an exemption from registration is available. Purchaser
understands that the Company has no present intention of registering the Shares
or any shares of its Common Stock. Purchaser also understands that there is no
assurance that any exemption from registration under the Act will be available
and that, even if available, such exemption may not allow Purchaser to transfer
all or any portion of the Shares under the circumstances, in the amounts or at
the times Purchaser might propose. Further, Purchaser is aware of no publication
of any advertisement in connection with the transactions contemplated in this
Agreement. Purchaser also represents it has not been organized for the purpose
of acquiring the Shares.
(d) Accredited Purchaser. Purchaser is an accredited purchaser
within the meaning of Regulation D under the Act.
(e) Restricted Securities. Purchaser understands that the Shares
may not be sold, transferred, or otherwise disposed of without registration
under the Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Shares or an available exemption from
registration under the Act, the Shares must be held indefinitely. In particular,
each Purchaser is aware of the provisions of Rule 144 promulgated under the Act
that the Shares may not be sold pursuant to Rule 144 unless all of the
conditions of that Rule are met. Among the conditions for use of Rule 144 may be
the availability of certain current information to the public about the Company.
Such information is not now available and the Company has no present plans to
make such information available.
3.3 Transfer Restrictions. Purchaser acknowledges and agrees that
the Shares are subject to restrictions on transfer.
4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.
<PAGE>
5. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.
Purchaser:
4,000,000 By: /s/ Paul G. Allen
- ----------------------- -------------------------
Number of Shares
Name: Paul G. Allen
-----------------------
Address:_____________________
$400,000 _____________________
- ----------------------- _____________________
Amount of Investment
($0.10 per Share)
The foregoing Agreement is hereby confirmed and accepted by the Company as
of October 7, 1998.
Mercata, Inc.
By /s/ Jon C. Engman
--------------------------------------
Name: Jon C. Engman
-----------------------------------
Title: Vice President & Treasurer
----------------------------------
Address: 110 - 110th Ave. NE, Suite 390
---------------------------------
Bellevue, WA 98004
---------------------------------
3.
<PAGE>
EXHIBIT 10.9
PROMISSORY NOTE
$1,200,000 Bellevue, Washington
[Date]
FOR VALUE RECEIVED, Mercata, Inc., a Delaware corporation ("Maker"),
hereby promises to pay to the order of Paul G. Allen or his successors or
assigns, as the case may be ("Payee"), at 110 - 110th Avenue NE; Bellevue,
Washington, or such other place as may be specified in writing by Payee, the
principal sum of One Million Two Hundred Thousand Dollars ($1,200,000), plus
simple interest at the rate of six percent (6%) per annum on the unpaid
principal balance. The principal amount of this promissory note and all accrued
interest shall be payable immediately on the demand of Payee at any time on or
after December 31, 1999.
Maker shall have the right to prepay all or any part of this
promissory note at any time without penalty or premium, and any such prepayment
shall be applied first to the payment of accrued interest and then to the
payment of principal.
Maker hereby waives presentment for payment, notice of dishonor,
protest and notice of protest, and in the event of default hereunder, Maker
agrees to pay all costs of collection, including reasonable attorneys' fees.
This promissory note shall be governed by the laws of the State of
Washington.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
IN WITNESS WHEREOF, Maker has executed this promissory note as of the
date first above written.
Mercata, Inc.
By: /s/ Jon Engman
---------------
Its V.P. & Treasurer
----------------
1.
<PAGE>
EXHIBIT 10.10
COMMON STOCK AND PROMISSORY NOTE
ASSIGNMENT AND TRANSFER INSTRUCTIONS
The undersigned, Paul G. Allen, Vulcan Ventures Incorporated ("Vulcan
Ventures") and Mercata, Inc. (the Company) agree as follows:
Recitals
Whereas, the Company borrowed an aggregate principal amount of three
million six hundred thousand dollars ($3,600,000) from Paul G. Allen pursuant to
promissory notes, dated October 13, 1998, December 22, 1998 and February 1, 1999
(the "Notes");
Whereas, the Company has sold an aggregate of four million (4,000,000)
shares of the Company's Common Stock to Paul G. Allen (the "Outstanding Common
Stock");
Whereas, the Paul G. Allen wishes to assign and transfer the Outstanding
Common Stock and the Notes to Vulcan Ventures Incorporated ("Vulcan Ventures")
in connection with the Series A Preferred Stock financing and recaptialization
of the Company; and
Whereas, the Company is in the process of completing a financing in which
Vulcan Ventures will purchase fourteen million (14,000,000) shares of the
Company's Series A Preferred Stock (the "Series A Stock") at a per share price
of one dollar and five cents ($1.05) per share with the following consideration:
(i) cancellation of the Notes; (ii) exchange of three million (3,000,000) shares
of the Outstanding Common Stock with a current fair market value of ten cents
($0.10) per share and an aggregate current fair market value of three hundred
thousand dollars ($300,000); and (iii) payment of ten million eight hundred
thousand dollars ($10,800,000) cash (less a credit for the accrued but unpaid
interest on the Notes owed by the Company at the time of cancellation); and
Whereas, as the result of the transfer of the Outstanding Common Stock
and/or the Notes to Vulcan Ventures or the creation of a second class of stock
by the Company, the Company will cease being a Subchapter S corporation.
Agreement
1. Assignments from Paul G. Allen to Vulcan Ventures.
(a) Common Stock. For Value Received, Paul G. Allen hereby assigns and
transfers unto Vulcan Ventures, the Outstanding Common Stock of the Company
standing in the name Paul G. Allen on the books of the Company represented by
Certificate No. C-1 attached hereto as Exhibit A and do hereby irrevocably
constitute and appoint the Secretary of the Company attorney to transfer the
said stock on the books of the Company with full power of substitution in the
premises.
1.
<PAGE>
(b) Promissory Notes. For Value Received, Paul G. Allen hereby assigns and
transfers unto Vulcan Ventures the Notes, together with any accrued but unpaid
interest thereon, represented by the Promissory Notes attached hereto as Exhibit
B and hereby irrevocably constitute and appoint the Secretary of the Company
attorney to transfer the Notes on the books of the Company with full power of
substitution in the premises.
2. Instructions of Vulcan Ventures to the Company.
(a) Common Stock. In consideration for and effective upon the sale by the
Company to Vulcan Ventures of the Series A Stock, Vulcan Ventures hereby sells,
assigns and transfers to the Company three million (3,000,000) shares of the
Outstanding Common Stock as part of the consideration for the shares of Series A
Preferred Stock of the Company and instructs the Company to issue a stock
certificate representing the remaining one million (1,000,000) shares of the
Outstanding Common Stock in the name of Vulcan Ventures Incorporated. Vulcan
Ventures hereby irrevocably constitute and appoint the Secretary of the Company
attorney to transfer in accordance with these instructions the said stock on the
books of the Company with full power of substitution in the premises.
(b) Promissory Notes. In consideration for and effective upon the sale by
the Company to Vulcan Ventures of the Series A Stock, Vulcan Ventures hereby
sells, assigns and transfers to the Company the Notes, together with any accrued
but unpaid interest thereon, to the Company for cancellation as part of the
consideration for the shares of Series A Preferred Stock of the Company.
3. Representations and Warranties of Vulcan Ventures.
(a) Investment Representations. Vulcan Ventures understands that the
Outstanding Common Stock has not been registered under the Securities Act.
Vulcan Ventures also understands that the Outstanding Common Stock is being
transferred pursuant to an exemption from registration contained in the
Securities Act based in part upon Vulcan Ventures' representations contained in
the Agreement. Vulcan Ventures hereby represents and warrants that Vulcan
Ventures is (a) acquiring the Outstanding Common Stock for Vulcan Ventures' own
account for investment only, and not with a view towards their distribution; and
(b) an accredited investor within the meaning of Regulation D under the
Securities Act.
(b) Restrictions on Transfer. Each certificate representing Outstanding
Common Stock shall be stamped or otherwise imprinted with a legend substantially
similar to the following (in addition to any legend required under applicable
state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE
2.
<PAGE>
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4. Waiver of Right of First Refusal. The Company hereby waives the right of
first refusal (and any related rights to notice) under Article XIV of the Bylaws
of the Company as it applies to the transfer of the Outstanding Common Stock
from Paul G. Allen to Vulcan Ventures.
[Remainder of Page Intentionally Left Blank]
3.
<PAGE>
In Witness Whereof, the parties hereto have executed these Common Stock and
Promissory Note Assignment and Transfer Instructions as of March ___, 1999.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument.
/s/ Paul G. Allen
- ----------------------------------------
Paul G. Allen
Vulcan Ventures Incorporated
By: /s/ [Illegible]
-------------------------------------
Name/Title: Vice President
----------------------------
Mercata, Inc.
By: /s/ Jon Engman
------------------------------------
Name/Title: VP, Secretary & Treasurer
-----------------------------
Exhibit A: Common Stock Certificate C-1
Exhibit B: Promissory Note, dated October 13, 1998
Promissory Note, dated December 22, 1998
Promissory Note, dated February 1, 1999
4.
<PAGE>
Exhibit A
[Common Stock Certificate C-1]
5.
<PAGE>
Exhibit B
[Promissory Note, dated October 13, 1998
Promissory Note, dated December 22, 1998
Promissory Note, dated February 1, 1999]
6.
<PAGE>
EXHIBIT 10.11
MERCATA, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
Table of Contents
<TABLE>
<CAPTION> Page
<S> <C>
1. Agreement To Sell And Purchase....................................... 1
1.1 Authorization of Shares......................................... 1
1.2 Sale and Purchase............................................... 1
2. Closing, Delivery And Payment........................................ 2
2.1 Closing......................................................... 2
2.2 Delivery........................................................ 2
3. Representations And Warranties Of The Company........................ 2
3.1 Organization, Good Standing and Qualification................... 2
3.2 Capitalization; Voting Rights................................... 2
3.3 Authorization; Binding Obligations.............................. 3
3.4 Offering Valid.................................................. 3
4. Representations And Warranties Of Purchaser.......................... 3
4.1 Investment Representations...................................... 3
4.2 Restrictions on Transfer........................................ 3
5. Miscellaneous........................................................ 4
5.1 Survival........................................................ 4
5.2 Entire Agreement................................................ 4
5.3 Severability.................................................... 4
5.4 Waiver of Conflicts............................................. 4
5.5 Counterparts.................................................... 4
5.6 Broker's Fees................................................... 4
</TABLE>
i.
<PAGE>
LIST OF EXHIBITS
Schedule of Purchasers Exhibit A
Restated Certificate Exhibit B
ii.
<PAGE>
EXHIBIT 10.11
MERCATA, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This Series A Preferred Stock Purchase Agreement (the "Agreement") is
entered into as of March 5, 1999, by and among Mercata, Inc., a Delaware
corporation (the "Company") and the entity whose names are set forth on the
Schedule of Purchasers attached hereto as Exhibit A ("Purchaser").
Recitals
Whereas, the Company has authorized the sale and issuance of an
aggregate of fourteen million (14, 000,000) shares of its Series A Preferred
Stock (the "Shares");
Whereas, Purchaser desire to purchase the Shares on the terms and
conditions set forth herein; and
Whereas, the Company desires to issue and sell the Shares to Purchaser
on the terms and conditions set forth herein;
Now, Therefore, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. Agreement To Sell And Purchase.
1.1 Authorization of Shares. On or prior to the Closing (as defined
in Section 2 below), the Company shall have authorized (a) the sale and issuance
to Purchaser of the Shares and (b) the issuance of such shares of Common Stock
to be issued upon conversion of the Shares (the "Conversion Shares"). The
Shares and the Conversion Shares shall have the rights, preferences, privileges
and restrictions set forth in the Amended and Restated Certificate of
Incorporation of the Company, in the form attached hereto as Exhibit B (the
"Restated Charter").
1.2 Sale and Purchase. Subject to the terms and conditions hereof,
at the Closing (as hereinafter defined) the Company hereby agrees to issue and
sell to Purchaser and Purchaser agrees to purchase from the Company the number
of Shares set forth opposite Purchaser's name on Exhibit A, at a purchase price
of one dollar and five cents ($1.05) per share.
1.
<PAGE>
2. Closing, Delivery And Payment.
2.1 Closing. The closing of the sale and purchase of the Shares
under this Agreement (the "Closing") shall take place at 5:00 p.m. on the date
hereof, at the offices of Cooley Godward llp, 4205 Carillon Point, Kirkland,
Washington 98033-7355 or at such other time or place as the Company and
Purchaser may mutually agree (such date is hereinafter referred to as the
"Closing Date").
2.2 Delivery. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to Purchaser a certificate representing the
number of Shares to be purchased at the Closing by Purchaser, against payment of
the purchase price therefor by check, wire transfer made payable to the order of
the Company, cancellation of indebtedness or any combination of the foregoing.
3. Representations And Warranties Of The Company.
Except as set forth on a Schedule of Exceptions delivered by the
Company to Purchaser at the Closing, the Company hereby represents and warrants
to Purchaser as of the date of this Agreement as follows:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, to issue and sell the Shares and the Conversion Shares, and to
carry out the provisions of this Agreement and the Restated Charter and to carry
on its business as presently conducted and as presently proposed to be
conducted.
3.2 Capitalization; Voting Rights. The authorized capital stock of
the Company, immediately prior to the Closing, will consist of twenty-one
million (21,000,000) shares of Common Stock, 1,000,000 shares of which are
issued and outstanding and five million (5,000,000) shares of which are reserved
for future issuance pursuant to the Company's 1999 Equity Incentive Plan, and
fourteen million (14,000,000) shares of Preferred Stock, all of which are
designated Series A Preferred Stock, none of which are issued and outstanding.
All issued and outstanding shares of the Company's Common Stock (a) have been
duly authorized and validly issued, and (b) are fully paid and nonassessable.
The rights, preferences, privileges and restrictions of the Shares are as stated
in the Restated Charter. Each series of Preferred Stock is convertible into
Common Stock on a one-for-one basis. The Conversion Shares have been duly and
validly reserved for issuance. Other than the five million (5,000,000) shares
reserved for issuance under the Company's 1999 Equity Incentive Plan, there are
no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or shareholder agreements, or
agreements of any kind for the purchase or acquisition from the Company of any
of its securities. When issued in compliance with the provisions of this
Agreement and the Restated Charter, the Shares and the Conversion Shares will be
validly issued, fully paid and nonassessable, and will be free of any liens or
encumbrances other than liens and encumbrances created by or imposed upon
Purchaser; provided, however, that the Shares and the Conversion Shares may be
subject to restrictions on transfer under state and/or
2.
<PAGE>
federal securities laws as set forth herein or as otherwise required by such
laws at the time a transfer is proposed.
3.3 Authorization; Binding Obligations. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement, the performance of all obligations of the
Company hereunder at the Closing and the authorization, sale, issuance and
delivery of the Shares pursuant hereto and the Conversion Shares pursuant to the
Restated Charter has been taken or will be taken prior to the Closing. The
Agreement, when executed and delivered, will be valid and binding obligations of
the Company enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, and (b) general
principles of equity that restrict the availability of equitable remedies. The
sale of the Shares and the subsequent conversion of the Shares into Conversion
Shares are not and will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with.
3.4 Offering Valid. Assuming the accuracy of the representations and
warranties of Purchaser contained in Section 4.1 hereof, the offer, sale and
issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the Shares
to any person or persons so as to bring the sale of such Shares by the Company
within the registration provisions of the Securities Act or any state securities
laws.
4. Representations And Warranties Of Purchaser.
4.1 Investment Representations. Purchaser understands that the
Shares and Conversion Shares have not been registered under the Securities Act.
Purchaser also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants that Purchaser is (a) acquiring the Shares for
Purchaser's own account for investment only, and not with a view towards their
distribution; and (b) an accredited investor within the meaning of Regulation D
under the Securities Act.
4.2 Restrictions on Transfer. Each certificate representing Shares
and Conversion Shares shall be stamped or otherwise imprinted with a legend
substantially similar to the following (in addition to any legend required under
applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY
HAS
3.
<PAGE>
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND
ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
5. Miscellaneous.
5.1 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
5.2 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto, and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
5.3 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
5.4 Waiver of Conflicts. Each party to this Agreement acknowledges
that legal counsel for the Company, Cooley Godward llp ("Cooley Godward"), has
in the past performed and may continue in the future to perform legal services
for Purchaser or their affiliates in matters unrelated to the transactions
contemplated by this Agreement, including, but not limited to, the
representation of Purchaser in matters of a similar nature to the transactions
contemplated herein. Each party to this Agreement hereby (a) acknowledges that
they have had an opportunity to ask for and have obtained information relevant
to such representation, including disclosure of the reasonably foreseeable
adverse consequences of such representation; (b) acknowledges that with respect
to the transactions contemplated herein, Cooley Godward has represented the
Company and not Purchaser or any individual shareholder, director or employee of
the Company; and (c) gives its informed consent to Cooley Godward's
representation of the Company in the transactions contemplated by this Agreement
and Cooley Godward's previous or continuing representation of Purchaser or their
affiliates in matters unrelated to such transactions.
5.5 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 one instrument.
5.6 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further
4.
<PAGE>
agrees to indemnify each other party for any claims, losses or expenses incurred
by such other party as a result of the representation in this Section 6.14 being
untrue.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
5.
<PAGE>
In Witness Whereof, the parties hereto have executed the Series A Preferred
Stock Purchase Agreement as of the date set forth in the first paragraph hereof.
Company: Purchaser:
Mercata, Inc. Vulcan Ventures Incorporated
By: /s/ Tom Van Horn By: /s/ [Illegible]
------------------------- ---------------------------
President Title: Vice President
------------------------
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE
<PAGE>
Exhibit A
SCHEDULE OF PURCHASERS
Aggregate
Name and Address Shares Purchase Price
Vulcan Ventures Incorporated 14,000,000 $ 14,700,000 1
110-110/th/ Avenue N.E., Suite 550
Bellevue, WA 98004
Total: 14,000,000 $ 14,700,000
========== =============
1 Includes cancellation of indebtedness of the Company under notes dated
October 13, 1998, December 22, 1998 and February 1, 1999 each in the principal
amounts of $1,200,000 and the aggregate principal amount of $3,600,000. Also
includes contribution of 3,000,000 shares of Common Stock having a current fair
market value of ten cents ($0.10) per share and an aggregate fair market value
of three hundred thousand dollars ($300,000). Each such note and all such
shares were originally issued to Paul G. Allen and subsequently assigned to
Vulcan Ventures Incorporated. Vulcan Ventures Incorporated shall pay the
remaining ten million eight hundred thousand dollars ($10,800,000) of the
purchase price by check or wire transfer (less a credit of $_______________ to
reflect the cancellation of accrued but unpaid interest on the Notes owed by the
Company at the time of cancellation).
<PAGE>
Exhibit B
RESTATED CERTIFICATE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MERCATA, INC.
Tom Van Horn and Jon C. Engman hereby certify that:
1. The name of this corporation is Mercata, Inc. and the date of filing
the original Certificate of Incorporation of this corporation with the Secretary
of State of the State of Delaware is September 23, 1998.
2. They are duly elected and acting President and Secretary,
respectively, of Mercata, Inc., a Delaware Corporation.
3. The Certificate of Incorporation of this corporation is hereby amended
and restated to read as follows:
I.
The name of this corporation is Mercata, Inc.
II.
The address of the registered office of the corporation in the State of
Delaware is 30 Old Rudnick Lane, City of Dover, County of Kent, and the name of
the registered agent of the corporation in the State of Delaware at such address
is CorpAmerica, Inc.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This corporation is authorized to issue only one class of stock, to be
designated Common Stock. The total number of shares of Common Stock presently
authorized is ten million (10,000,000), each having a par value of one-tenth of
one cent ($0.001).
1.
V.
A. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the Bylaws.
B. Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may be
altered or amended or new Bylaws adopted by the stockholders entitled to vote.
The Board of Directors shall also have the power to adopt, amend or repeal
Bylaws.
VI.
A. The liability of the directors for monetary damages shall be eliminated
to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the stockholders
herein are granted subject to this reservation.
VIII.
The name and the mailing address of the Sole Incorporator is as follows:
Matthew F. Roberts
c/o Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
****
This Amended and Restated Certificate of Incorporation has been duly
approved by a majority of the Board of Directors of this Corporation.
2.
This Corporation has not received any payment for any stock and these
Amended and Restated Articles of Incorporation have been duly adopted in
accordance with Section 241 of the Delaware General Corporation Law and is
executed, acknowledged and filed in accordance with Section 103 of the Delaware
General Corporation Law.
In Witness Whereof, Mercata, Inc. has caused this Amended and Restated
Certificate of Incorporation to be signed by the President and the Secretary in
Bellevue, Washington this 8th day of October , 1997.
Mercata, Inc.
By: /s/ Thomas Van Horn
-------------------
President
ATTEST:
By: /s/ Jon Engman
--------------
Secretary
3.
<PAGE>
EXHIBIT 10.12
PROMISSORY NOTE
Bellevue, Washington
September 10, 1999
FOR VALUE RECEIVED, the undersigned, MERCATA, INC., an Washington corporation
("Borrower"), promises to pay to the order of VULCAN VENTURES INCORPORATED
("Lender"), ON DEMAND on or after October 31, 1999, the principal sum of TEN
MILLION AND NO/100 DOLLARS ($10,000,000.00), or so much thereof as may be from
time-to-time disbursed hereunder, in lawful money of the United States of
America, together with interest on the unpaid principal from time-to-time
outstanding at the Prime Rate until fully paid. The entire unpaid principal
balance of this Note plus all accrued interest thereon shall be due and payable
on demand.
The total principal balance as of the date hereof is $2,000,000.
1. Definitions. As used herein, the following terms shall be defined as
-----------
follows:
(a) Available Amount: As of any date, (i) $10,000,000, minus (ii) the
----------------
total principal amount of Disbursements previously made hereunder
(whether or not such Disbursements are outstanding or have been
prepaid pursuant to Section 3(b) of this Note).
(b) Business Day: Any day other than a Saturday, Sunday or day on which
------------
banks in Seattle, Washington are required or permitted by law to
close.
(c) Default Rate: The rate of 12% per annum.
------------
(d) Disbursement: Any amount disbursed by Lender to Borrower under this
------------
Note from time to time in accordance with the provisions of Section 2
hereof.
(e) Note: This Promissory Note executed by Borrower in favor of Lender.
----
(f) Prime Rate: The interest rate per annum reported as the Prime Rate in
----------
the Money Rates section of The Wall Street Journal (Western Edition).
-----------------------
If The Wall Street Journal ceases reporting the Prime Rate as
-----------------------
currently reported, the Prime Rate shall be another reasonably
comparable rate selected by Lender.
2. Disbursements. Lender has no obligation to fund any Disbursement,
-------------
regardless of the Available Amount. Every Disbursement is discretionary on
the part of Lender. Borrower may request Disbursements hereunder by notice
to Lender. Such notice shall specify that a Disbursement is requested, the
date on which the Disbursement is requested to be made (which shall be a
Business Day) and the amount thereof. Notwithstanding anything in this Note
to the contrary, Borrower may not request any Disbursement if after giving
effect to the required Disbursement, the Available Amount would be less
than zero.
3. Payments.
--------
(a) Principal and Interest. The principal hereof, together with interest
----------------------
accrued thereon, shall be due and payable on demand by Lender.
(b) Prepayment. Borrower may prepay this Note in whole or in part at any
----------
time without penalty or premium, provided, that any amount prepaid may
not be reborrowed.
4. Default. If this Note is not paid when due, the principal of and, to the
-------
extent permitted by applicable law, interest on this Note shall bear
interest at the Default Rate.
5. Miscellaneous.
-------------
(a) Every person or entity at any time liable for the payment of the
indebtedness evidenced hereby waives presentment for payment, demand
and notice of nonpayment of this Note. Every such person or entity
further hereby consents to any extension of the time of payment hereof
or other modification of terms of payment of this Note, the release of
all or any part of any security hereof or the release of any party
liable for the payment of the indebtedness evidenced hereby at any
time and from time-to-time at the request of anyone now or hereafter
liable therefore. Any such extension or release may be made without
notice to any of such persons or entities and without discharging
their liability.
(b) This Note shall be governed by and construed in accordance with the
laws of the state of Washington, without giving effect to choice of
law or conflicts of law principles.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY, EXTEND CREDIT OR TO FOREBEAR
- -------------------------------------------------------------------------------
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
- ---------------------------------------------------------------------------
MERCATA, INC.
By: /s/ Jon Engman
--------------------------------------
Jon Engman, Vice President & Treasurer
<PAGE>
EXHIBIT 10.13
MERCATA, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
1. Agreement To Sell And Purchase........................................ 1
1.1 Authorization of Shares......................................... 1
1.2 Sale and Purchase............................................... 1
2. Closing, Delivery And Payment......................................... 2
2.1 Closing......................................................... 2
2.2 Delivery........................................................ 2
2.3 Subsequent Sales of Shares...................................... 2
3. Representations And Warranties Of The Company......................... 2
3.1 Organization, Good Standing and Qualification................... 2
3.2 Subsidiaries.................................................... 3
3.3 Capitalization; Voting Rights................................... 3
3.4 Authorization; Binding Obligations.............................. 3
3.5 Financial Statements............................................ 4
3.6 Liabilities..................................................... 4
3.7 Agreements; Action.............................................. 4
3.8 Obligations to Related Parties.................................. 5
3.9 Changes......................................................... 5
3.10 Title to Properties and Assets; Liens, Etc...................... 6
3.11 Patents and Trademarks.......................................... 6
3.12 Compliance with Other Instruments............................... 7
3.13 Litigation...................................................... 7
3.14 Tax Returns and Payments........................................ 8
3.15 Employees....................................................... 8
3.16 Proprietary Information and Inventions Agreements............... 8
3.17 Registration Rights and Voting Rights........................... 8
3.18 Compliance with Laws; Permits................................... 9
3.19 Offering Valid.................................................. 9
3.20 Full Disclosure................................................. 9
3.21 Insurance....................................................... 10
</TABLE>
i.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
4. Representations And Warranties Of The Purchasers...................... 10
4.1 Requisite Power and Authority................................... 10
4.2 Investment Representations...................................... 10
4.3 Transfer Restrictions........................................... 11
5. Conditions To Closing................................................. 11
5.1 Conditions to Purchasers' Obligations at the Closing............ 11
5.2 Conditions to Obligations of the Company........................ 13
6. Miscellaneous......................................................... 13
6.1 Governing Law................................................... 13
6.2 Survival........................................................ 13
6.3 Successors and Assigns.......................................... 14
6.4 Entire Agreement................................................ 14
6.5 Severability.................................................... 14
6.6 Amendment and Waiver............................................ 14
6.7 Delays or Omissions............................................. 14
6.8 Waiver of Conflicts............................................. 15
6.9 Notices......................................................... 15
6.10 Expenses........................................................ 15
6.11 Attorneys' Fees................................................. 15
6.12 Titles and Subtitles............................................ 16
6.13 Counterparts.................................................... 16
6.14 Broker's Fees................................................... 16
6.15 Exculpation Among Purchasers.................................... 16
6.16 Confidentiality................................................. 16
6.17 Pronouns........................................................ 16
6.18 California Corporate Securities Law............................. 16
</TABLE>
ii.
<PAGE>
List Of Exhibits
Exhibit A Schedule of Purchasers
Exhibit B Form of Convertible Promissory Note
Exhibit C Amended and Restated Certificate of Incorporation
Exhibit D Investor Rights Agreement
Exhibit E Co-Sale Agreement
Exhibit F Voting Agreement
Exhibit G Financial Statements
Exhibit H Proprietary Information and Inventions Agreement
Exhibit I Form of Legal Opinion
iii.
<PAGE>
MERCATA, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Series B Preferred Stock Purchase Agreement (this "Agreement") is
entered into as of September 30, 1999, by and among Mercata, Inc., a Delaware
corporation (the "Company") and each of those persons and entities, severally
and not jointly, whose names are set forth on the Schedule of Purchasers
attached hereto as Exhibit A (which persons and entities are hereinafter
collectively referred to as "Purchasers" and each individually as a
"Purchaser").
Recitals
Whereas, the Company has authorized the sale and issuance of an aggregate
of eleven million two hundred thousand (11,200,000) shares of its Series B
Preferred Stock (the "Shares") and the sale and issuance of Convertible
Promissory Notes in the aggregate principle amount of Two Million Three Hundred
Ninety-five Thousand Eight Hundred Thirty-four and 38/100 ($2,395,834.38) and
convertible into 766,667 shares of the Shares in substantially the form attached
hereto as Exhibit B (each a "Note" and collectively the "Notes");
Whereas, Purchasers desire to purchase the Shares and/or the Notes on the
terms and conditions set forth herein; and
Whereas, the Company desires to issue and sell the Shares and the Notes to
Purchasers on the terms and conditions set forth herein;
Now, Therefore, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. Agreement To Sell And Purchase.
1.1 Authorization of Shares. On or prior to the Closing (as defined
in Section 2 below), the Company shall have authorized (a) the sale and issuance
to Purchasers of the Shares; (b) the issuance of such shares of Common Stock to
be issued upon conversion of the Shares (the "Conversion Shares") and the
issuance of such shares of Preferred Stock to be issued upon conversion of the
Notes. The Shares and the Conversion Shares shall have the rights, preferences,
privileges and restrictions set forth in the Amended and Restated Certificate of
Incorporation of the Company, in the form attached hereto as Exhibit C (the
"Restated Charter"). The shares of Series B Preferred Stock issued upon
conversion of the Notes shall be deemed "Shares" for all purposes under this
Agreement.
1.2 Sale and Purchase. Subject to the terms and conditions hereof, at
the Closing (as defined in Section 2 below) the Company hereby agrees to issue
and sell to each Purchaser, severally and not jointly, and each Purchaser agrees
to purchase from the Company, severally and not jointly, the number of Shares
set forth opposite such Purchaser's name on
1.
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Exhibit A, at a purchase price of three dollars and twelve and one-half cents
($3.125) per share and the Note in the principal amount, if any, specified for
such Purchaser on Exhibit A.
2. Closing, Delivery And Payment.
2.1 Closing. The closing of the sale and purchase of the Shares and
the Notes under this Agreement (the "Closing") shall take place at 5:00 p.m. on
the date hereof, at the offices of Cooley Godward LLP, 5200 Carillon Point,
Kirkland, WA 98033 or at such other time or place as the Company and Purchasers
may mutually agree (such date is hereinafter referred to as the "Closing Date").
2.2 Delivery. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to each Purchaser a certificate representing
the number of Shares and, if applicable, the Note to be purchased at the Closing
by such Purchaser, against payment of the purchase price therefor by check, wire
transfer made payable to the order of the Company, cancellation of indebtedness
or any combination of the foregoing.
2.3 Subsequent Sales of Shares. At any time on or before October 15,
1999, the Company may sell up to the balance of the authorized shares of Series
B Preferred Stock not sold at the Closing to such persons as may be approved by
the Board of Directors of the Company. All such sales shall be made on the
terms and conditions set forth in this Agreement, including, without limitation,
the representations and warranties by such Purchasers as set forth in Section 4.
Any Shares of Series A Preferred Stock sold pursuant to this Section 2.3 shall
be deemed to be "Shares" for all purposes under this Agreement and any
purchasers thereof shall be deemed to be "Purchasers" for all purposes under
this Agreement.
3. Representations And Warranties Of The Company.
Except as set forth on a Schedule of Exceptions delivered by the
Company to the Purchasers at the Closing, the Company hereby represents and
warrants to each Purchaser as of the date of this Agreement as follows:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Investor Rights Agreement in the form attached hereto as
Exhibit D (the "Investor Rights Agreement"), the Co-Sale Agreement in the form
attached hereto as Exhibit E (the "Co-Sale Agreement") and the Voting Agreement
in the form attached hereto as Exhibit F (the "Voting Agreement') (collectively,
the "Related Agreements"), to issue and sell the Shares and the Conversion
Shares, and to carry out the provisions of this Agreement, the Related
Agreements and the Restated Charter and to carry on its business as presently
conducted and as presently proposed to be conducted. The Company is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature of its activities and of
its properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so would not have a
material adverse effect on the Company or its business.
2.
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3.2 Subsidiaries. The Company does not own or control any equity
security or other interest of any other corporation, limited partnership or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
3.3 Capitalization; Voting Rights. The authorized capital stock of
the Company, immediately prior to the Closing, will consist of 40,000,000 shares
of Common Stock, (par value $0.001 per share), 1,444,058 shares of which are
issued and outstanding and 30,000,000 shares of Preferred Stock (par value
$0.001 per share), 14,000,000 of which are designated Series A Preferred Stock,
all of which are issued and outstanding, 12,000,000 of which are designated
Series B Preferred Stock, none of which are issued and outstanding. All issued
and outstanding shares of the Company's Common Stock and Preferred Stock (a)
have been duly authorized and validly issued, and (b) are fully paid and non-
assessable. The rights, preferences, privileges and restrictions of the Shares
are as stated in the Restated Charter. Each series of Preferred Stock is
convertible into Common Stock on a one-for-one basis. The Conversion Shares
have been duly and validly reserved for issuance. Other than the 7,400,000
shares reserved for issuance under the Company's 1999 Equity Incentive Plan, and
except as may be granted pursuant to the Related Agreements, there are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or shareholder agreements, or agreements of
any kind for the purchase or acquisition from the Company of any of its
securities. Of such reserved shares of Common Stock, (i) 444,058 shares have
been issued pursuant to the exercise of options, (ii) options to purchase
3,665,063 shares have been granted and are currently outstanding, and (iii)
3,290,879 shares of Common Stock remain available for issuance to officers,
directors, employees and consultants pursuant to such Equity Incentive Plan.
When issued in compliance with the provisions of this Agreement and the Restated
Charter, the Shares and the Conversion Shares will be validly issued, fully paid
and non-assessable, and will be free of any liens or encumbrances; provided,
however, that the Shares and the Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is proposed.
3.4 Authorization; Binding Obligations. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Shares pursuant hereto, the
Notes pursuant hereto and the Conversion Shares pursuant to the Notes and the
Restated Charter has been taken or will be taken prior to the Closing. The
Agreement, the Notes and the Related Agreements, when executed and delivered,
will be valid and binding obligations of the Company enforceable in accordance
with their terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (b) general principles of equity that restrict
the availability of equitable remedies, and (c) to the extent that the
enforceability of the indemnification provisions in Section 2.9 of the Investor
Rights Agreement may be limited by applicable laws. The sale of the Shares and
the Notes and the subsequent conversion of the Shares and the Notes into
Conversion Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.
3.
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3.5 Financial Statements. The Company has made available to each
Purchaser its unaudited balance sheet as at August 31, 1999 (the "Statement
Date") and unaudited consolidated statement of income and cash flows for the
eight month period ending on the Statement Date (collectively, the "Financial
Statements"), copies of which are attached hereto as Exhibit G. The Financial
Statements, together with the notes thereto have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, except as disclosed therein, and present
fairly the financial condition and position of the Company as of the Statement
Date; provided, however, that the unaudited financial statements are subject to
normal recurring year-end audit adjustments (which are not expected to be
material), and do not contain all footnotes required under generally accepted
accounting principles.
3.6 Liabilities. The Company has no material liabilities and, to the
best of its knowledge, knows of no material contingent liabilities not disclosed
in the Financial Statements, except current liabilities incurred in the ordinary
course of business subsequent to the Statement Date which have not been, either
in any individual case or in the aggregate, materially adverse.
3.7 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby and
agreements between the Company and its employees with respect to the sale of the
Company's Common Stock, there are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates
or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) the transfer or license of any patent, copyright,
trade secret or other proprietary right to or from the Company (other than
licenses arising from the purchase of "off the shelf" or other standard
products), or (iii) indemnification by the Company with respect to infringements
of proprietary rights (other than indemnification obligations arising from
purchase, sale or license agreements entered into in the ordinary course of
business).
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities (other than with respect to dividend obligations,
distributions, indebtedness and other obligations incurred in the ordinary
course of business or as disclosed in the Financial Statements) individually in
excess of $50,000 or, in the case of indebtedness and/or liabilities
individually less than $50,000, in excess of $100,000 in the aggregate, (iii)
made any loans or advances to any person, other than ordinary advances for
travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business.
4.
<PAGE>
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
3.8 Obligations to Related Parties. There are no obligations of the
Company to officers, directors, greater than 5% shareholders, or employees of
the Company other than (a) for payment of salary for services rendered, (b)
reimbursement for reasonable expenses incurred on behalf of the Company and (c)
for other standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Company). None of the officers,
directors or greater than 5% shareholders of the Company, or any members of
their immediate families, are indebted to the Company or have any direct or
indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company, except that officers, directors
and/or greater than 5% shareholders of the Company may own stock in publicly
traded companies which may compete with the Company. No officer, director or
greater than 5% shareholder, or any member of their immediate families, is,
directly or indirectly, interested in any material contract with the Company
(other than such contracts as relate to any such person's ownership of capital
stock or other securities of the Company). Except as may be disclosed in the
Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.9 Changes. Since the Statement Date, there has not been:
(a) Any change in the assets, liabilities, financial condition
or operations of the Company from that reflected in the Financial Statements,
other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a material
adverse effect on such assets, liabilities, financial condition, operations or
prospects of the Company;
(b) Any resignation or termination of any officer or key
employee of the Company; and the Company, to the best of its knowledge, does not
know of the impending resignation or termination of employment of any such
officer or key employee;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
5.
<PAGE>
(f) Any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is
a party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects of
the Company;
(m) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
the Company; or
(n) Any arrangement or commitment by the Company to do any of
the acts described in subsection (a) through (m) above.
3.10 Title to Properties and Assets; Liens, Etc. The Company has good
and marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the Financial
Statements, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent, (b) minor liens and
encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of the Company, and (c)
those that have otherwise arisen in the ordinary course of business. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company are in good operating condition and repair and are
reasonably fit and usable for the purposes for which they are being used. The
Company is in compliance with all material terms of each lease to which it is a
party or is otherwise bound.
3.11 Patents and Trademarks. To the best of its knowledge, the
Company owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information and
other proprietary rights and processes necessary for its business as now
conducted and as presently proposed to be conducted, without any known
infringement of the rights of others. There are no outstanding options,
licenses or
6.
<PAGE>
agreements of any kind relating to the foregoing, nor is the Company bound by or
a party to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes of any other
person or entity other than such licenses or agreements arising from the
purchase of "off the shelf" or standard products. The Company has not received
any communications alleging that the Company has violated or, by conducting its
business as presently proposed, would violate any of the patents, trademarks,
service marks, trade names, copyrights or trade secrets or other proprietary
rights of any other person or entity. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
their duties to the Company or that would conflict with the Company's business
as presently proposed to be conducted. Neither the execution nor delivery of
this Agreement or the Related Agreements, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as presently proposed, will, to the Company's knowledge, conflict with
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any employee is
now obligated. The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company, except for inventions,
trade secrets or proprietary information that have been assigned to the Company.
3.12 Compliance with Other Instruments. The Company is not in
violation or default of any term of its Restated Charter or Bylaws, or, to the
Company's knowledge, of any provision of any mortgage, indenture, contract,
agreement, instrument or contract to which it is party or by which it is bound
or of any judgment, decree, order, or writ. The execution, delivery, and
performance of and compliance with this Agreement, the Notes and the Related
Agreements, and the issuance and sale of the Shares pursuant hereto and of the
Conversion Shares and the Notes pursuant to the Notes and Restated Charter, will
not, with or without the passage of time or giving of notice, result in any such
material violation, or be in conflict with or constitute a default under any
such term, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or non-renewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.
3.13 Litigation. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened in writing against
the Company that questions the validity of this Agreement, the Notes or the
Related Agreements or the right of the Company to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for any of the
foregoing. The foregoing includes, without limitation, actions pending or
threatened in writing (or any basis therefor known to the Company) involving the
prior employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers. The Company is not a party or
7.
<PAGE>
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
3.14 Tax Returns and Payments. The Company has filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be
due and payable on such returns, any assessments imposed, and all other taxes
due and payable by the Company on or before the Closing, have been paid or will
be paid prior to the time they become delinquent. The Company has not been
advised (a) that any of its returns, federal, state or other, have been or are
being audited as of the date hereof, or (b) of any deficiency in assessment or
proposed judgment to its federal, state or other taxes. The Company has no
knowledge of any liability for any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided for.
3.15 Employees. The Company has no collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate his, her or their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any officer, key employee or group of key employees.
3.16 Proprietary Information and Inventions Agreements. Each employee,
officer and consultant of the Company has executed a Proprietary Information and
Inventions Agreement in the form of Exhibit H attached hereto. No current
employee, officer or consultant of the Company has excluded works or inventions
made prior to his or her employment with the Company from his or her assignment
of inventions pursuant to such employee, officer or consultant's Proprietary
Information and Inventions Agreement.
3.17 Registration Rights and Voting Rights.
(a) Except as required pursuant to the Investor Rights
Agreement, the Company is presently not under any obligation, and has not
granted any rights, to register (as defined in Section 1.1 of the Investor
Rights Agreement) any of the Company's presently outstanding securities or any
of its securities that may hereafter be issued.
8.
<PAGE>
(b) Except as provided for in the Voting Agreement, to the
Company's knowledge, no shareholder of the Company has entered into any
agreement with respect to the voting of equity securities of the Company.
3.18 Compliance with Laws; Permits. To its knowledge, the Company is
not in violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties which violation would materially and adversely affect the business,
assets, liabilities, financial condition, operations or prospects of the
Company. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or declarations
are required to be filed in connection with the execution and delivery of this
Agreement and the issuance of the Shares, the Notes or the Conversion Shares,
except such as has been duly and validly obtained or filed, or with respect to
any filings that must be made after the Closing, as will be filed in a timely
manner. The Company has all franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects or financial condition of the Company and believes it can
obtain, without undue burden or expense, any similar authority for the conduct
of its business as planned to be conducted.
3.19 Offering Valid. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4.2 hereof, the offer, sale
and issuance of the Shares, the Notes and the Conversion Shares will be exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and will have been registered or qualified (or are
exempt from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the Shares
or the Notes to any person or persons so as to bring the sale of such Shares by
the Company within the registration provisions of the Securities Act or any
state securities laws.
3.20 Full Disclosure. The Company has provided the Purchasers with all
information requested by the Purchasers in connection with their decision to
purchase the Shares and/or the Notes, including all information the Company
believes is reasonably necessary to make such investment decision. To the
Company's knowledge, neither this Agreement, the Exhibits hereto, the Related
Agreements nor any other document delivered by the Company to Purchasers or
their attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, contain any untrue statement of a
material fact nor, to the Company's knowledge, omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.
3.21 Insurance. The Company has fire and casualty insurance policies
with coverage customary for companies similarly situated to the Company.
9.
<PAGE>
4. Representations And Warranties Of The Purchasers.
Each Purchaser hereby represents and warrants to the Company as
follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 Requisite Power and Authority. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement, the Notes (if applicable) and the Related Agreements and to carry out
their provisions. All action on Purchaser's part required for the lawful
execution and delivery of this Agreement, the Notes (if applicable) and the
Related Agreements have been or will be effectively taken prior to the Closing.
Upon their execution and delivery, this Agreement, the Notes (if applicable) and
the Related Agreements will be valid and binding obligations of Purchaser,
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) general principles
of equity that restrict the availability of equitable remedies, and (c) to the
extent that the enforceability of the indemnification provisions of Section 2.9
of the Investor Rights Agreement may be limited by applicable laws.
4.2 Investment Representations. Purchaser understands that neither
the Shares, the Notes nor the Conversion Shares have been registered under the
Securities Act. Purchaser also understands that the Shares and the Notes are
being offered and sold pursuant to an exemption from registration contained in
the Securities Act based in part upon Purchaser's representations contained in
this Agreement. Purchaser hereby represents and warrants as follows:
(a) Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Notes or the Conversion
Shares) are registered pursuant to the Securities Act, or an exemption from
registration is available. Purchaser understands that the Company has no present
intention of registering the Shares, the Notes, the Conversion Shares or any
shares of its Common Stock. Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow Purchaser to
transfer all or any portion of the Shares, the Notes or the Conversion Shares
under the circumstances, in the amounts or at the times Purchaser might propose.
(b) Acquisition for Own Account. Purchaser is acquiring the
Shares, the Notes (if applicable) and the Conversion Shares for Purchaser's own
account for investment only, and not with a view towards their distribution.
(c) Purchaser Can Protect Its Interest. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement,
10.
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and the Related Agreements. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement.
(d) Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) Company Information. Purchaser has received and read the
Financial Statements and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and
management of the Company and has had the opportunity to review the Company's
operations and facilities. Purchaser has also had the opportunity to ask
questions of and receive answers from, the Company and its management regarding
the terms and conditions of this investment.
(f) Rule 144. Purchaser acknowledges and agrees that the Shares,
the Notes and, if issued, the Conversion Shares must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(g) Residence. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on Exhibit A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located at
the address or addresses of the Purchaser set forth on Exhibit A.
4.3 Transfer Restrictions. Each Purchaser acknowledges and agrees
that the Shares and, if issued, the Conversion Shares are subject to
restrictions on transfer as set forth in the Investor Rights Agreement.
5. Conditions To Closing.
5.1 Conditions to Purchasers' Obligations at the Closing. Purchasers'
obligations to purchase the Shares and/or the Notes at the Closing are subject
to the satisfaction, at or prior to the Closing Date, of the following
conditions:
(a) Representations and Warranties True; Performance of
Obligations. The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if they had been made as of the Closing Date,
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.
11.
<PAGE>
(b) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
(c) Filing of Restated Charter. The Restated Charter shall have
been filed with the Secretary of State of the State of Delaware and shall
continue to be in full force and effect as of the Closing Date.
(d) Corporate Documents. The Company shall have delivered to
Purchasers or their counsel, copies of all corporate documents of the Company as
Purchasers shall reasonably request.
(e) Reservation of Conversion Shares. The Conversion Shares
issuable upon conversion of the Shares and the Notes shall have been duly
authorized and reserved for issuance upon such conversion.
(f) Compliance Certificate. The Company shall have delivered to
Purchasers a Compliance Certificate, executed by the President of the Company,
dated the Closing Date, to the effect that the conditions specified in
subsections (a), (b), (c) and (e) of this Section 5.1 have been satisfied.
(g) Investor Rights Agreement. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit D shall have been executed
and delivered by the parties thereto.
(h) Co-Sale Agreement. The Co-Sale Agreement substantially in
the form attached hereto as Exhibit E shall have been executed and delivered by
the parties thereto. The stock certificates representing the shares subject to
the Co-Sale Agreement shall have been delivered to the Secretary of the Company
and shall have had appropriate legends placed upon them to reflect the
restrictions on transfer set forth on the Co-Sale Agreement.
(i) Board of Directors. Upon the Closing, the authorized size of
the Board of Directors of the Company shall be seven members and the Board shall
consist of Bert Kolde, William Savoy, Dennis Shepard, Tom Van Horn, Diane
Daggatt and the nominee of the Series B Preferred.
(j) Voting Agreement. The Voting Agreement substantially in the
form attached hereto as Exhibit F shall have been executed and delivered by the
parties thereto.
(k) Legal Opinion. The Purchasers shall have received from legal
counsel to the Company an opinion addressed to them, dated as of the Closing
Date, in substantially the form attached hereto as Exhibit I.
(l) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in
12.
<PAGE>
substance and form to the Purchasers and their special counsel, and the
Purchasers and their special counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.
5.2 Conditions to Obligations of the Company. The Company's
obligation to issue and sell the Shares and the Notes at each Closing is subject
to the satisfaction, on or prior to such Closing, of the following conditions:
(a) Representations and Warranties True. The representations and
warranties in Section 4 made by those Purchasers acquiring Shares and the Notes
hereof shall be true and correct in all material respects at the date of the
Closing, with the same force and effect as if they had been made on and as of
said date.
(b) Performance of Obligations. Such Purchasers shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by such Purchasers on or before the Closing.
(c) Filing of Restated Charter. The Restated Charter shall have
been filed with the Secretary of State of the State of Delaware.
(d) Investor Rights Agreement. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit D shall have been executed
and delivered by the Purchasers.
(e) Co-Sale Agreement. The Co-Sale Agreement substantially in
the form attached hereto as Exhibit E shall have been executed and delivered by
the parties thereto.
(f) Voting Agreement. The Voting Agreement substantially in the
form attached hereto as Exhibit F shall have been executed and delivered by the
parties thereto.
(g) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
6. Miscellaneous.
6.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Washington as such laws are applied to agreements
between Washington residents entered into and performed entirely in Washington.
6.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
13.
<PAGE>
6.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto, the Related Agreements and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
6.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under the Agreement may be waived only
with the written consent of the holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
(c) Notwithstanding the foregoing, this Agreement may be amended
with only the written consent of the Company to include additional purchasers of
the Shares at subsequent sales pursuant to Section 2.3.
6.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Related
Agreements or the Restated Charter, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on any Purchaser's
part of any breach, default or noncompliance under this Agreement, the Related
Agreements or under the Restated Charter or any waiver on such party's part of
any provisions or conditions of the Agreement, the Related Agreements, or the
Restated Charter must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, the Related Agreements, the Restated Charter, by law, or otherwise
afforded to any party, shall be cumulative and not alternative.
14.
<PAGE>
6.8 Waiver of Conflicts. Each party to this Agreement acknowledges
that Cooley Godward LLP ("Cooley Godward"), outside general counsel to the
Company, has in the past performed and is or may now or in the future represent
one or more of the Purchasers or their affiliates in matters unrelated to the
transactions contemplated by this Agreement (the "Financing"), including
representation of such Purchasers or their affiliates in matters of a similar
nature to the Financing. The applicable rules of professional conduct require
that Cooley Godward inform the parties hereunder of this representation and
obtain their consent. Cooley Godward has served as outside general counsel to
the Company and has negotiated the terms of the Financing solely on behalf of
the Company. It is the belief of Cooley Godward that these terms and conditions
represent an arm's length transaction between the Company and the Purchasers.
Purchasers have been represented by independent legal counsel regarding the
terms of the Financing. The Company and each Purchaser hereby (a) acknowledge
that they have had an opportunity to ask for and have obtained information
relevant to such representation, including disclosure of the reasonably
foreseeable adverse consequences of such representation; (b) acknowledge that
with respect to the Financing, Cooley Godward has represented solely the
Company, and not any Purchaser or any stockholder, director or employee of the
Company or any Purchaser; and (c) gives its informed consent to Cooley Godward's
representation the Company in the Financing.
6.9 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on Exhibit A attached hereto or at such other
address as the Company or Purchaser may designate by ten (10) days advance
written notice to the other parties hereto.
6.10 Expenses. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement. The Company shall, at the Closing, reimburse the reasonable fees
of and expenses of one special counsel for the Purchasers, not to exceed
$15,000, incurred in connection with the negotiation, execution, delivery and
performance of this Agreement.
6.11 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.12 Titles and Subtitles. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
15.
<PAGE>
6.13 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 one instrument.
6.14 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 6.14 being untrue.
6.15 Exculpation Among Purchasers. Each Purchaser acknowledges that it
is not relying upon any person, firm, or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable to any other Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Shares and Conversion Shares.
6.16 Confidentiality. Each party hereto agrees that, except with the
prior written consent of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement or the Related Agreements,
discussions or negotiations relating to this Agreement or the Related
Agreements, the performance of its obligations hereunder or the ownership of the
Shares purchased hereunder. The provisions of this Section 6.16 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto.
6.17 Pronouns. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
6.18 California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
[The Remainder Of This Page Intentionally Left Blank]
16.
<PAGE>
In Witness Whereof, the parties hereto have executed the Series B Preferred
Stock Purchase Agreement as of the date set forth in the first paragraph hereof.
COMPANY:
Mercata, Inc.
By: /s/ Tom Van Horn
------------------
President
SIGNATURE PAGE TO SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
INVESTOR(S)
Vulcan Ventures Incorporated
By: /s/ William D. Savoy
--------------------
William D. Savoy
Vice President
SIGNATURE PAGE TO SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
INVESTORS(S)
Highland Capital Partners IV Limited Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By: /s/ Daniel Nova
------------------
Member
Highland Entrepreneurs' Fund IV Limited Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By: /s/ Daniel Nova
------------------
Member
SIGNATURE PAGE TO SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
NOTE: THIS PAGE, DATED AS OF 11th Oct, 1999, IS A COUNTERPART SIGNATURE
PAGE TO THAT CERTAIN SERIES B PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF
SEPTEMBER 30, 1999 (THE "PURCHASE AGREEMENT"), BY AND AMONG MERCATA, INC., A
DELAWARE CORPORATION, AND EACH OF THOSE PERSONS AND ENTITIES WHOSE NAMES ARE SET
FORTH ON THE SCHEDULE OF PURCHASERS ATTACHED THERETO AS EXHIBIT A. EXECUTION AND
DELIVERY OF THIS SIGNATURE PAGE BY EACH UNDERSIGNED REPRESENTS EACH
UNDERSIGNED'S AGREEMENT TO BECOME A PARTY TO THE PURCHASE AGREEMENT AND TO
PURCHASE SHARES OF SERIES B PREFERRED STOCK PURSUANT TO THE TERMS THEREOF, IN
THE NUMBER SET FORTH OPPOSITE ITS NAME ON THE SCHEDULE OF PURCHASERS ATTACHED
THERETO AS EXHIBIT A.
ATGF II
By: /s/ Gary A. Tanaka
---------------------
Name: Gary A. Tanaka
-------------------
Title: Director
------------------
<PAGE>
NOTE: THIS PAGE, DATED AS OF October 11, 1999, IS A COUNTERPART SIGNATURE
PAGE TO THAT CERTAIN SERIES B PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF
SEPTEMBER 30, 1999 (THE "PURCHASE AGREEMENT"), BY AND AMONG MERCATA, INC., A
DELAWARE CORPORATION, AND EACH OF THOSE PERSONS AND ENTITIES WHOSE NAMES ARE SET
FORTH ON THE SCHEDULE OF PURCHASERS ATTACHED THERETO AS EXHIBIT A. EXECUTION AND
DELIVERY OF THIS SIGNATURE PAGE BY EACH UNDERSIGNED REPRESENTS EACH
UNDERSIGNED'S AGREEMENT TO BECOME A PARTY TO THE PURCHASE AGREEMENT AND TO
PURCHASE SHARES OF SERIES B PREFERRED STOCK PURSUANT TO THE TERMS THEREOF, IN
THE NUMBER SET FORTH OPPOSITE ITS NAME ON THE SCHEDULE OF PURCHASERS ATTACHED
THERETO AS EXHIBIT A.
Beagle Limited
By: /s/ Michael Hecht
--------------------
Name: Michael Hecht
------------------
Title: President
-----------------
<PAGE>
NOTE: THIS PAGE, DATED AS OF October 14, 1999, IS A COUNTERPART SIGNATURE
PAGE TO THAT CERTAIN SERIES B PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF
SEPTEMBER 30, 1999 (THE "PURCHASE AGREEMENT"), BY AND AMONG MERCATA, INC., A
DELAWARE CORPORATION, AND EACH OF THOSE PERSONS AND ENTITIES WHOSE NAMES ARE SET
FORTH ON THE SCHEDULE OF PURCHASERS ATTACHED THERETO AS EXHIBIT A. EXECUTION AND
DELIVERY OF THIS SIGNATURE PAGE BY EACH UNDERSIGNED REPRESENTS EACH
UNDERSIGNED'S AGREEMENT TO BECOME A PARTY TO THE PURCHASE AGREEMENT AND TO
PURCHASE SHARES OF SERIES B PREFERRED STOCK PURSUANT TO THE TERMS THEREOF, IN
THE NUMBER SET FORTH OPPOSITE ITS NAME ON THE SCHEDULE OF PURCHASERS ATTACHED
THERETO AS EXHIBIT A.
Global Retail Partners, L.P.
By: /s/ Osamu R. Watanabe
------------------------
Name: Osamu R. Watanabe
----------------------
Title: Vice President
---------------------
DLJ Diversified Partners, L.P.
By: /s/ Osamu R. Watanabe
------------------------
Name: Osamu R. Watanabe
----------------------
Title: Vice President
---------------------
DLJ Diversified Partners-A, L.P.
By: /s/ Osamu R. Watanabe
------------------------
Name: Osamu R. Watanabe
----------------------
Title: Vice President
---------------------
<PAGE>
GRP Partners, L.P.
By: /s/ Osamu R. Watanabe
------------------------
Name: Osamu R. Watanabe
----------------------
Title: Vice President
---------------------
Global Retail Partners Funding, Inc.
By: /s/ Osamu R. Watanabe
------------------------
Name: Osamu R. Watanabe
----------------------
Title: Vice President
---------------------
DLJ ESC II, L.P.
By: /s/ Osamu R. Watanabe
------------------------
Name: Osamu R. Watanabe
----------------------
Title: Vice President
---------------------
Waelinvest
By: /s/ Freddy DeGreef
------------------------
Name: Freddy DeGreef
----------------------
Title: C.E.O.
---------------------
<PAGE>
Watershed Capital I, L.P.
By: Watershed Capital G.P. I, L.P.
Its General Partner
By: Watershed Capital G.P. I, L.L.C.
Its General Partner
By: /s/ Ralph C. Derrickson
---------------------------
Ralph C. Derrickson
Managing Member
Dated: As of October 14, 1999
----------
/s/ Diane H. Daggatt
-----------------------
Diane H. Daggatt
/s/ Bert Kolde
-----------------
Bert Kolde
Agreed to and Accepted By:
Mercata, Inc.
110 110th Avenue NE, Suite 390
Bellevue, WA 98004
/s/ Thomas Van Horn
----------------------
Thomas Van Horn
President
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
AGGREGATE SHARE
NAME AND ADDRESS SHARES PURCHASE PRICE
<S> <C> <C>
First Closing:
- --------------
Vulcan Ventures Incorporated 1,888,000 $ 5,900,000.00
110 - 110th Avenue N.E., Suite 550
Bellevue, Washington 98004
Highland Capital Partners IV Limited Partnership 4,640,000* $14,500,000.00*
Two International Place
Boston, Massachusetts 02110
Highland Entrepreneurs' Fund IV Limited Partnership 193,333* $ 604,165.63*
Two International Place
Boston, Massachusetts 02110
First Closing Total: 6,721,333 $21,004,165.63
========= ==============
Second Closing:
- --------------
ATGF II 320,000 $ 1,000,000.00
399 Park Avenue, 22nd Floor
New York, NY 10022
Beagle Limited 160,000 $ 500,000.00
c/o Hecht and Company
111 West 40th Street, 20th Floor
New York, NY 10018
Global Retail Partners, L.P. 1,436,153 $ 4,487,978.12
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
DLJ Diversified Partners, L.P. 427,953 $ 1,337,353.12
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
DLJ Diversified Partners - A, L.P. 158,920 $ 496,625.00
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
</TABLE>
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
<TABLE>
<S> <C> <C>
GRP Partners, L.P. 93,363 $ 291,759.38
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
Global Retail Partners Funding, Inc. 98,890 $ 309,031.25
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
DLJ ESC II L.P. 24,721 $ 77,253.13
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
Waelinvest 800,000 $ 2,500,000.00
525 Market Street, 23rd Floor
San Francisco, CA 94105
Watershed Capital I, L.P. 160,000 $ 500,000.00
Two Union Square
601 Union Street, Suite 4200
Seattle, WA 98101
Diane H. Daggatt 16,000 $ 50,000.00
110 - 110th Avenue NE, Suite 550
Bellevue, WA 98004-5862
Bert Kolde 16,000 $ 50,000.00
110 - 110th Avenue NE, Suite 550
Bellevue, WA 98004-5862
Second Closing Total: 3,712,000 $11,600,000.00
========= ==============
Total 10,433,333 $32,604,165.63
========== ==============
Total (including the Notes and assuming conversion 11,200,000 $35,000,000.01
========== ==============
of the Notes)
</TABLE>
* Highland Capital Partners IV Limited Partnership and Highland Entrepreneurs'
Fund IV Limited Partnership will also be purchasing Notes in the amount of
$2,300,000 and $95,834.38, respectively, that will be convertible into 736,000
shares and 30,667 shares of the Shares, respectively.
<PAGE>
EXHIBIT B
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.
CONVERTIBLE PROMISSORY NOTE
$_________.00 __________ ___, 1999
Bellevue, Washington
For value received, Mercata, Inc., a Delaware corporation (the "Company"),
promises to pay to __________________________ (the "Holder"), the principal sum
of __________________ dollars ($________.00). No interest shall accrue or be
paid on this Note; provided, that if this Note shall not have converted in
accordance with Section 2 below on or before November 30, 1999, this Note shall
bear interest accruing from the date hereof on the unpaid principal amount at a
rate equal to the lower of (a) 7.00% per annum, compounded annually or (b) the
highest rate permitted by law. This Note is one of a series of Convertible
Promissory Notes containing substantially identical terms and conditions issued
pursuant to that certain Series B Preferred Stock Purchase Agreement, dated
September ____, 1999 (the "Purchase Agreement"). Such Notes are referred to
herein as the "Notes," and the holders thereof are referred to herein as the
"Holders." This Note is subject to the following terms and conditions.
1. Maturity. Unless converted as provided in Section 2, this Note will
automatically mature and be due and payable on November 30, 1999 (the "Maturity
Date"). Subject to Section 2 below, any interest shall accrue on this Note but
shall not be due and payable until the Maturity Date.
2. Conversion
(a) HSR Clearance. As soon as practicable after the Closing (as
defined in the Purchase Agreement), the Company and the Holder hereby agree to
file or to cause to be filed with the United States Federal Trade Commission
(the "FTC") and the Antitrust Division of the United States Department of
Justice (the "DOJ") pursuant to the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") all requisite documents and notifications in
order to provide for the conversion of this Note into shares of the Company's
Series B Preferred Stock. Upon the earlier of one business day after (i) the
date all required clearances or pre-termination notices under the HSR Act have
been received from the FTC and the DOJ (or all applicable waiting periods have
expired) or (ii) the date the Holder and the Company are no longer required by
law to make filings under the HSR to convert this Note into capital stock, the
entire principal amount of this Note shall automatically convert into fully-paid
and non-assessable shares of the Company's Series B Preferred Stock (the
"Stock"); provided,
1.
<PAGE>
however, the automatic conversion of such principal amount into shares of the
Company's Series B Preferred Stock shall be conditioned upon (A) the Company
having provided to the Holder a compliance certificate in the form attached
hereto as Exhibit A or (B) the Holder having waived such applicable terms,
conditions or certifications included in such certificate, either individually
or in the aggregate. The number of shares of Stock to be issued upon such
conversion shall be equal to the quotient obtained by dividing (i) the entire
outstanding principal amount of this Note by (ii) $3.125 (as adjusted for any
future stock splits, stock dividends, recapitalizations or the like to the
Stock), provided that no fractional shares shall be issued. In the event that
the required clearances from the FTC and the DOJ are not obtained, this Note
shall not be convertible into the Stock.
(b) Redemption. In the event the Company consummates a Liquidity
Event (as defined below) prior to the conversion of this note pursuant to
Section 2(a), then the Company shall redeem this Note for an aggregate
consideration substantially equivalent to the consideration which would have
been received by the Holder had the Note been converted into Series B Preferred
Stock immediately prior to the consummation of such Liquidity Event, as
determined in the reasonable and good faith judgement of the Board of Directors
of the Company. For the Purposes of hereof "Liquidity Event" shall mean (i) any
consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization, in which the
stockholders of the Company immediately prior to such consolidation, merger or
reorganization, own less than 50% of the Company's voting power immediately
after such consolidation, merger or reorganization, or any transaction or series
of related transactions to which the Company is a party in which in excess of
50% of the Company's voting power is transferred (ii) any voluntary or
involuntary liquidation or dissolution of the Company, or (iii) the sale of all
or substantially all the assets of the Company.
(c) Mechanics and Effect of Conversion. No fractional shares of the
Company's capital stock will be issued upon conversion of this Note. In lieu of
any fractional share to which the Holder would otherwise be entitled, the
Company will pay to the Holder in cash the amount of the unconverted principal
and interest balance of this Note that would otherwise be converted into such
fractional share. Upon conversion of this Note pursuant to this Section 2, the
Holder shall surrender this Note, duly endorsed, at the principal offices of the
Company or any transfer agent of the Company. At its expense, the Company will,
as soon as practicable thereafter, issue and deliver to such Holder, at such
principal office, a certificate or certificates for the number of shares to
which such Holder is entitled upon such conversion, together with any other
securities and property to which the Holder is entitled upon such conversion
under the terms of this Note, including a check payable to the Holder for any
cash amounts payable as described herein. Upon conversion of this Note, the
Company will be forever released from all of its obligations and liabilities
under this Note with regard to that portion of the principal amount and accrued
interest being converted including without limitation the obligation to pay such
portion of the principal amount and accrued interest.
3. Payment. All payments shall be made in lawful money of the United
States of America at such place as the Holder hereof may from time to time
designate in writing to the Company. Payment shall be credited first to the
accrued interest then due and payable and the
2.
<PAGE>
remainder applied to principal. Prepayment of this Note may be made without
penalty, if the Company's Board of Directors has determined, in consultation
with legal counsel, and with the consent of the Holders of a majority of the
outstanding principal amount of the Notes, that the required clearances or pre-
termination notices under the HSR Act specified in Section 2(a) are not likely
to be obtained, otherwise this note made not prepaid without the consent of the
Holders of a majority of the outstanding principal amount of the Notes;
provided, however, that the Company may repay the Note on or after November 30,
1999 in the event the conditions to conversion set forth in Section 2 hereof
have not occurred.
4. Transfer; Successors and Assigns. The terms and conditions of this
Note shall inure to the benefit of and be binding upon the respective successors
and assigns of the parties. Notwithstanding the foregoing, the Company may not
assign, pledge or otherwise transfer this Note without the prior written consent
of the Holder, which shall not be unreasonably withheld, and the Holder may not
assign, pledge, or otherwise transfer this Note without the prior written
consent of the Company, which shall not be unreasonably withheld. Subject to the
preceding sentence, this Note may be transferred only upon surrender of the
original Note for registration of transfer, duly endorsed, or accompanied by a
duly executed written instrument of transfer in form satisfactory to the Holder.
Thereupon, a new note for the same principal amount and interest will be issued
to, and registered in the name of, the transferee. Interest and principal are
payable only to the registered holder of this Note.
5. Governing Law. This Note and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
6. Notices. Any notice required or permitted by this Note shall be in
writing and shall be deemed sufficient upon delivery, when delivered personally
or one business day after being sent by a nationally-recognized overnight
delivery service (such as Federal Express or UPS), or forty-eight (48) hours
after being deposited in the U.S. mail, as certified or registered mail, with
postage prepaid, addressed to the party to be notified at such party's address
as set forth below or as subsequently modified by written notice.
7. Amendments and Waivers. Any term of this Note may be amended only
with the written consent of the Company and at least a majority in interest of
the Holders. Any amendment or waiver effected in accordance with this Section 7
shall be binding upon the Company, the Holders and each transferee of the Notes.
8. Waiver. The Company waives presentment and demand for payment, notice
of dishonor, protest and notice of protest of this Note, and shall pay all costs
of collection when incurred, including, without limitation, reasonable
attorneys' fees, costs and other expenses.
The right to plead any and all statutes of limitations as a defense to any
demands hereunder is hereby waived to the full extent permitted by law.
3.
<PAGE>
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
COMPANY:
Mercata, Inc.
By:_______________________________
Name:_____________________________
(print)
Title:____________________________
Address: 110 110th Avenue Northeast, Suite
Bellevue, WA 98004
AGREED TO AND ACCEPTED:
___________________
By:
Its:
Name:___________________________
(print)
Address:
<PAGE>
Exhibit A to the Form of Promissory Note
COMPLIANCE CERTIFICATE
The undersigned, _______________, the President and Chief Executive Officer
of Mercata, Inc., a Delaware corporation (the "Company"), certifies that he is
authorized to execute this Compliance Certificate for and on behalf of the
Company, and further certifies that:
1. The representations and warranties of the Company contained in Section
3.19 of the Series B Preferred Stock Purchase Agreement, dated September ____,
1999 (the "Purchase Agreement"), are true and correct as though made on and as
of the date hereof.
2. The Company has performed or fulfilled all covenants, agreements and
conditions contained in the Purchase Agreement and that certain Convertible
Promissory Note, dated September ___, 1999, in the amount of $__________.00 of
the Company in favor of ___________________ to be performed or fulfilled by the
Company on or prior to the date hereof.
In Witness Whereof, the undersigned has hereunto set his hand this _______
day of _________________, 1999.
_______________________________________
Name
Title
<PAGE>
EXHIBIT C
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MERCATA, INC.
(Incorporated September 23, 1998)
Tom Van Horn and Jon C. Engman hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of Mercata, Inc., a Delaware corporation.
TWO: The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
I.
The name of the corporation is Mercata, Inc. (the "Corporation" or the
"Company").
II.
The address of the registered office of the Corporation in the State of
Delaware is:
CorpAmerica, Inc.
30 Old Rudnick Lane
Dover, DE 19901
County of Kent
The name of the Corporation's registered agent at said address is
CorpAmerica, Inc.
III.
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is seventy million
(70,000,000) shares, forty million (40,000,000) shares of which shall be Common
Stock (the "Common Stock") and thirty million (30,000,000) shares of which shall
be Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have a
par value of one tenth of a cent ($0.001) per share and the Common Stock shall
have a par value of one tenth of a cent ($0.001) per share.
1.
<PAGE>
B. The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares of Common Stock then outstanding)
by the affirmative vote of the holders of a majority of the stock of the
Corporation (voting together on an as-if-converted basis).
C. Fourteen million (14,000,000) of the authorized shares of Preferred
Stock are hereby designated "Series A Preferred Stock" and twelve million
(12,000,000) of the authorized shares of Preferred Stock are hereby designated
"Series B Preferred Stock" (collectively, the "Series Preferred").
D. The rights, preferences, privileges, restrictions and other matters
relating to the Series Preferred are as follows:
1. Dividend Rights.
(a) Holders of Series Preferred, in preference to the holders of
any other stock of the Company ("Junior Stock"), shall be entitled to receive,
when and as declared by the Board of Directors, but only out of funds that are
legally available therefor, cash dividends at the rate of eight percent (8%) of
the Original Issue Price (as defined below) per annum on each outstanding share
of Series Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares). The "Original Issue
Price" of the Series A Preferred Stock and the Series B Preferred Stock shall be
one dollar and five cents ($1.05) per share and three dollars twelve and one-
half cents per share ($3.125), respectively. Such dividends shall be payable
only when, as and if declared by the Board of Directors and shall be non-
cumulative.
(b) So long as any shares of Series Preferred shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Company be purchased, redeemed, or
otherwise acquired for value by the Company (except for acquisitions of Common
Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer) until
all dividends (set forth in Section 1(a) above) on the Series Preferred shall
have been paid or declared and set apart. In the event dividends are paid on any
share of Common Stock, an additional dividend shall be paid with respect to all
outstanding shares of Series Preferred in an amount equal per share (on an as-
if-converted to Common Stock basis) to the amount paid or set aside for each
share of Common Stock. The provisions of this Section 1(b) shall not, however,
apply to (i) a dividend payable in Common Stock, (ii) the acquisition of shares
of any Junior Stock in exchange for shares of any other Junior Stock, or (iii)
any repurchase of any outstanding securities of the Company that is unanimously
approved by the Company's Board of Directors.
2. Voting Rights.
(a) General Rights. Except as otherwise provided herein or as
required by law, the Series Preferred shall be voted equally with the shares of
the Common Stock
2.
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of the Company and not as a separate class, at any annual or special meeting of
stockholders of the Company, and may act by written consent in the same manner
as the Common Stock, in either case upon the following basis: each holder of
shares of Series Preferred shall be entitled to such number of votes as shall be
equal to the whole number of shares of Common Stock into which such holder's
aggregate number of shares of Series Preferred are convertible (pursuant to
Section 4 hereof) immediately after the close of business on the record date
fixed for such meeting or the effective date of such written consent.
(b) Separate Vote of Series Preferred. For so long as at least
ten million (10,000,000) shares of Series Preferred (subject to adjustment for
any stock split, reverse stock split or other similar event affecting the Series
Preferred) remain outstanding, in addition to any other vote or consent required
herein or by law, the vote or written consent of the holders of at least a
majority of the outstanding Series Preferred shall be necessary for effecting or
validating the following actions:
(i) Any amendment, alteration, or repeal of any
provision of the Certificate of Incorporation or Bylaws of the Company
(including any filing of a Certificate of Designation), that alters or changes
the voting powers, preferences, or other special rights or privileges, or
restrictions of the Series Preferred (including by way of a merger or
consolidation).
(ii) Any increase or decrease (other than by redemption
or conversion) in the authorized number of shares of Common Stock or Preferred
Stock;
(iii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking on a parity
with or senior to the Series Preferred in right of redemption, liquidation
preference, voting or dividends or any increase in the authorized or designated
number of any such new class or series;
(iv) Any redemption, repurchase, payment of dividends or
other distributions with respect to Junior Stock (except for acquisitions of
Common Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer);
(v) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3(c));
(vi) Any action that results in the payment or
declaration of a dividend on any shares of Common Stock or Preferred Stock;
(vii) Any voluntary dissolution or liquidation of the
Company; or
(viii) Any increase or decrease in the authorized number of
members of the Company's Board of Directors.
3.
<PAGE>
(C) Separate Votes of Series B Preferred Stock. For so long as
at least five million (5,000,000) shares of Series B Preferred Stock (subject to
adjustment for any stock split, reverse stock split or other similar event
affecting the Series B Preferred Stock) remain outstanding, in addition to any
other vote or consent required herein or by law, the vote or written consent of
the holders of at least a majority of the outstanding Series B Preferred Stock
shall be necessary for effecting or validating the following actions:
(i) Any amendment, alteration, or repeal of any provision
of the Certificate of Incorporation or Bylaws of the Company (including any
filing of a Certificate of Designation), that alters or changes the voting
powers, preferences, or other special rights or privileges, or restrictions of
the Series B Preferred Stock (including by way of a merger or consolidation).
(ii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking on a parity
with or senior to the Series B Preferred in right of redemption, liquidation
preference, voting or dividends or any increase in the authorized or designated
number of any such new class or series;
(iii) Any redemption, repurchase, payment of dividends or
other distributions with respect to Junior Stock (except for acquisitions of
Common Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer);
(iv) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3(c)).
(d) Election of Board of Directors. For so long as at least ten
million (10,000,000) shares of Series Preferred remain outstanding (subject to
adjustment for any stock split, reverse stock split or similar event affecting
the Series Preferred) (i) the holders of Series A Preferred Stock, voting as a
separate class, shall be entitled to elect two (2) members of the Company's
Board of Directors at each meeting or pursuant to each consent of the Company's
stockholders for the election of directors, and to remove from office such
directors and to fill any vacancy caused by the resignation, death or removal of
such directors; (ii) the holders of Series B Preferred Stock, voting as a
separate class, shall be entitled to elect one (1) member of the Company's Board
of Directors at each meeting or pursuant to each consent of the Company's
stockholders for the election of directors, and to remove from office such
director and to fill any vacancy caused by the registration, death or removal of
such director; (iii) the holders of Common Stock, voting as a separate class,
shall be entitled to elect two (2) members of the Board of Directors at each
meeting or pursuant to each consent of the Company's stockholders for the
election of directors, and to remove from office such directors and to fill any
vacancy caused by the resignation, death or removal of such directors; and (iv)
the holders of Common Stock and Series Preferred, voting together as a single
class on an as-if-converted basis, shall be entitled to elect all remaining
members of the Board of Directors at each meeting or pursuant to each consent of
the Company's stockholders for the election of directors, and to remove from
4.
<PAGE>
office such directors and to fill any vacancy caused by the resignation, death
or removal of such directors.
3. Liquidation Rights.
(a) Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Junior Stock, the holders of Series
Preferred shall be entitled to be paid out of the assets of the Company an
amount per share of Series Preferred equal to the Original Issue Price plus all
declared and unpaid dividends on the Series Preferred (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares) for each share of Series Preferred held by them. If, upon any such
liquidation, distribution, or winding up, the assets of the Company shall be
insufficient to make payment in full to all holders of Series Preferred of the
liquidation preference set forth in this Section 3(a), then such assets shall be
distributed among the holders of Series Preferred at the time outstanding,
ratably in proportion to the full amounts to which they would otherwise be
respectively entitled.
(b) After the payment of the full liquidation preference of the
Series Preferred as set forth in Section 3(a) above, the assets of the Company
legally available for distribution, if any, shall be distributed ratably to the
holders of the Common Stock and Series Preferred on an as-if-converted to Common
Stock basis until such time as the holders of Series Preferred have received
pursuant to Section 3(a) above and this Section 3(b) in aggregate an amount per
share of Series Preferred equal to three (3) times the Original Issue Price (as
adjusted for any stock, dividends, combinations, splits, recapitalizations and
the like with respect to such shares); thereafter the remaining assets of the
Company legally available for distribution, if any, shall be distributed ratably
to the holders of the Common Stock.
(c) The following events shall be considered a liquidation under
this Section:
(i) any consolidation or merger of the Company with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than 50% of the Company's
voting power immediately after such consolidation, merger or reorganization, or
any transaction or series of related transactions to which the Company is a
party in which in excess of fifty percent (50%) of the Company's voting power is
transferred, excluding any consolidation or merger effected exclusively to
change the domicile of the Company (an "Acquisition"); or
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer").
(iii) In any of such events, if the consideration received
by this corporation is other than cash, its value will be deemed its fair market
value as determined in good faith by the Board of Directors. Any securities
shall be valued as follows:
5.
<PAGE>
(A) Securities not subject to investment letter or
other similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or
through the Nasdaq National Market, the value shall be deemed to be the average
of the closing prices of the securities on such quotation system over the thirty
(30) day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period ending three (3) days
prior to the closing; and
(3) If there is no active public market, the
value shall be the fair market value thereof, as determined by the Board of
Directors.
(B) The method of valuation of securities subject
to investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof, as determined by the Board of Directors.
4. Conversion Rights.
The holders of the Series Preferred shall have the following
rights with respect to the conversion of the Series Preferred into shares of
Common Stock (the "Conversion Rights"):
(a) Optional Conversion. Subject to and in compliance with the
provisions of this Section 4, any shares of Series Preferred may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Series Preferred shall be entitled upon conversion shall be the product obtained
by multiplying the "Series Preferred Conversion Rate" then in effect (determined
as provided in Section 4(b)) by the number of shares of Series Preferred being
converted.
(b) Series Preferred Conversion Rate. The conversion rate in
effect at any time for conversion of the Series Preferred (the "Series Preferred
Conversion Rate") shall be the quotient obtained by dividing the Original Issue
Price of the Series Preferred by the "Series Preferred Conversion Price,"
calculated as provided in Section 4(c).
(c) Series Preferred Conversion Price. The conversion price for
the Series Preferred shall initially be the Original Issue Price of the Series
Preferred (the "Series Preferred Conversion Price"). Such initial Series
Preferred Conversion Price shall be adjusted from time to time in accordance
with this Section 4. All references to the Series Preferred Conversion Price
herein shall mean the Series Preferred Conversion Price as so adjusted.
6.
<PAGE>
(d) Mechanics of Conversion. Each holder of Series Preferred
who desires to convert the same into shares of Common Stock pursuant to this
Section 4 shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or any transfer agent for the Series
Preferred, and shall give written notice to the Company at such office that such
holder elects to convert the same. Such notice shall state the number of shares
of Series Preferred being converted. Thereupon, the Company shall promptly issue
and deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay (i) in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared and unpaid dividends on the shares of Series Preferred being converted
and (ii) in cash (at the Common Stock's fair market value determined by the
Board of Directors as of the date of conversion) the value of any fractional
share of Common Stock otherwise issuable to any holder of Series Preferred. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Series
Preferred to be converted, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date.
(e) Adjustment for Stock Splits and Combinations. If the Company
shall at any time or from time to time after the date that the first share of
Series Preferred is issued (the "Original Issue Date") effect a subdivision of
the outstanding Common Stock without a corresponding subdivision of the
Preferred Stock, the Series Preferred Conversion Price in effect immediately
before that subdivision shall be proportionately decreased. Conversely, if the
Company shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock into a smaller number of shares
without a corresponding combination of the Preferred Stock, the Series Preferred
Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 4(e) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(f) Adjustment for Common Stock Dividends and Distributions. If
the Company at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series Preferred Conversion Price
that is then in effect shall be decreased as of the time of such issuance or, in
the event such record date is fixed, as of the close of business on such record
date, by multiplying the Series Preferred Conversion Price then in effect by a
fraction (i) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (ii) the denominator of which is
the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in payment of such dividend
or distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series Preferred Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
7.
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Series Preferred Conversion Price shall be adjusted pursuant to this Section
4(f) to reflect the actual payment of such dividend or distribution.
(g) Adjustment for Reclassification, Exchange and Substitution.
If at any time or from time to time after the Original Issue Date, the Common
Stock issuable upon the conversion of the Series Preferred is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3(c) or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 4), in any such event each holder
of Series Preferred shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series
Preferred could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
(h) Reorganizations, Mergers, Consolidations or Sales of Assets.
If at any time or from time to time after the Original Issue Date, there is a
capital reorganization of the Common Stock (other than an Acquisition or Asset
Transfer as defined in Section 3(c) or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 4), as a part of such capital reorganization,
provision shall be made so that the holders of the Series Preferred shall
thereafter be entitled to receive upon conversion of the Series Preferred the
number of shares of stock or other securities or property of the Company to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, subject to
adjustment in respect of such stock or securities by the terms thereof. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of Series
Preferred after the capital reorganization to the end that the provisions of
this Section 4 (including adjustment of the Series Preferred Conversion Price
then in effect and the number of shares issuable upon conversion of the Series
Preferred) shall be applicable after that event and be as nearly equivalent as
practicable.
(i) Sale of Shares Below Series Preferred Conversion Price.
(i) If at any time or from time to time after the
Original Issue Date, the Company issues or sells, or is deemed by the express
provisions of this subsection (i) to have issued or sold, Additional Shares of
Common Stock (as defined in subsection (i)(iv) below), other than as a dividend
or other distribution on any class of stock as provided in Section 4(f) above,
and other than a subdivision or combination of shares of Common Stock as
provided in Section 4(e) above, for an Effective Price (as defined in subsection
(i)(iv) below) less than the then effective Series Preferred Conversion Price,
then and in each such case the then existing Series Preferred Conversion Price
shall be reduced, as of the opening of business on the date of such issue or
sale, to a price determined by multiplying the Series Preferred Conversion Price
by a fraction (i) the numerator of which shall be (A) the number of shares of
Common Stock deemed outstanding (as defined below) immediately prior to such
issue or sale, plus (B) the
8.
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number of shares of Common Stock which the aggregate consideration received (as
defined in subsection (i)(ii) by the Company for the total number of Additional
Shares of Common Stock so issued would purchase at such Series Preferred
Conversion Price, and (ii) the denominator of which shall be the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale plus the total number of Additional Shares of Common Stock
so issued. For the purposes of the preceding sentence, the number of shares of
Common Stock deemed to be outstanding as of a given date shall be the sum of (A)
the number of shares of Common Stock actually outstanding, (B) the number of
shares of Common Stock into which the then outstanding shares of Series
Preferred could be converted if fully converted on the day immediately preceding
the given date, and (C) the number of shares of Common Stock which could be
obtained through the exercise or conversion of all other rights, options and
convertible securities outstanding on the day immediately preceding the given
date.
(ii) For the purpose of making any adjustment required
under this Section 4(i), the consideration received by the Company for any issue
or sale of securities shall (A) to the extent it consists of cash, be computed
at the net amount of cash received by the Company after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Company in connection with such issue or sale but without deduction of
any expenses payable by the Company, (B) to the extent it consists of property
other than cash, be computed at the fair value of that property as determined in
good faith by the Board of Directors, and (C) if Additional Shares of Common
Stock, Convertible Securities (as defined in subsection (i)(iii)) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Company for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined in
good faith by the Board of Directors to be allocable to such Additional Shares
of Common Stock, Convertible Securities or rights or options.
(iii) For the purpose of the adjustment required under this
Section 4(i), if the Company issues or sells (i) stock or other securities
convertible into, Additional Shares of Common Stock (such convertible stock or
securities being herein referred to as "Convertible Securities") or (ii) rights
or options for the purchase of Additional Shares of Common Stock or Convertible
Securities and if the Effective Price of such Additional Shares of Common Stock
is less than the Series Preferred Conversion Price, in each case the Company
shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Company for the issuance of
such rights or options or Convertible Securities, plus, in the case of such
rights or options, the minimum amounts of consideration, if any, payable to the
Company upon the exercise of such rights or options, plus, in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable to
the Company (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion thereof; provided that if in
the case of Convertible Securities the minimum amounts of such consideration
cannot be ascertained, but are a function of antidilution or similar protective
clauses, the Company shall be deemed to have received the minimum amounts of
consideration without reference to such
9.
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clauses; provided further that if the minimum amount of consideration payable to
the Company upon the exercise or conversion of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the Effective
Price shall be recalculated using the figure to which such minimum amount of
consideration is reduced; provided further that if the minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased, the
Effective Price shall be again recalculated using the increased minimum amount
of consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities. No further adjustment of the Series
Preferred Conversion Price, as adjusted upon the issuance of such rights,
options or Convertible Securities, shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exercise of any such rights
or options or the conversion of any such Convertible Securities. If any such
rights or options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised, the Series
Preferred Conversion Price as adjusted upon the issuance of such rights, options
or Convertible Securities shall be readjusted to the Series Preferred Conversion
Price which would have been in effect had an adjustment been made on the basis
that the only Additional Shares of Common Stock so issued were the Additional
Shares of Common Stock, if any, actually issued or sold on the exercise of such
rights or options or rights of conversion of such Convertible Securities, and
such Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all
such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted,
plus the consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities, provided that such
readjustment shall not apply to prior conversions of Series Preferred.
(IV) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant to
this Section 4(i), other than (A) shares of Common Stock issued upon conversion
of the Series Preferred; (B) shares of Common Stock and/or options, warrants or
other Common Stock purchase rights, and the Common Stock issued pursuant to such
options, warrants or other rights (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like) after the Original Issue
Date to employees, officers or directors of, or consultants or advisors to the
Company or any subsidiary pursuant to stock purchase or stock option plans or
other arrangements that are approved by the Board; (C) shares of Common Stock
issued pursuant to the exercise of options, warrants or convertible securities
outstanding as of the Original Issue Date, (D) shares of Common Stock and/or
options, warrants or other Common Stock purchase rights, and the Common Stock
issued pursuant to such options, warrants or other rights issued for
consideration other than cash pursuant to a merger, consolidation, acquisition
or similar business combination approved by the Board and (E) shares of Common
Stock issued pursuant to any equipment leasing arrangement, or debt financing
from a bank or similar financial institution approved by the Board. References
to Common Stock in the subsections of this clause (iv) above shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant
10.
<PAGE>
to this Section 4(i). The "Effective Price" of Additional Shares of Common Stock
shall mean the quotient determined by dividing the total number of Additional
Shares of Common Stock issued or sold, or deemed to have been issued or sold by
the Company under this Section 4(i), into the aggregate consideration received,
or deemed to have been received by the Company for such issue under this Section
4(i), for such Additional Shares of Common Stock.
(j) Certificate of Adjustment. In each case of an adjustment or
readjustment of the Series Preferred Conversion Price for the number of shares
of Common Stock or other securities issuable upon conversion of the Series
Preferred, if the Series Preferred is then convertible pursuant to this Section
4, the Company, at its expense, shall compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of Series Preferred at the
holder's address as shown in the Company's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (i) the
consideration received or deemed to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (ii) the Series Preferred Conversion Price at the time in effect, (iii)
the number of Additional Shares of Common Stock and (iv) the type and amount, if
any, of other property which at the time would be received upon conversion of
the Series Preferred.
(k) Notices of Record Date. Upon (i) any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 3(c)) or
other capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation, or any Asset
Transfer (as defined in Section 3(c)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Company shall mail to
each holder of Series Preferred at least ten (10) days prior to the record date
specified therein (or such shorter period approved by a majority of the
outstanding Series Preferred) a notice specifying (A) the date on which any such
record is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (B) the date on which any such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the holders
of record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up.
(l) Automatic Conversion.
(i) Each share of Series Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Series
Preferred Conversion Price, (A) at any time upon the affirmative election of the
holders of at least a majority of the
11.
<PAGE>
outstanding shares of the Series A Preferred Stock and of the holders of at
least a majority of the outstanding shares of the Series B Preferred Stock, or
(B) immediately upon the closing of a firmly underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for the account of
the Company in which (i) the per share price is at least $9.375 (as adjusted for
stock splits, dividends, recapitalizations and the like), and (ii) the gross
cash proceeds to the Company (before underwriting discounts, commissions and
fees) are at least $10,000,000. Upon such automatic conversion, any declared and
unpaid dividends shall be paid in accordance with the provisions of Section
4(d).
(ii) Upon the occurrence of either of the events specified
in Section 4(l)(i) above, the outstanding shares of Series Preferred shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; provided, however, that the Company shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing such shares of
Series Preferred are either delivered to the Company or its transfer agent as
provided below, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates. Upon the occurrence of such automatic
conversion of the Series Preferred, the holders of Series Preferred shall
surrender the certificates representing such shares at the office of the Company
or any transfer agent for the Series Preferred. Thereupon, there shall be issued
and delivered to such holder promptly at such office and in its name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of Series Preferred
surrendered were convertible on the date on which such automatic conversion
occurred, and any declared and unpaid dividends shall be paid in accordance with
the provisions of Section 4(d).
(m) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
(n) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series Preferred, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series Preferred, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
12.
<PAGE>
(o) Notices. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Company.
(p) Payment of Taxes. The Company will pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon conversion
of shares of Series Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series Preferred
so converted were registered.
(q) No Dilution or Impairment. Without the consent of the
holders of then outstanding Series Preferred as required under Section 2(b), the
Company shall not amend its Restated Certificate of Incorporation or participate
in any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or take any other voluntary action, for the purpose
of avoiding or seeking to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but shall at all
times in good faith assist in carrying out all such action as may be reasonably
necessary or appropriate in order to protect the conversion rights of the
holders of the Series Preferred against dilution or other impairment.
5. No Reissuance of Series Preferred.
No share or shares of Series Preferred acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued.
V.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article V shall only be prospective
and shall not effect the rights under this Article V in effect at the time of
the alleged occurrence of any action or omission to act giving rise to
liability.
VI.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
13.
<PAGE>
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the Bylaws.
B. Subject to the indemnification provisions in the Bylaws, the Board of
Directors may from time to time make, amend, supplement or repeal the Bylaws;
provided, however, that the stockholders may change or repeal any Bylaw adopted
by the Board of Directors by the affirmative vote of the percentage of holders
of capital stock as provided therein; and, provided further, that no amendment
or supplement to the Bylaws adopted by the Board of Directors shall vary or
conflict with any amendment or supplement thus adopted by the stockholders.
C. The directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide.
* * * *
THREE: This Restated Certificate of Incorporation has been duly approved
by the Board of Directors of this Corporation.
FOUR: This Restated Certificate of Incorporation has been duly adopted in
accordance with the provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and the
stockholders of the Corporation. The total number of outstanding shares entitled
to vote or act by written consent was one million four hundred forty-four
thousand fifty-eight (1,444,058) shares of Common Stock and fourteen million
(14,000,000) shares of Series A Preferred Stock. A majority of the outstanding
shares of Common Stock and all of the outstanding shares of Series A Preferred
Stock approved this Restated Certificate of Incorporation by written consent in
accordance with Section 228 of the General Corporation Law of the State of
Delaware and written notice of such was given by the Corporation in accordance
with said Section 228.
14.
<PAGE>
In Witness Whereof, Mercata, Inc. has caused this Restated Certificate of
Incorporation to be signed by the President and the Secretary in Bellevue,
Washington, this 30th day of September 1999.
Mercata, Inc.
By: /s/ Tom Van Horn
--------------------------
President
Attest:
By: /s/ Jon Engman
----------------------
Secretary
15.
<PAGE>
Exhibit D
INVESTORS RIGHTS AGREEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. GENERAL......................................................... 1
1.1 Definitions..................................................... 1
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.......................... 3
2.1 Restrictions on Transfer........................................ 3
2.2 Demand Registration............................................. 4
2.3 Piggyback Registrations......................................... 5
2.4 Form S-3 Registration........................................... 6
2.5 Expenses of Registration........................................ 7
2.6 Obligations of the Company...................................... 8
2.7 Termination of Registration Rights.............................. 9
2.8 Delay of Registration; Furnishing Information................... 9
2.9 Indemnification................................................. 9
2.10 Assignment of Registration Rights............................... 11
2.11 Amendment of Registration Rights................................ 11
2.12 Limitation on Subsequent Registration Rights.................... 12
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information.. 12
2.14 Rule 144 Reporting.............................................. 12
SECTION 3. COVENANTS OF THE COMPANY........................................ 13
3.1 Basic Financial Information and Reporting....................... 13
3.2 Inspection Rights............................................... 14
3.3 Confidentiality of Records...................................... 14
3.4 Reservation of Common Stock..................................... 14
3.5 Stock Vesting................................................... 14
3.6 Proprietary Information and Inventions Agreement................ 14
3.7 Assignment of Right of First Refusal............................ 14
3.8 Termination of Covenants........................................ 15
SECTION 4. RIGHTS OF FIRST REFUSAL......................................... 15
4.1 Subsequent Offerings............................................ 15
4.2 Exercise of Rights.............................................. 15
4.3 Issuance of Equity Securities to Other Persons.................. 16
</TABLE>
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
4.4 Sale Without Notice............................................. 16
4.5 Termination and Waiver of Rights of First Refusal............... 16
4.6 Transfer of Rights of First Refusal............................. 16
4.7 Excluded Securities............................................. 16
SECTION 5. MISCELLANEOUS................................................... 17
5.1 Governing Law................................................... 17
5.2 Survival........................................................ 17
5.3 Successors and Assigns.......................................... 17
5.4 Entire Agreement................................................ 18
5.5 Severability.................................................... 18
5.6 Amendment and Waiver............................................ 18
5.7 Delays or Omissions............................................. 18
5.8 Notices......................................................... 18
5.9 Attorneys' Fees................................................. 19
5.10 Titles and Subtitles............................................ 19
5.11 Additional Investors............................................ 19
5.12 Counterparts.................................................... 19
</TABLE>
ii.
<PAGE>
MERCATA, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "Agreement") is entered into as of the
30th day of September, 1999, by and among Mercata, Inc., a Delaware corporation
(the "Company"), the holders of the Company's Series A Preferred Stock (the
"Series A Holders") and the purchasers of the Company's Series B Preferred Stock
("Series B Stock") set forth on Exhibit A of that certain Series B Preferred
Stock Purchase Agreement of even date herewith (the "Purchase Agreement") and
Exhibit A hereto. The Series A Holders and the purchasers of the Series B Stock
shall be referred to hereinafter as the "Investors" and each individually as an
"Investor."
Recitals
Whereas, the Company proposes to sell and issue up to eleven million two
hundred thousand (11,200,000) shares of its Series B Stock pursuant to the
Purchase Agreement; and
Whereas, as a condition of entering into the Purchase Agreement, the
Investors have requested that the Company extend to them registration rights,
information rights and other rights as set forth below.
Now, Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 Definitions. As used in this Agreement the following terms shall have
the following respective meanings:
"Affiliate" of a person or entity means any person or entity who
controls, is controlled by or under common control with such person or entity.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
1.
<PAGE>
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means (a) Common Stock of the Company issued
or issuable upon conversion of the Shares; and (b) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which the
transferor's rights under Section 2 of this Agreement are not assigned.
"Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed twenty-five thousand dollars ($25,000) of a single special counsel for
the Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Shares" shall mean the one million (1,000,000) shares of Common Stock
currently held by Vulcan Ventures Incorporated, the Company's Series A Preferred
Stock issued pursuant to that certain Series A Preferred Stock Purchase
Agreement, dated March 17, 1999, and the Company's Series B Stock issued
pursuant to the Purchase Agreement and held by the Investors listed on Exhibit A
hereto and their permitted assigns.
2.
<PAGE>
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by the
terms of this Agreement, (B) such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners or former
partners in accordance with partnership interests, (B) a corporation to its
shareholders in accordance with their interest in the corporation, (C) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, or (D) to the Holder's family member
or trust for the benefit of an individual Holder; provided that in each case the
transferee will be subject to the terms of this Agreement to the same extent as
if he were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
3.
<PAGE>
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders (the "Initiating Holders")
proposing to sell Registrable Securities at an anticipated aggregate offering
price, net of underwriting discounts and commissions, exceeding ten million
dollars ($10,000,000) (a "Qualified Public Offering")), then the Company shall,
within thirty (30) days of the receipt thereof, give written notice of such
request to all Holders, and subject to the limitations of this Section 2.2, use
its best efforts to effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to one hundred eighty (180) days following the
effective date of the registration statement pertaining to the Initial Offering;
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective;
4.
<PAGE>
(iii) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than ninety (90) days after receipt of the request of the Initiating
Holders; provided that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12) month period; or
(iv) if the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 2.4 below.
2.3 Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within ten (10) days after the above-described notice from the Company,
so notify the Company in writing. Such notice shall state the intended method
of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) Underwriting. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any shareholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall (i) reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting,
or (ii) reduce the amount of securities of the selling Holders included in the
registration below twenty-five percent (25%) of the total amount of securities
included in such registration, unless
5.
<PAGE>
such offering is the Initial Offering and such registration does not include
shares of any other selling shareholders, in which event any or all of the
Registrable Securities of the Holders may be excluded in accordance with the
immediately preceding sentence. In no event will shares of any other selling
shareholder be included in such registration which would reduce the number of
shares which may be included by Holders without the written consent of Holders
of not less than a majority of the Registrable Securities proposed to be sold in
the offering. If any Holder disapproves of the terms of any such underwriting,
such Holder may elect to withdraw therefrom by written notice to the Company and
the underwriter, delivered at least ten (10) business days prior to the
effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration. For any Holder which is a partnership or corporation, the
partners, retired partners and shareholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing person shall be deemed to be a single "Holder",
and any pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
(b) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
2.4 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and
6.
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such other securities (if any) at an aggregate price to the public of less than
two million dollars ($2,000,000), or
(iii) if within thirty (30) days of receipt of a written request
from any Holder or Holders pursuant to this Section 2.4, the Company gives
notice to such Holder or Holders of the Company's intention to make a public
offering within ninety (90) days;
(iv) if the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.4; provided, that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period, or
(v) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively.
2.5 Expenses of Registration. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
2.2 or Section 2.4, as applicable, in which event such right shall be forfeited
by all Holders. If the Holders are required to pay the Registration Expenses,
such expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above, then
the Holders shall not forfeit their rights pursuant to Section 2.2 or Section
2.4 to a demand registration.
7.
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2.6 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to thirty (30) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto. The
Company shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of the Company, in form and
8.
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substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering addressed to the underwriters.
2.7 Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect three
(3) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if all Registrable Securities held by
and issuable to such Holder (and its affiliates, partners, former partners,
members and former members) may be sold under Rule 144 during any ninety (90)
day period.
2.8 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by
9.
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such registration statement; and the Company will pay as incurred to each such
Holder, partner, officer, director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers and each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such
10.
<PAGE>
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 2.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. 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 which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
2.10 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (a) is an
Affiliate, general partner, limited partner, retired partner, member or retired
member of a Holder, (b) is a Holder's family member or trust for the benefit of
an individual Holder, or (c) acquires at least one hundred thousand (100,000)
shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (i) the transferor shall, within ten (10) days
after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned and (ii) such transferee shall agree
to be subject to all restrictions set forth in this Agreement.
2.11 Amendment of Registration Rights. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 2.11 shall be binding upon each Holder and the
11.
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Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 Limitation on Subsequent Registration Rights. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities then outstanding, enter into
any agreement with any holder or prospective holder of any securities of the
Company that would grant such holder registration rights pari passu or senior to
those granted to the Holders hereunder.
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information. Each
Holder hereby agrees that such Holder shall not sell, transfer, make any short
sale of, grant any option for the purchase of, or enter into any hedging or
similar transaction with the same economic effect as a sale, any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act; provided
that:
(a) such agreement shall apply only to the Company's Initial
Offering;
(b) all officers and directors of the Company enter into similar
agreements;
(c) such agreement shall not apply to the purchase or sale of
Common Stock (or other securities registered by the Company) acquired in the
Company's Initial Offering (other than any shares that are purchased in the
Initial Offering as part of a directed share program) or on the open market
after the Company's Initial Offering by ATGF II.
Each Holder agrees to execute and deliver such other agreements as
may be reasonably requested by the Company or the underwriter which are
consistent with the foregoing or which are necessary to give further effect
thereto. In addition, if requested by the Company or the representative of the
underwriters of Common Stock (or other securities) of the Company, each Holder
shall provide, within ten (10) days of such request, such information as may be
required by the Company or such representative in connection with the completion
of any public offering of the Company's securities pursuant to a registration
statement filed under the Securities Act. The obligations described in this
Section 2.13 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or similar forms that may be promulgated in the future.
The Company may impose stop-transfer instructions with respect to the shares of
Common Stock (or other securities) subject to the foregoing restriction until
the end of said one hundred eighty (180) day period.
2.14 Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the
12.
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Securities Act, at all times after the effective date of the first registration
filed by the Company for an offering of its securities to the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY
3.1 Basic Financial Information and Reporting.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred twenty (120) days thereafter, the
Company will furnish to each Investor a balance sheet of the Company, as at the
end of such fiscal year, and a statement of income and a statement of cash flows
of the Company, for such year, all prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be accompanied by a report
and opinion thereon by independent public accountants of national standing
selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as practicable
after the end of the first, second and third quarterly accounting periods in
each fiscal year of the Company, and in any event within forty-five (45) days
thereafter, a balance sheet of the Company as of the end of each such quarterly
period, and a statement of income and a statement of cash flows of the Company
for such period and for the current fiscal year to date, prepared in accordance
with generally accepted accounting principles, with the exception that no notes
need be attached to such statements and year-end audit adjustments may not have
been made.
(d) So long as an Investor (with its Affiliates) shall own not less
than one million (1,000,000) shares of Registrable Securities (as adjusted for
stock splits, combinations and the like) (a "Major Investor"), the Company will
furnish each such Major Investor requesting such information as soon as
practicable after the end of each month, and in any event within twenty-one (21)
days thereafter, a balance sheet of the Company as of the end of each such month
and a statement of income and a statement of cash flows of the Company for such
month and for the current fiscal year to date prepared in accordance with
generally accepted
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accounting principles consistently applied, with the exception that no notes
need be attached to such statements and year-end audit adjustments may not have
been made.
3.2 Inspection Rights. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 Confidentiality of Records. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such Investor for the purpose of evaluating its investment in the Company as
long as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3.
3.4 Reservation of Common Stock. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 Stock Vesting. Unless otherwise approved by the Board of Directors,
all stock options and other stock equivalents issued after the date of this
Agreement to employees, directors, consultants and other service providers shall
be subject to vesting as follows: (a) twenty-five percent (25%) of such stock
shall vest at the end of the first year following the earlier of the date of
issuance or such person's services commencement date with the company, and (b)
seventy-five percent (75%) of such stock shall vest over the remaining three (3)
years. With respect to any shares of stock purchased by any such person, the
Company's repurchase option shall provide that upon such person's termination of
employment or service with the Company, with or without cause, the Company or
its assignee (to the extent permissible under applicable securities laws and
other laws) shall have the option to purchase at cost any unvested shares of
stock held by such person.
3.6 Proprietary Information and Inventions Agreement. The Company shall
require all employees to execute and deliver a Proprietary Information and
Inventions Agreement in the form attached to the Purchase Agreement. The Company
shall require all consultants to execute and deliver an agreement containing
confidentiality and other reasonably protective provisions for the Company under
the circumstances.
3.7 Assignment of Right of First Refusal. In the event the Company
elects not to exercise any right of first refusal or right of first offer the
Company may have on a proposed transfer of any of the Company's outstanding
capital stock pursuant to the Company's charter documents, by contract or
otherwise, the Company shall, to the extent it may do so, assign such
14.
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right of first refusal or right of first offer to each Major Investor. In the
event of such assignment, each Major Investor shall have a right to purchase its
pro rata portion (as defined in Section 4.1) of the capital stock proposed to be
transferred.
3.8 Termination of Covenants. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor upon
the earlier of (i) the effective date of the registration statement pertaining
to the Initial Offering or (ii) upon (a) the sale, lease or other disposition of
all or substantially all of the assets of the Company or (b) an acquisition of
the Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction, provided that this
Section 3.8(ii)(b) shall not apply to a merger effected exclusively for the
purpose of changing the domicile of the Company (a "Change in Control").
SECTION 4. RIGHTS OF FIRST REFUSAL
4.1 Subsequent Offerings. So long as an Investor (with its Affiliates)
shall own not less than three hundred thousand (300,000) shares of Registrable
Securities (as adjusted for stock splits and combinations and the like) (a
"Significant Investor"), each such Significant Investor shall have a right of
first refusal to purchase its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.7 hereof. Each Investor's pro rata share is equal to the
ratio of (a) the number of shares of the Company's Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares) which
such Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock, Preferred Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Significant Investor written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each Significant
Investor shall have fifteen (15) days from the giving of such notice to agree to
purchase its pro rata share of the Equity Securities for the price and upon the
terms and conditions specified in the notice by giving written notice to the
Company and stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Significant Investor who would cause the
Company to be in violation of applicable federal securities laws by virtue of
such offer or sale.
15.
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4.3 Issuance of Equity Securities to Other Persons. If not all of the
Significant Investors elect to purchase their pro rata share of the Equity
Securities, then the Company shall promptly notify in writing the Significant
Investors who do so elect and shall offer such Significant Investors the right
to acquire such unsubscribed shares. The Significant Investors shall have five
(5) days after receipt of such notice to notify the Company of its election to
purchase all or a portion thereof of the unsubscribed shares. If the Significant
Investors fail to exercise in full the rights of first refusal, the Company
shall have ninety (90) days thereafter to sell the Equity Securities in respect
of which the Significant Investor's rights were not exercised, at a price and
upon general terms and conditions materially no more favorable to the purchasers
thereof than specified in the Company's notice to the Significant Investors
pursuant to Section 4.2 hereof. If the Company has not sold such Equity
Securities within ninety (90) days of the notice provided pursuant to Section
4.2, the Company shall not thereafter issue or sell any Equity Securities,
without first offering such securities to the Significant Investors in the
manner provided above.
4.4 Sale Without Notice. In lieu of giving notice to the Significant
Investors prior to the issuance of Equity Securities as provided in Section 4.2,
the Company may elect to give notice to the Significant Investors within thirty
(30) days after the issuance of Equity Securities. Such notice shall describe
the type, price and terms of the Equity Securities. Each Significant Investor
shall have twenty (20) days from the date of receipt of such notice to elect to
purchase its pro rata share of Equity Securities (as defined in Section 4.1, and
calculated before giving effect to the sale of the Equity Securities to the
purchasers thereof). The closing of such sale shall occur within sixty (60) days
of the date of notice to the Significant Investors.
4.5 Termination and Waiver of Rights of First Refusal. The rights of
first refusal established by this Section 4 shall not apply to, and shall
terminate upon the earlier of (i) the effective date of the registration
statement pertaining to the Company's Initial Offering or (ii) a Change in
Control. The rights of first refusal established by this Section 4 may be
amended, or any provision waived with the written consent of Significant
Investors holding a majority of the Registrable Securities held by all
Significant Investors, or as permitted by Section 5.6.
4.6 Transfer of Rights of First Refusal. The rights of first refusal of
each Significant Investor under this Section 4 may be transferred to the same
parties, subject to the same restrictions as any transfer of registration rights
pursuant to Section 2.10.
4.7 Excluded Securities. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued after the Original Issue Date (as defined in the
Company's Certificates of Incorporation) to employees, officers or directors of,
or consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
(b) stock issued pursuant to any rights or agreements outstanding
as of the date of this Agreement, options and warrants outstanding as of the
date of this Agreement, and
16.
<PAGE>
stock issued pursuant to any such rights or agreements granted after the date of
this Agreement; provided that the rights of first refusal established by this
Section 4 applied with respect to the initial sale or grant by the Company of
such rights or agreements;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the Shares;
(f) any Equity Securities issued pursuant to any equipment leasing
or loan arrangement, or debt financing from a bank or similar financial or
lending institution;
(g) any Equity Securities that are issued by the Company pursuant
to a registration statement filed under the Securities Act; and
(h) shares of the Company's Common Stock or Preferred Stock issued
in connection with strategic transactions involving the Company and other
entities, including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein, has been
approved by the Company's Board of Directors.
SECTION 5. MISCELLANEOUS
5.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Washington as applied to agreements among
Washington residents entered into and to be performed entirely within
Washington.
5.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
17.
<PAGE>
5.4 Entire Agreement. This Agreement, the Exhibits and Schedules hereto,
the Purchase Agreement and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
5.5 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
5.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least seventy percent (70%) of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least a majority of the
Registrable Securities.
(c) Notwithstanding the foregoing, this Agreement may be amended
with only the written consent of the Company to include additional purchasers of
Shares as "Investors," "Holders" and parties hereto.
5.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
18.
<PAGE>
5.9 Attorneys' Fees. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.10 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 Additional Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Preferred
Stock pursuant to the Purchase Agreement, any purchaser of such shares of
Preferred Stock may become a party to this Agreement by executing and delivering
an additional counterpart signature page to this Agreement and shall be deemed
an "Investor" hereunder.
5.12 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 one instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
19.
<PAGE>
In Witness Whereof, the parties hereto have executed this Investor Rights
Agreement as of the date set forth in the first paragraph hereof.
COMPANY:
Mercata, Inc.
By: _______________________________
President
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
FOUNDER:
Vulcan Ventures Incorporated
By: _______________________________
William D. Savoy
Vice President
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
INVESTORS(S):
Highland Capital Partners IV Limited
Partnership
By: Highland Management Partners
IV LLC
Its: General Partner
By: ______________________
Member
Highland Entrepreneurs' Fund IV
Limited Partnership
By: Highland Management Partners
IV LLC
Its: General Partner
By: ______________________
Member
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
NOTE: THIS PAGE, DATED AS OF __________________, 1999, IS A COUNTERPART
SIGNATURE PAGE TO THAT CERTAIN INVESTOR RIGHTS AGREEMENT, DATED AS OF SEPTEMBER
30, 1999 (THE "RIGHTS AGREEMENT"), BY AND AMONG MERCATA, INC., A DELAWARE
CORPORATION, AND EACH OF THOSE PERSONS AND ENTITIES WHOSE NAMES ARE SET FORTH ON
THE SCHEDULE OF INVESTORS ATTACHED THERETO AS EXHIBIT A. EXECUTION AND DELIVERY
OF THIS SIGNATURE PAGE BY THE UNDERSIGNED REPRESENTS THE UNDERSIGNED'S AGREEMENT
TO BECOME A PARTY TO THE RIGHTS AGREEMENT AS AN "INVESTOR."
ATGF II
By: _________________________
Name: _______________________
Title: ______________________
Beagle Limited
By: _________________________
Name: _______________________
Title: ______________________
Global Retail Partners, L.P.
By: _________________________
Name: _______________________
Title: ______________________
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
DLJ Diversified Partners, L.P.
By: _________________________________
Name: _______________________________
Title: ______________________________
DLJ Diversified Partners-A, L.P.
By: _________________________________
Name: _______________________________
Title: ______________________________
GRP Partners, L.P.
By: _________________________________
Name: _______________________________
Title: ______________________________
Global Retail Partners Funding, Inc.
By: _________________________________
Name: _______________________________
Title: ______________________________
2.
<PAGE>
DLJ ESC II, L.P.
By: ____________________________________
Name: __________________________________
Title: _________________________________
Waelinvest
By: ____________________________________
Name: __________________________________
Title: _________________________________
Watershed Capital I, L.P.
By: Watershed Capital G.P. I, L.P.
Its General Partner
By: Watershed Capital G.P. I, L.L.C.
Its General Partner
By: ____________________________
Ralph C. Derrickson
Managing Member
Dated: As of ______________, 1999
________________________________________
Diane H. Daggatt
________________________________________
Bert Kolde
3.
<PAGE>
Agreed to and Accepted By:
Mercata, Inc.
110 110th Avenue NE, Suite 390
Bellevue, WA 98004
_______________________________
Thomas Van Horn
President
4.
<PAGE>
Exhibit A
SCHEDULE OF INVESTORS
Name and Address
Vulcan Ventures Incorporated
110 - 110th Avenue N.E., Suite 550
Bellevue, Washington 98004
Highland Capital Partners IV Limited Partnership
Two International Place
Boston, Massachusetts 02110
Highland Entrepreneurs' Fund IV Limited Partnership
Two International Place
Boston, Massachusetts 02110
ATGF II
399 Park Avenue, 22nd Floor
New York, NY 10022
Beagle Limited
c/o Hecht and Company
111 West 40th Street, 20th Floor
New York, NY 10018
Global Retail Partners, L.P.
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
DLJ Diversified Partners, L.P.
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
DLJ Diversified Partners - A, L.P.
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
GRP Partners, L.P.
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
INVESTORS RIGHTS AGREEMENT
A-1
<PAGE>
Global Retail Partners Funding, Inc.
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
DLJ ESC II L.P.
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
Waelinvest
525 Market Street, 23rd Floor
San Francisco, CA 94105
Watershed Capital I, L.P.
Two Union Square
601 Union Street, Suite 4200
Seattle, WA 98101
Diane H. Daggatt
110 - 110th Avenue NE, Suite 550
Bellevue, WA 98004-5862
Bert Kolde
110 - 110th Avenue NE, Suite 550
Bellevue, WA 98004-5862
2.
<PAGE>
EXHIBIT E
MERCATA, INC.
CO-SALE AGREEMENT
This Co-Sale Agreement (the "Agreement") is made and entered into as of
this 30th day of September, 1999, by and among Mercata, Inc., a Delaware
corporation (the "Company"), each of the persons and entities listed on Exhibit
A hereto (the "Investors"), and Vulcan Ventures Incorporated (referred to herein
as the "Founder").
Recitals
Whereas, the Founder is the beneficial owner of an aggregate of one million
(1,000,000) shares of Common Stock of the Company, fourteen million (14,000,000)
shares of Series A Preferred Stock of the Company and one million eight hundred
eighty-eight thousand (1,888,000) shares of Series B Preferred Stock of the
Company;
Whereas, Investors are purchasing shares of the Company's Series B
Preferred Stock (the "Series B Preferred Stock") pursuant to that certain Series
B Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date
herewith;
Whereas, such Investors were induced by the Company to purchase the Series
B Preferred Stock in part by the Company's and the Founder's agreement to enter
into this Agreement; and
Whereas, the parties desire to enter into this Agreement in order to grant
rights of co-sale to each Investor.
Now, Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and the
Purchase Agreement and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree hereto as
follows:
1. Definitions.
(a) "Co-Sale Stock" shall mean shares of the Company's Common Stock
and Preferred Stock now owned or subsequently acquired by the Founder by gift,
purchase, dividend, option exercise or any other means whether or not such
securities are only registered in a Founder's name or beneficially or legally
owned by Founder, including any interest of a spouse in any of the Co-Sale
Stock, whether that interest is asserted pursuant to marital property laws or
otherwise. The number of shares of Co-Sale Stock owned by the Founder as of the
date hereof are set forth on Exhibit B, which Exhibit may be amended from time
to time by the Company to reflect changes in the number of shares owned by the
Founder, but the failure to so amend shall have no effect on such Co-Sale Stock
being subject to this Agreement.
(b) "Common Stock" shall mean the Company's Common Stock and shares
of Common Stock issued or issuable upon exercise of any option, warrant or other
security or right of any kind convertible into or exchangeable for Common Stock.
1.
<PAGE>
(c) "Preferred Stock" shall mean the Company's Preferred Stock and
shares of Preferred Stock issued or issuable upon exercise of any option,
warrant or other security or right of any kind convertible into or exchangeable
for Preferred Stock.
(d) For the purpose of this Agreement, the term "Transfer" shall
include any sale, assignment, encumbrance, hypothecation, pledge, conveyance in
trust, gift, transfer by request, devise or descent, or other transfer or
disposition of any kind, including, but not limited to, transfers to receivers,
levying creditors, trustees or receivers in bankruptcy proceedings or general
assignees for the benefit of creditors, whether voluntary or by operation of
law, directly or indirectly, of any of the Co-Sale Stock.
(e) "Affiliate" of a person or entity means any person or entity who
controls, is controlled by or under common control with such person or entity.
2. Transfers by a Founder.
(a) If the Founder proposes to Transfer any shares of Co-Sale Stock
then the Founder shall promptly give written notice (the "Notice")
simultaneously to the Company and to each of the Investors at least thirty (30)
days prior to the closing of such Transfer. The Notice shall describe in
reasonable detail the proposed Transfer including, without limitation, the
number of shares of Co-Sale Stock to be transferred, the nature of such
Transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the Transfer is being
made pursuant to the provisions of Section 3(a), the Notice shall state under
which section the Transfer is being made.
(b) Each Investor shall have the right, exercisable upon written
notice to the Founder within fifteen (15) days after the Notice, to participate
in such Transfer of Co-Sale Stock on the same terms and conditions. Such notice
shall indicate the number of shares of Common Stock and/or Preferred Stock such
Investor wishes to sell under his or her right to participate. To the extent one
or more of the Investors exercise such right of participation in accordance with
the terms and conditions set forth below, the number of shares of Co-Sale Stock
that the Founder may sell in the transaction shall be correspondingly reduced.
(c) Each Investor may sell all or any part of that number of shares
equal to the product obtained by multiplying (i) the aggregate number of shares
of Co-Sale Stock covered by the Notice by (ii) a fraction the numerator of which
is the number of shares of Common Stock (including shares of Preferred Stock on
an as converted basis) owned by such Investor at the time of the Transfer and
the denominator of which is the total number of shares of Common Stock
(including shares of Preferred Stock on an as converted basis) owned by Founder
and the Investors at the time of the Transfer.
(d) Each Investor who elects to participate in the Transfer pursuant
to this Section 2 (a "Participant") shall effect its participation in the
Transfer by promptly delivering to Founder for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent:
(i) the type and number of shares of Common Stock and/or
Preferred Stock which such Participant elects to sell; or
2.
<PAGE>
(ii) that number of shares of Preferred Stock which is at such
time convertible into the number of shares of Common Stock which such
Participant elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Preferred Stock in lieu of Common Stock, such
Participant shall convert such Preferred Stock into Common Stock and deliver
Common Stock as provided in Section 2(d)(i) above. The Company agrees to make
any such conversion concurrent with the actual transfer of such shares to the
purchaser.
(e) The stock certificate or certificates that the Participant
delivers to Founder pursuant to Section 2(d) shall be transferred to the
prospective purchaser in consummation of the sale of the Common Stock pursuant
to the terms and conditions specified in the Notice, and the Founder shall
concurrently therewith remit to such Participant that portion of the sale
proceeds to which such Participant is entitled by reason of its participation in
such sale. To the extent that any prospective purchaser or purchasers prohibits
such assignment or otherwise refuses to purchase shares or other securities from
a Participant exercising its rights of co-sale hereunder, the Founder shall not
sell to such prospective purchaser or purchasers any Co-Sale Stock unless and
until, simultaneously with such sale, the Founder shall purchase such shares or
other securities from such Participant on the same terms and conditions
specified in the Notice.
(f) The exercise or non-exercise of the rights of the Investors
hereunder to participate in one or more Transfers of Co-Sale Stock made by the
Founder shall not adversely affect their rights to participate in subsequent
Transfers of Co-Sale Stock subject to Section 2(a).
(g) If none of the Investors elect to participate in the sale of the
Co-Sale Stock subject to the Notice, the Founder may, not later than sixty (60)
days following delivery to the Company of the Notice, enter into an agreement
providing for the closing of the Transfer of the Co-Sale Stock covered by the
Notice within thirty (30) days of such agreement on terms and conditions not
more materially favorable to the transferor than those described in the Notice.
Any proposed transfer on terms and conditions materially more favorable than
those described in the Notice, as well as any subsequent proposed transfer of
any of the Co-Sale Stock by Founder, shall again be subject to the co-sale
rights of the Investors and shall require compliance by Founder with the
procedures described in this Section 2.
3. Exempt Transfers.
(a) Notwithstanding the foregoing, the co-sale rights of the
Investors shall not apply to (i) any transfer to the ancestors, descendants or
spouse or to trusts for the benefit of such persons or the Founder, (ii) any
transfer or transfers by a Founder to another Founder (the "Transferee-Founder")
so long as the Transferee-Founder is, at the time of the transfer, employed by
or acting as a consultant or director of the Company, (iii) any pledge of Co-
Sale Stock made pursuant to a bona fide loan transaction that creates a mere
security interest, (iv) any bona fide gift, or (v) any transfer to an Affiliate;
provided that in the event of any transfer made pursuant to one of the
exemptions provided above, (A) the Founder shall inform the Investors of such
pledge, transfer or gift prior to effecting it and (B) the pledgee, transferee
or donee shall furnish the Investors with a written agreement to be bound by and
comply with all provisions of Section 2. Except with respect to Co-Sale Stock
transferred under clause (i) above (which Co-Sale Stock shall no longer be
subject to the co-sale rights of the Investors), such transferred Co-
3.
<PAGE>
Sale Stock shall remain "Co-Sale Stock" hereunder, and such pledgee, transferee
or donee shall be treated as the "Founder" for purposes of this Agreement.
(b) Notwithstanding the foregoing, the provisions of Section 2 shall
not apply to the sale of any Co-Sale Stock to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act").
(c) This Agreement is subject to, and shall in no manner limit the
right which the Company may have to repurchase securities from the Founder
pursuant to (i) a stock restriction agreement or other agreement between the
Company and the Founder and (ii) any right of first refusal set forth in the
Bylaws of the Company.
4. Prohibited Transfers.
(a) In the event that Founder should Transfer any Co-Sale Stock in
contravention of the co-sale rights of each Investor under this Agreement (a
"Prohibited Transfer"), each Investor, in addition to such other remedies as may
be available at law, in equity or hereunder, shall have the put option provided
below, and the Founder shall be bound by the applicable provisions of such
option.
(b) In the event of a Prohibited Transfer, each Investor shall have
the right to sell to Founder the type and number of shares of Common Stock equal
to the number of shares each Investor would have been entitled to transfer to
the purchaser under Section 2(c) hereof had the Prohibited Transfer been
effected pursuant to and in compliance with the terms hereof. Such sale shall be
made on the following terms and conditions:
(i) The price per share at which the shares are to be sold to
the Founder shall be equal to the price per share paid by the purchaser to the
Founder in such Prohibited Transfer. The Founder shall also reimburse each
Investor for any and all fees and expenses, including legal fees and expenses,
incurred pursuant to the exercise or the attempted exercise of the Investor's
rights under Section 2.
(ii) Within ninety (90) days after the date on which an
Investor received notice of the Prohibited Transfer or otherwise became aware of
the Prohibited Transfer, such Investor shall, if exercising the option created
hereby, deliver to the Founder the certificate or certificates representing
shares to be sold, each certificate to be properly endorsed for transfer.
(iii) The Founder shall, upon receipt of the certificate or
certificates for the shares to be sold by an Investor, pursuant to this Section
4(b), pay the aggregate purchase price therefor and the amount of reimbursable
fees and expenses, as specified in Section 4(b)(i), in cash or by other means
acceptable to the Investor.
(iv) Notwithstanding the foregoing, any attempt by a Founder to
transfer Co-Sale Stock in violation of Section 2 hereof shall be voidable at the
option of a majority in interest of the Investors if the Investors do not elect
to exercise the put option set forth in this Section 4, and the Company agrees
it will not effect such a transfer nor will it treat
4.
<PAGE>
any alleged transferee as the holder of such shares without the written consent
of a majority in interest of the Investors.
5. Legend.
(a) Each certificate representing shares of Co-Sale Stock now or
hereafter owned by the Founder or issued to any person in connection with a
transfer pursuant to Section 3(a) hereof shall be endorsed with the following
legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN CO-SALE AGREEMENT BY AND BETWEEN THE SHAREHOLDER, THE COMPANY AND
CERTAIN HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY."
(b) The Founder agrees that the Company may instruct its transfer
agent to impose transfer restrictions on the shares represented by certificates
bearing the legend referred to in Section 5(a) above to enforce the provisions
of this Agreement and the Company agrees to promptly do so. The legend shall be
removed upon termination of this Agreement.
6. Miscellaneous.
(a) Conditions to Exercise of Rights. Exercise of the Investors'
rights under this Agreement shall be subject to and conditioned upon, and the
Founder and the Company shall use their best efforts to assist each Investor in,
compliance with applicable laws.
(b) Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Washington as applied to agreements among
Washington residents entered into and to be performed entirely within
Washington.
(c) Amendment. Any provision of this Agreement may be amended and
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only by the written consent
of (i) as to the Company, only the Company, (ii) as to the Investors, persons
holding more than a majority in interest of the Common Stock (including shares
of Preferred Stock on an as converted basis) held by the Investors and their
assignees, pursuant to Section 6(d) hereof, and (iii) as to the Founder, only
the Founder; provided, that no consent of the Founder shall be necessary for any
amendment and/or restatement which includes additional holders of Preferred
Stock or other preferred stock of the Company as "Investors" and parties hereto.
Any amendment or waiver effected in accordance with clauses (i), (ii), and (iii)
of this Section 6(c) shall be binding upon each Investor, its successors and
assigns, the Company and the Founder.
(d) Assignment of Rights. This Agreement constitutes the entire
agreement between the parties relative to the specific subject matter hereof.
Any previous agreement among the parties relative to the specific subject matter
hereof is superseded by this Agreement. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit
5.
<PAGE>
of, and be binding upon, their respective successors, assigns and legal
representatives. Each Investor may transfer or assign its rights hereunder only
along with the corresponding shares of Common Stock or Preferred Stock and any
purported transfer in violation of the foregoing shall be void and of no effect.
(e) Term. This Agreement shall continue in full force and effect
from the date hereof through the earliest of the following dates, on which date
it shall terminate in its entirety:
(i) the date of the closing of a firmly underwritten public
offering of the Common Stock pursuant to a registration statement filed with the
Securities and Exchange Commission, and declared effective under the Securities
Act of 1933, as amended;
(ii) the date of the closing of a sale, lease, or other
disposition of all or substantially all of the Company's assets or the Company's
merger into or consolidation with any other corporation or other entity, or any
other corporate reorganization, in which the holders of the Company's
outstanding voting stock immediately prior to such transaction own, immediately
after such transaction, securities representing less than fifty percent (50%) of
the voting power of the corporation or other entity surviving such transaction,
provided, that this Section 6(e)(ii) shall not apply to a merger effected
exclusively for the purpose of changing the domicile of the Company; or
(f) the date as of which the parties hereto terminate this Agreement
by written consent of a majority in interest of the Investors (excluding Vulcan)
and a majority in interest of the Founder.
(g) Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature page hereof or
at such other address as such party may designate by ten (10) days advance
written notice to the other parties hereto.
(h) Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
(i) Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such
6.
<PAGE>
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.
(j) Entire Agreement. This Agreement and the Exhibits hereto, along
with the Purchase Agreement and each of the Exhibits thereto, constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
(k) Additional Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Series B
Preferred Stock pursuant to the Purchase Agreement, any purchaser of such shares
of Series B Preferred Stock may become a party to this Agreement by executing
and delivering an additional counterpart signature page to this Agreement and
shall be deemed an "Investor" hereunder.
(l) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
7.
<PAGE>
The foregoing Co-Sale Agreement is hereby executed as of the date first
above written.
COMPANY:
Mercata, Inc.
By:________________________________
President
SIGNATURE PAGE TO CO-SALE AGREEMENT
<PAGE>
FOUNDER:
Vulcan Ventures Incorporated
By:___________________________________
Name:_________________________________
Title:________________________________
SIGNATURE PAGE TO CO-SALE AGREEMENT
<PAGE>
INVESTORS(S):
Highland Capital Partners IV Limited
Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By:________________________________
Member
Highland Entrepreneurs' Fund IV Limited
Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By:________________________________
Member
SIGNATURE PAGE TO CO-SALE AGREEMENT
<PAGE>
NOTE: THIS PAGE, DATED AS OF ____________________, 1999, IS A COUNTERPART
SIGNATURE PAGE TO THAT CERTAIN CO-SALE AGREEMENT, DATED AS OF SEPTEMBER 30,
1999, BY AND AMONG MERCATA, INC., A DELAWARE CORPORATION, VULCAN VENTURES
INCORPORATED, A WASHINGTON CORPORATION, AND EACH OF THOSE PERSONS AND ENTITIES
WHOSE NAMES ARE SET FORTH ON THE SCHEDULE OF INVESTORS ATTACHED THERETO AS
EXHIBIT A. EXECUTION AND DELIVERY OF THIS SIGNATURE PAGE BY THE UNDERSIGNED
REPRESENTS THE UNDERSIGNED'S AGREEMENT TO BECOME A PARTY TO THE CO-SALE
AGREEMENT AS AN "INVESTOR."
ATGF II
By:______________________________
Name:____________________________
Title:___________________________
Beagle Limited
By:______________________________
Name:____________________________
Title:___________________________
Global Retail Partners, L.P.
By:______________________________
Name:____________________________
Title:___________________________
SIGNATURE PAGE TO CO-SALE AGREEMENT
<PAGE>
DLJ Diversified Partners, L.P.
By:___________________________________
Name:_________________________________
Title:________________________________
DLJ Diversified Partners-A, L.P.
By:___________________________________
Name:_________________________________
Title:________________________________
GRP Partners, L.P.
By:___________________________________
Name:_________________________________
Title:________________________________
Global Retail Partners Funding, Inc.
By:___________________________________
Name:_________________________________
Title:________________________________
2.
<PAGE>
DLJ ESC II, L.P.
By:________________________________________
Name:______________________________________
Title:_____________________________________
Waelinvest
By:________________________________________
Name:______________________________________
Title:_____________________________________
Watershed Capital I, L.P.
By: Watershed Capital G.P. I, L.P.
Its General Partner
By: Watershed Capital G.P. I, L.L.C.
Its General Partner
By:_______________________________
Ralph C. Derrickson
Managing Member
Dated: As of_________________________, 1999
___________________________________________
Diane H. Daggatt
___________________________________________
Bert Kolde
3.
<PAGE>
Agreed to and Accepted By:
Mercata, Inc.
110 110th Avenue NE, Suite 390
Bellevue, WA 98004
______________________________________
Thomas Van Horn
President
4.
<PAGE>
Exhibit A
LIST OF INVESTORS
Highland Capital Partners IV Limited Partnership
Highland Entrepreneurs' Fund IV Limited Partnership
ATGF II
Beagle Limited
Global Retail Partners, L.P.
DLJ Diversified Partners, L.P.
DLJ Diversified Partners - A, L.P.
GRP Partners, L.P.
Global Retail Partners Funding, Inc.
DLJ ESC II L.P.
Waelinvest
Watershed Capital I, L.P.
Diane H. Daggatt
Bert Kolde
CO-SALE AGREEMENT
<PAGE>
Exhibit B
CO-SALE STOCK OWNERSHIP
Name of Founder Co-Sale Stock
Vulcan Ventures Incorporated 1,000,000 shares of Common Stock
14,000,000 shares of Series A Preferred Stock
1,888,000 shares of Series B Preferred Stock
CO-SALE AGREEMENT
<PAGE>
EXHIBIT F
MERCATA, INC.
VOTING AGREEMENT
This Voting Agreement (this "Agreement") is made and entered into as of
this 30th day of September, 1999, by and among Mercata, Inc., a Delaware
corporation (the "Company"), the persons and entities listed on Exhibit A hereto
(the "Investors").
Witnesseth
Whereas, the Investors are purchasing shares of the Company's Series B
Preferred Stock (the "Series B Preferred Stock"), pursuant to that certain
Series B Preferred Stock Purchase Agreement (the "Purchase Agreement") of even
date herewith (the "Financing"); and
Whereas, in connection with the consummation of the Financing, the Company
and the Investors have agreed to provide for the future voting of their shares
of the Company's capital stock as set forth below.
Now, Therefore, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Agreement
1. Voting
1.1 Investor Shares. The Investors each agree to hold all shares of
voting capital stock of the Company registered in their respective names or
beneficially owned by them as of the date hereof and any and all other
securities of the Company legally or beneficially acquired by each of the
Investors after the date hereof (hereinafter collectively referred to as the
"Investor Shares") subject to, and to vote the Investor Shares in accordance
with, the provisions of this Agreement.
1.2 Election of Directors. For so long as at least 10,000,000 shares of
Preferred Stock remain outstanding (subject to adjustment for stock splits,
dividends or the like) and the authorized size of the Company's Board of
Directors is seven (7) or more, on all matters relating to the election of
directors of the Company, the Investors agree to vote all Investor Shares held
by them (or the holders thereof shall consent pursuant to an action by written
consent of the holders of capital stock of the Company) so as to elect a member
of the Company's Board of Directors as follows:
(a) At each election of directors in which the holders of Common
Stock and holders of Preferred Stock, voting together as a single class, are
entitled to elect directors of the Company, the Investors shall vote all of
their respective Investor Shares so as to elect: one (1) representative of
Global Retail Partners Funding, Inc. so long as it or its affiliates hold not
less than 1,792,000 shares of Preferred Stock (as adjusted for stock splits,
dividends and the like); provided, that in no event will this provision require
the Investors to vote any shares so as to
1.
<PAGE>
elect more than one (1) representative of Global Retail Partners Funding, Inc.
to the Company's Board of Directors at any one time. Any vote taken to remove
any director elected pursuant to this Section 1.2(a), or to fill any vacancy
created by the resignation or death of a director elected pursuant to this
Section 1.2(a), shall also be subject to the provisions of this Section 1.2(a).
(b) At each election of directors in which the holders of Series A
Preferred Stock, voting as a separate class, are entitled to elect directors of
the Company, the Investors shall vote all of their respective Investor Shares so
as to elect two (2) representatives of Vulcan Ventures Incorporated so long as
it holds not less than 11,200,000 shares of Series A Preferred Stock (as
adjusted for stock splits, dividends and the like). Any vote taken to remove
any director elected pursuant to this Section 1.2(b), or to fill any vacancy
created by the resignation or death of a director elected pursuant to this
Section 1.2(b), shall also be subject to the provisions of this Section 1.2(b);
(c) At each election of directors in which the holders of Series B
Preferred Stock, voting as a separate class, are entitled to elect directors of
the Company, the Investors shall vote all of their respective Investor Shares so
as to elect one designee of Highland Capital Partners IV Limited Partnership so
long as it holds not less than 4,480,000 shares of Series B Preferred Stock (as
adjusted for stock splits, dividends and the like). Any vote taken to remove
any director elected pursuant to this Section 1.2(c), or to fill any vacancy
created by the resignation or death of a director elected pursuant to this
Section 1.2(c), shall also be subject to the provisions of this Section 1.2(c).
(d) At each election of directors in which the holders of Common
Stock, voting as a separate class, are entitled to elect directors of the
Company, the Investors shall vote all of their respective Investor Shares so as
to elect: (i) the person serving as Chief Executive Officer of the Company, or
if there is no duly elected Chief Executive Officer, one (1) individual
nominated by the holders of a majority in interest of the Common Stock and (ii)
one (1) individual nominated by the holders of a majority in interest of the
Common Stock. Any vote taken to remove any director elected pursuant to this
Section 1.2(d), or to fill any vacancy created by the resignation or death of a
director elected pursuant to this Section 1.2(d), shall also be subject to the
provisions of this Section 1.2(d).
1.3 Legend
(a) Concurrently with the execution of this Agreement, there shall be
imprinted or otherwise placed, on certificates representing the Investor Shares
the following restrictive legend (the "Legend"):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A VOTING AGREEMENT WHICH PLACES CERTAIN
RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON
ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL
BECOME BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING
AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE
2.
<PAGE>
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE
OF BUSINESS."
(b) The Company agrees that, during the term of this Agreement, it
will not remove, and will not permit to be removed (upon registration of
transfer, reissuance of otherwise), the Legend from any such certificate and
will place or cause to be placed the Legend on any new certificate issued to
represent Investor Shares theretofore represented by a certificate carrying the
Legend.
1.4 Successors. The provisions of this Agreement shall be binding upon
the successors in interest to any of the Investor Shares. The Company shall not
permit the transfer of any of the Investor Shares on its books or issue a new
certificate representing any of the Investor Shares unless and until the person
to whom such security is to be transferred shall have executed a written
agreement, substantially in the form of this Agreement, pursuant to which such
person becomes a party to this Agreement and agrees to be bound by all the
provisions hereof as if such person were an Investor.
1.5 Other Rights. Except as provided by this Agreement or any other
agreement entered into in connection with the Financing, each Investor shall
exercise the full rights of a holder of capital stock of the Company with
respect to the Investor Shares.
2. Termination
2.1 This Agreement shall become effective upon the consummation of the
sale of at least 1,792,000 shares of Preferred Stock to Global Retail Partners
Funding, Inc. and continue in full force and effect from the date hereof through
the earliest of the following dates, on which date it shall terminate in its
entirety:
(a) the date of the closing of a firmly underwritten public offering
of the Common Stock pursuant to a registration statement filed with the
Securities and Exchange Commission, and declared effective under the Securities
Act of 1933, as amended;
(b) at such time as less than 10,000,000 shares of Preferred Stock
remain outstanding (as adjusted for stock splits, dividends or the like);
(c) ten (10) years from the date of this Agreement;
(d) the date of the closing of a sale, lease, or other disposition of
all or substantially all of the Company's assets or the Company's merger into or
consolidation with any other corporation or other entity, or any other corporate
reorganization, in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction, provided that this
Section 2.1(d) shall not apply to a merger effected exclusively for the purpose
of changing the domicile of the Company; or
(e) the date as of which the parties hereto terminate this Agreement
by written consent of a seventy percent (70%) in interest of the Investors.
3.
<PAGE>
3. Miscellaneous
3.1 Specific Performance. The parties hereto hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
or to their heirs, personal representatives, or assigns by reason of a failure
to perform any of the obligations under this Agreement and agree that the terms
of this Agreement shall be specifically enforceable. If any party hereto or his
heirs, personal representatives, or assigns institutes any action or proceeding
to specifically enforce the provisions hereof, any person against whom such
action or proceeding is brought hereby waives the claim or defense therein that
such party or such personal representative has an adequate remedy at law, and
such person shall not offer in any such action or proceeding the claim or
defense that such remedy at law exists.
3.2 Governing Law. This Agreement, and the rights of the parties hereto,
shall be governed by and construed in accordance with the laws of the State of
Washington as such laws apply to agreements among Washington residents made and
to be performed entirely within the State of Washington.
3.3 Amendment or Waiver. This Agreement may be amended (or provisions of
this Agreement waived) only by an instrument in writing signed by (a) the
Company and (b) seventy percent (70%) in interest of the Investors. Any
amendment or waiver so effected shall be binding upon the Company, each of the
parties hereto and any assignee of any such party.
3.4 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
3.5 Successors. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, successors, assigns,
administrators, executors and other legal representatives.
3.6 Additional Shares. In the event that subsequent to the date of this
Agreement any shares or other securities are issued on, or in exchange for, any
of the Investor Shares by reason of any stock dividend, stock split, combination
of shares, reclassification or the like, such shares or securities shall be
deemed to be Investor Shares for purposes of this Agreement.
3.7 Addition of Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Preferred
Stock pursuant to the Purchase Agreement, any purchaser of such shares of
Preferred Stock may become a party to this Agreement by executing and delivering
an additional counterpart signature page to this Agreement and shall be deemed
an "Investor" hereunder.
3.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same agreement.
4.
<PAGE>
3.9 Waiver. No waivers of any breach of this Agreement extended by any
party hereto to any other party shall be construed as a waiver of any rights or
remedies of any other party hereto or with respect to any subsequent breach.
3.10 Attorney's Fees. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
3.11 Notices. Any notices required in connection with this Agreement
shall be in writing and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified, (b) when sent by confirmed facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written notification of receipt. All notices shall be
addressed to the holder appearing on the books of the Company or at such address
as such party may designate by ten (10) days advance written notice to the other
parties hereto.
3.12 Entire Agreement. This Agreement and the Exhibits hereto, along with
the Purchase Agreement and each of the Exhibits thereto, constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof and no party shall be liable or bound to any other
in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
[This Space Intentionally Left Blank]
5.
<PAGE>
In Witness Whereof, the parties hereto have executed this Voting Agreement
as of the date first above written to become effective as provided in Section
2.1.
COMPANY:
Mercata, Inc.
By:_________________________________
President
SIGNATURE PAGE TO VOTING AGREEMENT
<PAGE>
Vulcan Ventures Incorporated
By:_________________________________
William D. Savoy
Vice President
SIGNATURE PAGE TO VOTING AGREEMENT
<PAGE>
INVESTORS(S):
Highland Capital Partners IV Limited
Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By:________________________________
Member
Highland Entrepreneurs' Fund IV Limited
Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By:________________________________
Member
SIGNATURE PAGE TO VOTING AGREEMENT
<PAGE>
NOTE: THIS PAGE, DATED AS OF ___________________, 1999, IS A COUNTERPART
SIGNATURE PAGE TO THAT CERTAIN VOTING AGREEMENT, DATED AS OF SEPTEMBER 30, 1999,
BY AND AMONG MERCATA, INC., A DELAWARE CORPORATION, AND EACH OF THOSE PERSONS
AND ENTITIES WHOSE NAMES ARE SET FORTH ON THE SCHEDULE OF INVESTORS ATTACHED
THERETO AS EXHIBIT A. EXECUTION AND DELIVERY OF THIS SIGNATURE PAGE BY THE
UNDERSIGNED REPRESENTS THE UNDERSIGNED'S AGREEMENT TO BECOME A PARTY TO THE
VOTING AGREEMENT AS AN "INVESTOR."
ATGF II
By:_____________________________
Name:___________________________
Title:__________________________
Beagle Limited
By:_____________________________
Name:___________________________
Title:__________________________
Global Retail Partners, L.P.
By:_____________________________
Name:___________________________
Title:__________________________
SIGNATURE PAGE TO VOTING AGREEMENT
<PAGE>
DLJ Diversified Partners, L.P.
By:_____________________________
Name:___________________________
Title:__________________________
DLJ Diversified Partners-A, L.P.
By:_____________________________
Name:___________________________
Title:__________________________
GRP Partners, L.P.
By:_____________________________
Name:___________________________
Title:__________________________
Global Retail Partners Funding, Inc.
By:_____________________________
Name:___________________________
Title:__________________________
2.
<PAGE>
DLJ ESC II, L.P.
By:_____________________________
Name:___________________________
Title:__________________________
Waelinvest
By:_____________________________
Name:___________________________
Title:__________________________
Watershed Capital I, L.P.
By: Watershed Capital G.P. I, L.P.
Its General Partner
By: Watershed Capital G.P. I, L.L.C.
Its General Partner
By:____________________
Ralph C. Derrickson
Managing Member
Dated: As of _______________, 1999
--------------------------------
Diane H. Daggatt
--------------------------------
Bert Kolde
3.
<PAGE>
Agreed to and Accepted By:
Mercata, Inc.
110 110th Avenue NE, Suite 390
Bellevue, WA 98004
--------------------------------
Thomas Van Horn
President
4.
<PAGE>
Exhibit A
LIST OF INVESTORS
Investor
Vulcan Ventures Incorporated
Highland Capital Partners IV Limited Partnership
Highland Entrepreneurs' Fund IV Limited Partnership
ATGF II
Beagle Limited
Global Retail Partners, L.P.
DLJ Diversified Partners, L.P.
DLJ Diversified Partners - A, L.P.
GRP Partners, L.P.
Global Retail Partners Funding, Inc.
DLJ ESC II L.P.
Waelinvest
Watershed Capital I, L.P.
Diane H. Daggatt
Bert Kolde
VOTING AGREEMENT
<PAGE>
Exhibit G
FINANCIAL STATEMENTS
Mercata, Inc.
Balance Sheet
(in thousands)
Dec - 98 Aug - 99
Actual Actual
---------- ----------
Cash 813 1,905
Accounts Receivable 0 44
Reserve for Bad Debts 0 0
---------- ----------
Net Trade Receivables 0 44
Inventory 0 830
Prepaid Expenses 112 1,175
Other Current Assets 51 7
---------- ----------
Total Current Assets 976 3,962
Fixed Assets, Net 844 3,043
Long-Term Assets 38 44
---------- ----------
TOTAL ASSETS 1,859 7,049
========== ==========
Accounts Payable 605 2,026
Accrued Payroll & Payroll Taxes 170 424
Other Liabilities 0 64
Intercompany Payable 184 1
Accrued Interest Payable 18 0
Current Portion of Long-Term Debt 2,402 3
---------- ----------
Total Current Liabilities 3,379 2,518
Loan Payable - Vulcan, less current 0 0
Capital Lease Payable, less current 15 13
---------- ----------
Total Liabilities 3,394 2,531
Paid-In Capital - Common Stock 400 103
Paid-In Capital - Preferred Stock 0 14,700
Accumulated Deficit (1,935) (10,285)
---------- ----------
Total Equity (1,535) 4,517
---------- ----------
TOTAL LIABILITIES & EQUITY 1,859 7,049
========== ==========
Mercata, Inc. Confidential
<PAGE>
Mercata, Inc.
Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Aug - 99 Q3 - 1999 1999 YTD
Actual QTD Actual Actual
------------ ------------- ------------
<S> <C> <C> <C>
Cash provided (used) by operating activities:
Net income (loss) for the period (2,440) (3,586) (8,350)
Adjustments:
Depreciation and amortization 95 188 402
(Increase) decrease in assets:
Net Trade Receivables (28) (37) (44)
Inventory (40) (81) (830)
Prepaid Expenses 168 (1,046) (1,063)
Other Current Assets (3) 1 43
Long-term Assets 1 1 (6)
Increase (decrease) in liabilities:
Accounts Payable 1,265 634 1,421
Accrued Payroll & Payroll Taxes 91 (71) 254
Other Liabilities 50 (265) 64
Intercompany Payable 0 0 (182)
Accrued Interest Payable 0 0 (16)
------------ ------------- ------------
Net cash provided by (used in) operating activities (843) (4,261) (8,308)
Investing Activities:
Fixed asset additions (30) (125) (2,601)
Financing activities:
Proceeds from issuance of stock 0 (0) 14,400
Proceeds from exercise of stock options 0 1 3
Proceeds from debt and capital leases 0 0 1,200
Principal payments on debt and leases (0) (0) (3,602)
------------ ------------- ------------
Net cash provided by (used in) financing activities (0) 1 12,001
Net increase (decrease) in cash (873) (4,386) 1,091
Cash, beginning of period 2,778 6,290 813
------------ ------------- ------------
Cash, end of period 1,905 1,905 1,905
============ ============= ============
</TABLE>
Mercata, Inc. Confidential
<PAGE>
EXHIBIT H
MERCATA, INC.
EMPLOYEE PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by Mercata, Inc.
(the "Company"), and the compensation now and hereafter paid to me, I hereby
agree as follows:
1. Nondisclosure
1.1 Recognition of Company's Rights; Nondisclosure. At all times during my
employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.
1.2 Proprietary Information. The term "Proprietary Information" shall mean
any and all confidential and/or proprietary knowledge, data or information of
the Company. By way of illustration but not limitation, "Proprietary
Information" includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "Inventions"); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the Company.
Notwithstanding the foregoing, it is understood that, at all such times, I am
free to use information which is generally known in the trade or industry, which
is not gained as result of a breach of this Agreement, and my own, skill,
knowledge, know-how and experience to whatever extent and in whichever way I
wish.
1.3 Third Party Information. I understand, in addition, that the Company
has received and in the future will receive from third parties confidential or
proprietary information ("Third Party Information") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless
expressly authorized by an officer of the Company in writing.
1.4 No Improper Use of Information of Prior Employers and Others. During
my employment by the Company I will not improperly use or disclose any
confidential information or trade secrets, if any, of any former employer or any
other person to whom I have an obligation of confidentiality, and I will not
bring onto the premises of the Company any unpublished documents or any property
belonging to any former employer or any other person to whom I have an
obligation of confidentiality unless consented to in writing by that former
employer or person. I will use in the performance of my duties only information
which is generally known and used by persons with training and experience
comparable to my own, which is common knowledge in the industry or otherwise
legally in the public domain, or which is otherwise provided or developed by the
Company.
2. Assignment of Inventions.
2.1 Proprietary Rights. The term "Proprietary Rights" shall mean all trade
secret, patent, copyright, mask work and other intellectual property rights
throughout the world.
2.2 Prior Inventions. Inventions, if any, patented or unpatented, which I
made prior to the commencement of my employment with the Company are excluded
from the scope of this Agreement. To preclude any possible uncertainty, I have
set forth on Exhibit A (Previous Inventions) attached hereto a complete list of
all Inventions that I have, alone or jointly with others, conceived, developed
or reduced
1.
<PAGE>
to practice or caused to be conceived, developed or reduced to practice prior to
the commencement of my employment with the Company, that I consider to be my
property or the property of third parties and that I wish to have excluded from
the scope of this Agreement (collectively referred to as "Prior Inventions"). If
disclosure of any such Prior Invention would cause me to violate any prior
confidentiality agreement, I understand that I am not to list such Prior
Inventions in Exhibit A but am only to disclose a cursory name for each such
invention, a listing of the party(ies) to whom it belongs and the fact that full
disclosure as to such inventions has not been made for that reason. A space is
provided on Exhibit A for such purpose. If no such disclosure is attached, I
represent that there are no Prior Inventions. If, in the course of my employment
with the Company, I incorporate a Prior Invention into a Company product,
process or machine, the Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license (with rights to
sublicense through multiple tiers of sublicensees) to make, have made, modify,
use and sell such Prior Invention. Notwithstanding the foregoing, I agree that I
will not incorporate, or permit to be incorporated, Prior Inventions in any
Company Inventions without the Company's prior written consent.
2.3 Assignment of Inventions. Subject to Sections 2.4, and 2.6, I hereby
assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company. Inventions
assigned to the Company, or to a third party as directed by the Company pursuant
to this Section 2, are hereinafter referred to as "Company Inventions."
2.4 Nonassignable Inventions. I recognize that, my obligation to assign
shall not apply to any Invention about which I can prove that: (i) it was
developed entirely on my own time; and (ii) no equipment, supplies, facility,
services, or trade secret information of the Company was used in its
development; and (iii) it does not relate (a) directly to the business of the
Company or (b) to the actual or demonstrably anticipated research or development
of the Company; and (iv) it does not result from any work performed by me for
the Company (a "Nonassignable Invention").
2.5 Obligation to Keep Company Informed. During the period of my
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after termination
of employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify as a Nonassignable
Invention; and I will at that time provide to the Company in writing all
evidence necessary to substantiate that belief. The Company will keep in
confidence and will not use for any purpose or disclose to third parties without
my consent any confidential information disclosed in writing to the Company
pursuant to this Agreement relating to Nonassignable Inventions. I will preserve
the confidentiality of any Invention that does not fully qualify as a
Nonassignable Invention.
2.6 Government or Third Party. I also agree to assign all my right, title
and interest in and to any particular Company Invention to a third party,
including without limitation the United States, as directed by the Company.
2.7 Works for Hire. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of my
employment and which are protectable by copyright are "works made for hire,"
pursuant to United States Copyright Act (17 U.S.C., Section 101).
2.8 Enforcement of Proprietary Rights. I will assist the Company in every
proper way to obtain, and from time to time enforce, United States and foreign
Proprietary Rights relating to Company Inventions in any and all countries. To
that end I will execute, verify and deliver such documents and perform such
other acts (including appearances as a witness) as the Company may reasonably
request for use in applying for, obtaining, perfecting, evidencing, sustaining
and enforcing such Proprietary Rights and the assignment thereof. In addition,
I will execute, verify and deliver assignments of such Proprietary Rights to the
Company or its designee. My obligation to assist the Company with respect to
Proprietary Rights relating to such Company Inventions in any and all countries
shall continue beyond the termination of my employment, but the Company shall
compensate me at a reasonable rate after my termination for the time actually
spent by me at the Company's request on such assistance.
2.
<PAGE>
In the event the Company is unable for any reason, after reasonable effort, to
secure my signature on any document needed in connection with the actions
specified in the preceding paragraph, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and attorney
in fact, which appointment is coupled with an interest, to act for and in my
behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.
3. Records. I agree to keep and maintain adequate and current records (in the
form of notes, sketches, drawings and in any other form that may be required by
the Company) of all Proprietary Information developed by me and all Inventions
made by me during the period of my employment at the Company, which records
shall be available to and remain the sole property of the Company at all times.
4. Additional Activities. I agree that during the period of my employment by
the Company I will not, without the Company's express written consent, engage in
any employment or business activity which is competitive with, or would
otherwise conflict with, my employment by the Company. I agree further that for
the period of my employment by the Company and for one (l) year after the date
of termination of my employment by the Company I will not induce any employee of
the Company to leave the employ of the Company.
5. No Conflicting Obligation. I represent that my performance of all the terms
of this Agreement and as an employee of the Company does not and will not breach
any agreement to keep in confidence information acquired by me in confidence or
in trust prior to my employment by the Company. I have not entered into, and I
agree I will not enter into, any agreement either written or oral in conflict
herewith.
6. Return of Company Documents. When I leave the employ of the Company, I will
deliver to the Company any and all drawings, notes, memoranda, specifications,
devices, formulas, and documents, together with all copies thereof, and any
other material containing or disclosing any Company Inventions, Third Party
Information or Proprietary Information of the Company. I further agree that any
property situated on the Company's premises and owned by the Company, including
disks and other storage media, filing cabinets or other work areas, is subject
to inspection by Company personnel at any time with or without notice. Prior to
leaving, I will cooperate with the Company in completing and signing the
Company's termination statement.
7. Legal and Equitable Remedies. Because my services are personal and unique
and because I may have access to and become acquainted with the Proprietary
Information of the Company, the Company shall have the right to enforce this
Agreement and any of its provisions by injunction, specific performance or other
equitable relief, without bond and without prejudice to any other rights and
remedies that the Company may have for a breach of this Agreement.
8. Notices. Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as the
party shall specify in writing. Such notice shall be deemed given upon personal
delivery to the appropriate address or if sent by certified or registered mail,
three (3) days after the date of mailing.
9. Notification of New Employer. In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my rights
and obligations under this Agreement.
10. General Provisions.
10.1 Governing Law; Consent to Personal Jurisdiction. This Agreement will
be governed by and construed according to the laws of the State of Washington,
as such laws are applied to agreements entered into and to be performed entirely
within Washington between Washington residents. I hereby expressly consent to
the personal jurisdiction of the state and federal courts located in King
County, Washington for any lawsuit filed there against me by Company arising
from or related to this Agreement.
10.2 Severability. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity or subject, it shall be construed
by limiting and
3.
<PAGE>
reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.
10.3 Successors and Assigns. This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and will be for the
benefit of the Company, its successors, and its assigns.
10.4 Survival. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.
10.5 Employment. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate my employment at any time, with or without cause.
10.6 Waiver. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach. No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.
10.7 Entire Agreement. The obligations pursuant to Sections 1 and 2 of
this Agreement shall apply to any time during which I was previously employed,
or am in the future employed, by the Company as a consultant if no other
agreement governs nondisclosure and assignment of inventions during such period.
This Agreement is the final, complete and exclusive agreement of the parties
with respect to the subject matter hereof and supersedes and merges all prior
discussions between us. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in
writing and signed by the party to be charged. Any subsequent change or changes
in my duties, salary or compensation will not affect the validity or scope of
this Agreement.
This Agreement shall be effective as of the first day of my employment with
the Company, namely: _______________, 19__.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.
Dated:______________________________________
- --------------------------------------------
(Signature)
- --------------------------------------------
(Printed Name)
ACCEPTED AND AGREED TO:
MERCATA, INC.
By:_________________________________________
Title:______________________________________
- --------------------------------------------
(Address)
- --------------------------------------------
Dated:______________________________________
4.
<PAGE>
Exhibit A
TO: Mercata, Inc.
FROM: __________________
DATE: __________________
SUBJECT: Previous Inventions
1. Except as listed in Section 2 below, the following is a complete list of
all inventions or improvements relevant to the subject matter of my employment
by Mercata, Inc. (the "Company") that have been made or conceived or first
reduced to practice by me alone or jointly with others prior to my engagement by
the Company:
[_] No inventions or improvements.
[_] See below:
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
[_] Additional sheets attached.
2. Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following party(ies):
Invention or Improvement Party(ies) Relationship
1. ________________________ ________________ _________________________
2. ________________________ ________________ _________________________
3. ________________________ ________________ _________________________
[_] Additional sheets attached.
<PAGE>
Exhibit I
FORM OF LEGAL OPINION
Ladies and Gentlemen:
We have acted as counsel for Mercata, Inc., a Delaware corporation (the
"Company"), in connection with the issuance and sale of ________ shares of the
Company's Series B Preferred Stock ("Shares") to the Purchasers under the Series
B Preferred Stock Purchase Agreement dated as of _____________ (the
"Agreement"). We are rendering this opinion pursuant to Section 5.1(j) of the
Agreement. Except as otherwise defined herein, capitalized terms used but not
defined herein have the respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreement by the various parties and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement, the Investor Rights Agreement, the Co-Sale
Agreement and the Voting Agreement (the "Transaction Agreements")), where
authorization, execution and delivery are prerequisites to the effectiveness of
such documents. We have also assumed: that all individuals executing and
delivering documents had the legal capacity to so execute and deliver; that you
have received all documents you were to receive under the Agreement; that the
Transaction Agreements are obligations binding upon you; and that there are no
extrinsic agreements or understandings among the parties to the Transaction
Agreements that would modify or interpret the terms of the Transaction
Agreements or the respective rights or obligations of the parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of Washington and the General
Corporation Law of the State of Delaware. We express no opinion as to whether
the laws of any particular jurisdiction apply, and no opinion to the extent that
the laws of any jurisdiction other than those identified above are applicable to
the subject matter hereof. We are not rendering any opinion as to compliance
with any antifraud law, rule or regulation relating to securities, or to the
sale or issuance thereof, or as to reportability of the sale of the Shares under
the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended.
<PAGE>
With regard to our opinion in paragraph 2 below, we express no opinion as to the
obligation of the Company to qualify as a foreign corporation to do business in
the State of Pennsylvania.
With regard to our opinion in paragraph 4 below, we have examined and relied
upon a certificate executed by an officer of the Company, to the effect that the
consideration for all outstanding shares of capital stock of the Company was
received by the Company in accordance with the provisions of the applicable
Board of Directors resolutions and any plan or agreement relating to the
issuance of such shares, and we have undertaken no independent verification with
respect thereto.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power to own its property and
assets and to conduct its business as it is currently being conducted and,
to the best of our knowledge, is qualified as a foreign corporation to do
business and is in good standing in each jurisdiction in the United States
in which the ownership of its property or the conduct of its business
requires such qualification and where any statutory fines or penalties or
any corporate disability imposed for the failure to qualify would
materially and adversely affect the Company, its assets, financial
condition or operations.
3. The Transaction Agreements have been duly and validly authorized, executed
and delivered by the Company and constitute valid and binding agreements of
the Company enforceable against the Company in accordance with their terms,
except as rights to indemnity under Section 2.9 of the Investor Rights
Agreement may be limited by applicable laws and except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting creditors' rights,
and subject to general equity principles and to limitations on availability
of equitable relief, including specific performance.
4. The Company's authorized capital stock consists of (a) forty million
(40,000,000) shares of Common Stock, par value $0.001 per share, of which
one million four hundred forty-four thousand fifty-eight (1,444,058) shares
are issued and outstanding, and (b) thirty million (30,000,000) shares of
Preferred Stock, par value $0.001 per share, fourteen million (14,000,000)
of which have been designated Series A Preferred Stock, all of which are
issued and outstanding, and twelve million (12,000,000) of which have been
designated Series B Preferred Stock, none of which are issued and
outstanding (excluding the Shares). The outstanding shares of Common Stock
and of Preferred Stock have been duly authorized and validly issued and are
fully paid and non-assessable. The rights, preferences and privileges of
the Series A Preferred Stock and the Series B Preferred Stock are as stated
in the Restated Certificate of Incorporation. The Shares have been duly
authorized, and upon issuance and delivery against payment therefor in
accordance with the terms of the Agreement, the Shares will be validly
issued, outstanding, fully paid
<PAGE>
and non-assessable. The shares of Common Stock issuable upon conversion of
the Shares have been duly authorized, and upon issuance and delivery upon
conversion of the Shares, will be validly issued, outstanding, fully paid
and non-assessable. To the best of our knowledge, there are no options,
warrants, conversion privileges, preemptive rights or other rights
presently outstanding to purchase any of the authorized but unissued
capital stock of the Company, other than the conversion privileges of the
Series A Preferred Stock, rights created in connection with the
transactions contemplated by the Agreement, and seven million four hundred
thousand (7,400,000) shares reserved for issuance under the Company's 1999
Equity Incentive Plan.
5. The execution and delivery of the Agreement by the Company and the issuance
of the Shares pursuant thereto do not violate any provision of the
Company's Certificate of Incorporation or Bylaws.
6. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any
court or administrative agency that questions the validity of the
Transaction Agreements or might result, either individually or in the
aggregate, in any material adverse change in the assets, financial
condition, or operations of the Company that has not been disclosed in
writing to the Investors.
7. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or
governmental body in the United States required for the consummation by the
Company of the transactions contemplated by the Agreement, have been made
or obtained, except for the filing of a Form D pursuant to Securities and
Exchange Commission Regulation D and the filings required by the securities
laws of the state of Washington.
8. The offer and sale of the Shares are exempt from the registration
requirements of the Securities Act of 1933, as amended.
<PAGE>
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
Cooley Godward llp
By:___________________________
Christopher W. Wright
<PAGE>
EXHIBIT 10.14
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.
CONVERTIBLE PROMISSORY NOTE
$[Amount] September 30, 1999
Bellevue, Washington
For value received, Mercata, Inc., a Delaware corporation (the "Company"),
promises to pay to ____________________ (the "Holder"), the principal sum of
____________________ Dollars ($__________). No interest shall accrue or be paid
on this Note; provided, that if this Note shall not have converted in accordance
with Section 2 below on or before November 30, 1999, this Note shall bear
interest accruing from the date hereof on the unpaid principal amount at a rate
equal to the lower of (a) 7.00% per annum, compounded annually or (b) the
highest rate permitted by law. This Note is one of a series of Convertible
Promissory Notes containing substantially identical terms and conditions issued
pursuant to that certain Series B Preferred Stock Purchase Agreement, dated
September 30, 1999 (the "Purchase Agreement"). Such Notes are referred to
herein as the "Notes," and the holders thereof are referred to herein as the
"Holders." This Note is subject to the following terms and conditions.
1. Maturity. Unless converted as provided in Section 2, this Note will
automatically mature and be due and payable on November 30, 1999 (the "Maturity
Date"). Subject to Section 2 below, any interest shall accrue on this Note but
shall not be due and payable until the Maturity Date.
2. Conversion
(A) HSR Clearance. As soon as practicable after the Closing (as defined
in the Purchase Agreement), the Company and the Holder hereby agree to file or
to cause to be filed with the United States Federal Trade Commission (the "FTC")
and the Antitrust Division of the United States Department of Justice (the
"DOJ") pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") all requisite documents and notifications in order to
provide for the conversion of this Note into shares of the Company's Series B
Preferred Stock. Upon the earlier of one business day after (i) the date all
required clearances or pre-termination notices under the HSR Act have been
received from the FTC and the DOJ (or all applicable waiting periods have
expired) or (ii) the date the Holder and the Company are no longer required by
law to make filings under the HSR to convert this Note into capital stock, the
entire principal amount of this Note shall automatically convert into fully-paid
and non-assessable shares of the Company's Series B Preferred Stock (the
"Stock"); provided, however, the automatic conversion of such principal amount
into shares of the Company's
1.
<PAGE>
Series B Preferred Stock shall be conditioned upon (A) the Company having
provided to the Holder a compliance certificate in the form attached hereto as
Exhibit A or (B) the Holder having waived such applicable terms, conditions or
certifications included in such certificate, either individually or in the
aggregate. The number of shares of Stock to be issued upon such conversion shall
be equal to the quotient obtained by dividing (i) the entire outstanding
principal amount of this Note by (ii) $3.125 (as adjusted for any future stock
splits, stock dividends, recapitalizations or the like to the Stock), provided
that no fractional shares shall be issued. In the event that the required
clearances from the FTC and the DOJ are not obtained, this Note shall not be
convertible into the Stock.
(b) Redemption. In the event the Company consummates a Liquidity
Event (as defined below) prior to the conversion of this note pursuant to
Section 2(a), then the Company shall redeem this Note for an aggregate
consideration substantially equivalent to the consideration which would have
been received by the Holder had the Note been converted into Series B Preferred
Stock immediately prior to the consummation of such Liquidity Event, as
determined in the reasonable and good faith judgement of the Board of Directors
of the Company. For the Purposes of hereof "Liquidity Event" shall mean (i) any
consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization, in which the
stockholders of the Company immediately prior to such consolidation, merger or
reorganization, own less than 50% of the Company's voting power immediately
after such consolidation, merger or reorganization, or any transaction or series
of related transactions to which the Company is a party in which in excess of
50% of the Company's voting power is transferred (ii) any voluntary or
involuntary liquidation or dissolution of the Company, or (iii) the sale of all
or substantially all the assets of the Company.
(c) Mechanics and Effect of Conversion. No fractional shares of the
Company's capital stock will be issued upon conversion of this Note. In lieu of
any fractional share to which the Holder would otherwise be entitled, the
Company will pay to the Holder in cash the amount of the unconverted principal
and interest balance of this Note that would otherwise be converted into such
fractional share. Upon conversion of this Note pursuant to this Section 2, the
Holder shall surrender this Note, duly endorsed, at the principal offices of the
Company or any transfer agent of the Company. At its expense, the Company will,
as soon as practicable thereafter, issue and deliver to such Holder, at such
principal office, a certificate or certificates for the number of shares to
which such Holder is entitled upon such conversion, together with any other
securities and property to which the Holder is entitled upon such conversion
under the terms of this Note, including a check payable to the Holder for any
cash amounts payable as described herein. Upon conversion of this Note, the
Company will be forever released from all of its obligations and liabilities
under this Note with regard to that portion of the principal amount and accrued
interest being converted including without limitation the obligation to pay such
portion of the principal amount and accrued interest.
3. Payment. All payments shall be made in lawful money of the United
States of America at such place as the Holder hereof may from time to time
designate in writing to the Company. Payment shall be credited first to the
accrued interest then due and payable and the remainder applied to principal.
Prepayment of this Note may be made without penalty, if the
2.
<PAGE>
Company's Board of Directors has determined, in consultation with legal counsel,
and with the consent of the Holders of a majority of the outstanding principal
amount of the Notes, that the required clearances or pre-termination notices
under the HSR Act specified in Section 2(a) are not likely to be obtained,
otherwise this note made not prepaid without the consent of the Holders of a
majority of the outstanding principal amount of the Notes; provided, however,
that the Company may repay the Note on or after November 30, 1999 in the event
the conditions to conversion set forth in Section 2 hereof have not occurred.
4. Transfer; Successors and Assigns. The terms and conditions of this
Note shall inure to the benefit of and be binding upon the respective successors
and assigns of the parties. Notwithstanding the foregoing, the Company may not
assign, pledge or otherwise transfer this Note without the prior written consent
of the Holder, which shall not be unreasonably withheld, and the Holder may not
assign, pledge, or otherwise transfer this Note without the prior written
consent of the Company, which shall not be unreasonably withheld. Subject to the
preceding sentence, this Note may be transferred only upon surrender of the
original Note for registration of transfer, duly endorsed, or accompanied by a
duly executed written instrument of transfer in form satisfactory to the Holder.
Thereupon, a new note for the same principal amount and interest will be issued
to, and registered in the name of, the transferee. Interest and principal are
payable only to the registered holder of this Note.
5. Governing Law. This Note and all acts and transactions pursuant hereto
and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
6. Notices. Any notice required or permitted by this Note shall be in
writing and shall be deemed sufficient upon delivery, when delivered personally
or one business day after being sent by a nationally-recognized overnight
delivery service (such as Federal Express or UPS), or forty-eight (48) hours
after being deposited in the U.S. mail, as certified or registered mail, with
postage prepaid, addressed to the party to be notified at such party's address
as set forth below or as subsequently modified by written notice.
7. Amendments and Waivers. Any term of this Note may be amended only with
the written consent of the Company and at least a majority in interest of the
Holders. Any amendment or waiver effected in accordance with this Section 7
shall be binding upon the Company, the Holders and each transferee of the Notes.
8. Waiver. The Company waives presentment and demand for payment, notice
of dishonor, protest and notice of protest of this Note, and shall pay all costs
of collection when incurred, including, without limitation, reasonable
attorneys' fees, costs and other expenses.
The right to plead any and all statutes of limitations as a defense to any
demands hereunder is hereby waived to the full extent permitted by law.
3.
<PAGE>
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
COMPANY:
Mercata, Inc.
By: __________________________________________
Name: ________________________________________
(print)
Title: _______________________________________
Address: 110 110/th/ Avenue Northeast, Suite
Bellevue, WA 98004
AGREED TO AND ACCEPTED:
_____________________________
By:__________________________
Name:________________________
(print)
Title:_______________________
Address:_____________________
<PAGE>
Exhibit A
COMPLIANCE CERTIFICATE
The undersigned, Tom Van Horn, the President and Chief Executive Officer of
Mercata, Inc., a Delaware corporation (the "Company"), certifies that he is
authorized to execute this Compliance Certificate for and on behalf of the
Company, and further certifies that:
1. The representations and warranties of the Company contained in Section
3.19 of the Series B Preferred Stock Purchase Agreement, dated September ____,
1999 (the "Purchase Agreement"), are true and correct as though made on and as
of the date hereof.
2. The Company has performed or fulfilled all covenants, agreements and
conditions contained in the Purchase Agreement and that certain Convertible
Promissory Note, dated September ___, 1999, in the amount of $2,300,000.00 of
the Company in favor of Highland Capital Partners IV Limited Partnership to be
performed or fulfilled by the Company on or prior to the date hereof.
In Witness Whereof, the undersigned has hereunto set his hand this _______
day of _________________, 1999.
_____________________________________________
Tom Van Horn
President and Chief Executive Officer
<PAGE>
EXHIBIT 10.15
MERCATA, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
Table of Contents
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1. Agreement To Sell And Purchase............................. 1
1.1 Authorization of Shares............................... 1
1.2 Sale and Purchase..................................... 1
2. Closing, Delivery And Payment.............................. 2
2.1 Closing............................................... 2
2.2 Delivery.............................................. 2
2.3 Subsequent Sales of Shares............................ 2
3. Representations And Warranties Of The Company.............. 2
3.1 Organization, Good Standing and Qualification......... 2
3.2 Subsidiaries.......................................... 3
3.3 Capitalization; Voting Rights......................... 3
3.4 Authorization; Binding Obligations.................... 3
3.5 Financial Statements.................................. 4
3.6 Liabilities........................................... 4
3.7 Agreements; Action.................................... 4
3.8 Obligations to Related Parties........................ 5
3.9 Changes............................................... 5
3.10 Title to Properties and Assets; Liens, Etc............ 6
3.11 Patents and Trademarks................................ 7
3.12 Compliance with Other Instruments..................... 7
3.13 Litigation............................................ 7
3.14 Tax Returns and Payments.............................. 8
3.15 Employees............................................. 8
3.16 Proprietary Information and Inventions Agreements..... 8
3.17 Registration Rights and Voting Rights................. 9
3.18 Compliance with Laws; Permits......................... 9
3.19 Offering Valid........................................ 9
3.20 Full Disclosure....................................... 9
3.21 Insurance............................................. 10
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Table of Contents
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4. Representations And Warranties Of The Purchasers............. 10
4.1 Requisite Power and Authority........................... 10
4.2 Investment Representations.............................. 10
4.3 Transfer Restrictions................................... 11
5. Conditions To Closing........................................ 12
5.1 Conditions to Purchasers' Obligations at the Closing.... 12
5.2 Conditions to Obligations of the Company................ 13
6. Miscellaneous................................................ 14
6.1 Governing Law........................................... 14
6.2 Survival................................................ 14
6.3 Successors and Assigns.................................. 14
6.4 Entire Agreement........................................ 14
6.5 Severability............................................ 14
6.6 Amendment and Waiver.................................... 14
6.7 Delays or Omissions..................................... 15
6.8 Waiver of Conflicts..................................... 15
6.9 Notices................................................. 15
6.10 Expenses................................................ 16
6.11 Attorneys' Fees......................................... 16
6.12 Titles and Subtitles.................................... 16
6.13 Counterparts............................................ 16
6.14 Broker's Fees........................................... 16
6.15 Exculpation Among Purchasers............................ 16
6.16 Confidentiality......................................... 16
6.17 Pronouns................................................ 17
6.18 California Corporate Securities Law..................... 17
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List Of Exhibits
Exhibit A Schedule of Purchasers
Exhibit B Form of Convertible Promissory Note
Exhibit C Amended and Restated Certificate of Incorporation
Exhibit D Amended and Restated Investor Rights Agreement
Exhibit E Amended and Restated Co-Sale Agreement
Exhibit F Amended and Restated Voting Agreement
Exhibit G Proprietary Information and Inventions Agreement
Exhibit H Form of Legal Opinion
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MERCATA, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Series C Preferred Stock Purchase Agreement (this "Agreement") is
entered into as of March 1, 2000, by and among Mercata, Inc., a Delaware
corporation (the "Company") and each of those persons and entities, severally
and not jointly, whose names are set forth on the Schedule of Purchasers
attached hereto as Exhibit A (which persons and entities are hereinafter
collectively referred to as "Purchasers" and each individually as a
"Purchaser").
Recitals
Whereas, the Company has authorized the sale and issuance of an aggregate
of three million three hundred sixty-three thousand (3,363,000) shares of its
Series C Preferred Stock (the "Shares") and the sale and issuance of Convertible
Promissory Notes in the aggregate principle amount of nine million nine hundred
ninety-nine thousand nine hundred ninety-nine dollars and eighty-nine cents
($9,999,999.89) and convertible into eight hundred forty thousand seven hundred
fifty shares (840,750) shares of the Shares in substantially the form attached
hereto as Exhibit B (each a "Note" and collectively the "Notes");
Whereas, Purchasers desire to purchase the Shares and/or the Notes on the
terms and conditions set forth herein; and
Whereas, the Company desires to issue and sell the Shares and the Notes to
Purchasers on the terms and conditions set forth herein;
Now, Therefore, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. Agreement To Sell And Purchase.
1.1 Authorization of Shares. On or prior to the Closing (as defined
in Section 2 below), the Company shall have authorized (a) the sale and issuance
to Purchasers of the Shares; (b) the issuance of such shares of Common Stock to
be issued upon conversion of the Shares (the "Conversion Shares") and; (c) the
issuance of such shares of Preferred Stock to be issued upon conversion of the
Notes. The Shares and the Conversion Shares shall have the rights, preferences,
privileges and restrictions set forth in the Amended and Restated Certificate of
Incorporation of the Company, in the form attached hereto as Exhibit C (the
"Restated Charter"). The shares of Series C Preferred Stock issued upon
conversion of the Notes shall be deemed "Shares" for all purposes under this
Agreement.
1.2 Sale and Purchase. Subject to the terms and conditions hereof, at
the Closing (as defined in Section 2 below) the Company hereby agrees to issue
and sell to each Purchaser, severally and not jointly, and each Purchaser agrees
to purchase from the Company, severally and not jointly, the number of Shares
set forth opposite such Purchaser's name on Exhibit A, at a purchase price of
eleven dollars and eighty-nine and four thousand one hundred
1.
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forty-two ten-thousands cents ($11.894142) per share and the Note in the
principal amount, if any, specified for such Purchaser on Exhibit A.
2. Closing, Delivery And Payment.
2.1 Closing. The closing of the sale and purchase of the Shares and
the Notes under this Agreement (the "Closing") shall take place at 5:00 p.m. on
the date hereof, at the offices of Cooley Godward LLP, 5200 Carillon Point,
Kirkland, WA 98033 or at such other time or place as the Company and Purchasers
may mutually agree (such date is hereinafter referred to as the "Closing Date").
2.2 Delivery. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to each Purchaser a certificate representing
the number of Shares and, if applicable, the Note to be purchased at the Closing
by such Purchaser, against payment of the purchase price therefor by check, wire
transfer made payable to the order of the Company, cancellation of indebtedness
or any combination of the foregoing.
2.3 Subsequent Sales of Shares. At any time on or before February
29, 2000, the Company may sell up to the balance of the authorized shares of
Series C Preferred Stock not sold at the Closing to such persons as may be
approved by the Board of Directors of the Company. All such sales shall be made
on the terms and conditions set forth in this Agreement, including, without
limitation, the representations and warranties by such Purchasers as set forth
in Section 4. Any Shares of Series C Preferred Stock sold pursuant to this
Section 2.3 shall be deemed to be "Shares" for all purposes under this Agreement
and any purchasers thereof shall be deemed to be "Purchasers" for all purposes
under this Agreement.
3. Representations And Warranties Of The Company.
Except as set forth on a Schedule of Exceptions delivered by the
Company to the Purchasers at the Closing, the Company hereby represents and
warrants to each Purchaser as of the date of this Agreement as follows:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Amended and Restated Investor Rights Agreement in the form
attached hereto as Exhibit D (the "Investor Rights Agreement"), the Amended and
Restated Co-Sale Agreement in the form attached hereto as Exhibit E (the "Co-
Sale Agreement") and the Amended and Restated Voting Agreement in the form
attached hereto as Exhibit F (the "Voting Agreement') (collectively, the
"Related Agreements"), to issue and sell the Shares and the Conversion Shares,
and to carry out the provisions of this Agreement, the Related Agreements and
the Restated Charter and to carry on its business as presently conducted and as
presently proposed to be conducted. The Company is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature of its activities and of its properties
(both owned and leased)
2.
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makes such qualification necessary, except for those jurisdictions in which
failure to do so would not have a material adverse effect on the Company or its
business.
3.2 Subsidiaries.The Company does not own or control any equity
security or other interest of any other corporation, limited partnership or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
3.3 Capitalization; Voting Rights. The authorized capital stock of
the Company, immediately prior to the Closing, will consist of 40,000,000 shares
of Common Stock, (par value $0.001 per share), 4,059,701 shares of which are
issued and outstanding and 30,000,000 shares of Preferred Stock (par value
$0.001 per share), 14,000,000 of which are designated Series A Preferred Stock,
all of which are issued and outstanding, 12,000,000 of which are designated
Series B Preferred Stock, 11,200,000 shares of which are issued and outstanding,
and 4,000,000 shares of Series C Preferred Stock, none of which are issued and
outstanding. All issued and outstanding shares of the Company's Common Stock and
Preferred Stock (a) have been duly authorized and validly issued, and (b) are
fully paid and non-assessable. The rights, preferences, privileges and
restrictions of the Shares are as stated in the Restated Charter. Each series of
Preferred Stock is convertible into Common Stock on a one-for-one basis. The
Conversion Shares have been duly and validly reserved for issuance. Other than
the 7,400,000 shares reserved for issuance under the Company's 1999 Equity
Incentive Plan, and except as may be granted pursuant to the Related Agreements,
there are no outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal), proxy or shareholder agreements,
or agreements of any kind for the purchase or acquisition from the Company of
any of its securities. Of such reserved shares of Common Stock, (i) 3,029,701
shares have been issued pursuant to the exercise of options, (ii) options to
purchase 3,118,594 shares have been granted and are currently outstanding, and
(iii) 1,664,205 shares of Common Stock remain available for issuance to
officers, directors, employees and consultants pursuant to such Equity Incentive
Plan. When issued in compliance with the provisions of this Agreement and the
Restated Charter, the Shares and the Conversion Shares will be validly issued,
fully paid and non-assessable, and will be free of any liens or encumbrances;
provided, however, that the Shares and the Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is proposed.
3.4 Authorization; Binding Obligations. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Shares pursuant hereto, the
Notes pursuant hereto and the Conversion Shares pursuant to the Notes and the
Restated Charter has been taken or will be taken prior to the Closing. The
Agreement, the Notes and the Related Agreements, when executed and delivered,
will be valid and binding obligations of the Company enforceable in accordance
with their terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (b) general principles of equity that restrict
the availability of equitable remedies, and (c) to the extent that the
enforceability of the indemnification provisions in Section 2.9 of the Investor
Rights Agreement may be limited by
3.
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applicable laws. The sale of the Shares and the Notes and the subsequent
conversion of the Shares and the Notes into Conversion Shares are not and will
not be subject to any preemptive rights or rights of first refusal that have not
been properly waived or complied with.
3.5 Financial Statements. The Company has made available to each
Purchaser its unaudited balance sheet as at December 31, 1999 (the "Statement
Date") and unaudited consolidated statement of income and cash flows for the
eight month period ending on the Statement Date (collectively, the "Financial
Statements"), copies of which were delivered by the Company to the Purchasers
prior to the Closing. The Financial Statements, together with the notes thereto
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated, except as
disclosed therein, and present fairly the financial condition and position of
the Company as of the Statement Date; provided, however, that the unaudited
financial statements are subject to normal recurring year-end audit adjustments
(which are not expected to be material), and do not contain all footnotes
required under generally accepted accounting principles.
3.6 Liabilities. The Company has no material liabilities and, to the
best of its knowledge, knows of no material contingent liabilities not disclosed
in the Financial Statements, except current liabilities incurred in the ordinary
course of business subsequent to the Statement Date which have not been, either
in any individual case or in the aggregate, materially adverse.
3.7 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby and
agreements between the Company and its employees with respect to the sale of the
Company's Common Stock, there are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates
or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $100,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) the transfer or license of any patent, copyright,
trade secret or other proprietary right to or from the Company (other than
licenses arising from the purchase of "off the shelf" or other standard
products), or (iii) indemnification by the Company with respect to infringements
of proprietary rights (other than indemnification obligations arising from
purchase, sale or license agreements entered into in the ordinary course of
business).
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities (other than with respect to dividend obligations,
distributions, indebtedness and other obligations incurred in the ordinary
course of business or as disclosed in the Financial Statements) individually in
excess of $100,000 or, in the case of indebtedness and/or liabilities
individually less than $100,000, in excess of $200,000 in the aggregate, (iii)
made any loans or advances to any person, other than ordinary
4.
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advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
3.8 Obligations to Related Parties. There are no obligations of the
Company to officers, directors, greater than 5% shareholders, or employees of
the Company other than (a) for payment of salary for services rendered, (b)
reimbursement for reasonable expenses incurred on behalf of the Company and (c)
for other standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Company). None of the officers,
directors or greater than 5% shareholders of the Company, or any members of
their immediate families, are indebted to the Company or have any direct or
indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company, except that officers, directors
and/or greater than 5% shareholders of the Company may own stock in publicly
traded companies which may compete with the Company. No officer, director or
greater than 5% shareholder, or any member of their immediate families, is,
directly or indirectly, interested in any material contract with the Company
(other than such contracts as relate to any such person's ownership of capital
stock or other securities of the Company). Except as may be disclosed in the
Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.9 Changes. Since the Statement Date, there has not been:
(a) Any change in the assets, liabilities, financial condition
or operations of the Company from that reflected in the Financial Statements,
other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a material
adverse effect on such assets, liabilities, financial condition, operations or
prospects of the Company;
(b) Any resignation or termination of any officer or key
employee of the Company; and the Company, to the best of its knowledge, does not
know of the impending resignation or termination of employment of any such
officer or key employee;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
5.
<PAGE>
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(f) Any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is
a party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects of
the Company;
(m) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
the Company; or
(n) Any arrangement or commitment by the Company to do any of
the acts described in subsection (a) through (m) above.
3.10 Title to Properties and Assets; Liens, Etc. The Company has good
and marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the Financial
Statements, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent, (b) minor liens and
encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of the Company, and (c)
those that have otherwise arisen in the ordinary course of business. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company are in good operating condition and repair and are
reasonably fit and usable for the purposes for which they are being used. The
Company is in compliance with all material terms of each lease to which it is a
party or is otherwise bound.
3.11 Patents and Trademarks. To the best of its knowledge, the Company
owns or possesses sufficient legal rights to all patents, trademarks, service
marks, trade names,
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copyrights, trade secrets, licenses, information and other proprietary rights
and processes necessary for its business as now conducted and as presently
proposed to be conducted, without any known infringement of the rights of
others. There are no outstanding options, licenses or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from the purchase of "off
the shelf" or standard products. The Company has not received any communications
alleging that the Company has violated or, by conducting its business as
presently proposed, would violate any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights of any
other person or entity. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with their duties to
the Company or that would conflict with the Company's business as presently
proposed to be conducted. Neither the execution nor delivery of this Agreement
or the Related Agreements, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as presently
proposed, will, to the Company's knowledge, conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any employee is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions,
trade secrets or proprietary information of any of its employees made prior to
their employment by the Company, except for inventions, trade secrets or
proprietary information that have been assigned to the Company.
3.12 Compliance with Other Instruments. The Company is not in
violation or default of any term of its Restated Charter or Bylaws, or, to the
Company's knowledge, of any provision of any mortgage, indenture, contract,
agreement, instrument or contract to which it is party or by which it is bound
or of any judgment, decree, order, or writ. The execution, delivery, and
performance of and compliance with this Agreement, the Notes and the Related
Agreements, and the issuance and sale of the Shares pursuant hereto and of the
Conversion Shares and the Notes pursuant to the Notes and Restated Charter, will
not, with or without the passage of time or giving of notice, result in any such
material violation, or be in conflict with or constitute a default under any
such term, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or non-renewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.
3.13 Litigation. There is no action, suit, proceeding or
investigation pending or to the Company's knowledge currently threatened in
writing against the Company that questions the validity of this Agreement, the
Notes or the Related Agreements or the right of the Company to enter into any of
such agreements, or to consummate the transactions contemplated hereby or
thereby, or which might result, either individually or in the aggregate, in any
material adverse change in the assets, condition, affairs or prospects of the
Company, financially or otherwise, or any change in the current equity ownership
of the Company, nor is the Company aware that there is any basis for any of the
foregoing. The foregoing includes, without limitation, actions pending or
threatened in writing (or any basis therefor known to the Company) involving the
prior
7.
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employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
3.14 Tax Returns and Payments. The Company has filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be
due and payable on such returns, any assessments imposed, and all other taxes
due and payable by the Company on or before the Closing, have been paid or will
be paid prior to the time they become delinquent. The Company has not been
advised (a) that any of its returns, federal, state or other, have been or are
being audited as of the date hereof, or (b) of any deficiency in assessment or
proposed judgment to its federal, state or other taxes. The Company has no
knowledge of any liability for any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided for.
3.15 Employees. The Company has no collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate his, her or their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any officer, key employee or group of key employees.
3.16 Proprietary Information and Inventions Agreements. Each
employee, officer and consultant of the Company has executed a Proprietary
Information and Inventions Agreement in the form of Exhibit G attached hereto.
No current employee, officer or consultant of the Company has excluded works or
inventions made prior to his or her employment with the Company from his or her
assignment of inventions pursuant to such employee, officer or consultant's
Proprietary Information and Inventions Agreement.
3.17 Registration Rights and Voting Rights.
(a) Except as required pursuant to the Investor Rights
Agreement, the Company is presently not under any obligation, and has not
granted any rights, to register (as
8.
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defined in Section 1.1 of the Investor Rights Agreement) any of the Company's
presently outstanding securities or any of its securities that may hereafter be
issued.
(b) Except as provided for in the Voting Agreement, to the
Company's knowledge, no shareholder of the Company has entered into any
agreement with respect to the voting of equity securities of the Company.
3.18 Compliance with Laws; Permits. To its knowledge, the Company is
not in violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties which violation would materially and adversely affect the business,
assets, liabilities, financial condition, operations or prospects of the
Company. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or declarations
are required to be filed in connection with the execution and delivery of this
Agreement and the issuance of the Shares, the Notes or the Conversion Shares,
except such as has been duly and validly obtained or filed, or with respect to
any filings that must be made after the Closing, as will be filed in a timely
manner. The Company has all franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects or financial condition of the Company and believes it can
obtain, without undue burden or expense, any similar authority for the conduct
of its business as planned to be conducted.
3.19 Offering Valid. Assuming the accuracy of the representations
and warranties of the Purchasers contained in Section 4.2 hereof, the offer,
sale and issuance of the Shares, the Notes and the Conversion Shares will be
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and will have been registered or qualified (or
are exempt from registration and qualification) under the registration, permit
or qualification requirements of all applicable state securities laws. Neither
the Company nor any agent on its behalf has solicited or will solicit any offers
to sell or has offered to sell or will offer to sell all or any part of the
Shares or the Notes to any person or persons so as to bring the sale of such
Shares by the Company within the registration provisions of the Securities Act
or any state securities laws.
3.20 Full Disclosure. The Company has provided the Purchasers with
all information requested by the Purchasers in connection with their decision to
purchase the Shares and/or the Notes, including all information the Company
believes is reasonably necessary to make such investment decision. To the
Company's knowledge, neither this Agreement, the Exhibits hereto, the Related
Agreements nor any other document delivered by the Company to Purchasers or
their attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, contain any untrue statement of a
material fact nor, to the Company's knowledge, omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.
3.21 Insurance. The Company has fire and casualty insurance policies
with coverage customary for companies similarly situated to the Company.
9.
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4. Representations And Warranties Of The Purchasers.
Each Purchaser hereby represents and warrants to the Company as
follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 Requisite Power and Authority. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement, the Notes (if applicable) and the Related Agreements and to carry out
their provisions. All action on Purchaser's part required for the lawful
execution and delivery of this Agreement, the Notes (if applicable) and the
Related Agreements have been or will be effectively taken prior to the Closing.
Upon their execution and delivery, this Agreement, the Notes (if applicable) and
the Related Agreements will be valid and binding obligations of Purchaser,
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) general principles
of equity that restrict the availability of equitable remedies, and (c) to the
extent that the enforceability of the indemnification provisions of Section 2.9
of the Investor Rights Agreement may be limited by applicable laws.
4.2 Investment Representations. Purchaser understands that neither
the Shares, the Notes nor the Conversion Shares have been registered under the
Securities Act. Purchaser also understands that the Shares and the Notes are
being offered and sold pursuant to an exemption from registration contained in
the Securities Act based in part upon Purchaser's representations contained in
this Agreement. Purchaser hereby represents and warrants as follows:
(a) Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Notes or the Conversion
Shares) are registered pursuant to the Securities Act, or an exemption from
registration is available. Purchaser understands that the Company has no present
intention of registering the Shares, the Notes, the Conversion Shares or any
shares of its Common Stock. Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow Purchaser to
transfer all or any portion of the Shares, the Notes or the Conversion Shares
under the circumstances, in the amounts or at the times Purchaser might propose.
(b) Acquisition for Own Account. Purchaser is acquiring the
Shares, the Notes (if applicable) and the Conversion Shares for Purchaser's own
account for investment only, and not with a view towards their distribution.
(c) Purchaser Can Protect Its Interest. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement,
10.
<PAGE>
and the Related Agreements. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement.
(d) Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) Company Information. Purchaser has received and read the
Financial Statements and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and
management of the Company and has had the opportunity to review the Company's
operations and facilities. Purchaser has also had the opportunity to ask
questions of and receive answers from, the Company and its management regarding
the terms and conditions of this investment.
(f) Rule 144. Purchaser acknowledges and agrees that the Shares,
the Notes and, if issued, the Conversion Shares must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(g) Residence. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on Exhibit A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located at
the address or addresses of the Purchaser set forth on Exhibit A.
4.3 Transfer Restrictions. Each Purchaser acknowledges and agrees
that the Shares and, if issued, the Conversion Shares are subject to
restrictions on transfer as set forth in the Investor Rights Agreement.
5. Conditions To Closing.
5.1 Conditions to Purchasers' Obligations at the Closing. Purchasers'
obligations to purchase the Shares and/or the Notes at the Closing are subject
to the satisfaction, at or prior to the Closing Date, of the following
conditions:
(a) Representations and Warranties True; Performance of
Obligations. The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if they had been made as of the Closing Date,
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.
11.
<PAGE>
(b) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
(c) Filing of Restated Charter. The Restated Charter shall have
been filed with the Secretary of State of the State of Delaware and shall
continue to be in full force and effect as of the Closing Date.
(d) Corporate Documents. The Company shall have delivered to
Purchasers or their counsel, copies of all corporate documents of the Company as
Purchasers shall reasonably request.
(e) Reservation of Conversion Shares. The Conversion Shares
issuable upon conversion of the Shares and the Notes shall have been duly
authorized and reserved for issuance upon such conversion.
(f) Compliance Certificate. The Company shall have delivered to
Purchasers a Compliance Certificate, executed by the President of the Company,
dated the Closing Date, to the effect that the conditions specified in
subsections (a), (b), (c) and (e) of this Section 5.1 have been satisfied.
(g) Investor Rights Agreement. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit D shall have been executed
and delivered by the parties thereto.
(h) Co-Sale Agreement. The Co-Sale Agreement substantially in
the form attached hereto as Exhibit E shall have been executed and delivered by
the parties thereto. The stock certificates representing the shares subject to
the Co-Sale Agreement shall have been delivered to the Secretary of the Company
and shall have had appropriate legends placed upon them to reflect the
restrictions on transfer set forth on the Co-Sale Agreement.
(i) Board of Directors. Upon the Closing, the authorized size of
the Board of Directors of the Company shall be six members and the Board shall
consist of Bert Kolde, William Savoy, Dan Nova, Linda Fayne Levinson, Tom Van
Horn, and Diane Daggatt.
(j) Voting Agreement. The Voting Agreement substantially in the
form attached hereto as Exhibit F shall have been executed and delivered by the
parties thereto.
(k) Legal Opinion. The Purchasers shall have received from legal
counsel to the Company an opinion addressed to them, dated as of the Closing
Date, in substantially the form attached hereto as Exhibit H.
(l) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in
12.
<PAGE>
substance and form to the Purchasers and their special counsel, and the
Purchasers and their special counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.
5.2 Conditions to Obligations of the Company. The Company's
obligation to issue and sell the Shares and the Notes at each Closing is subject
to the satisfaction, on or prior to such Closing, of the following conditions:
(a) Representations and Warranties True. The representations and
warranties in Section 4 made by those Purchasers acquiring Shares and the Notes
hereof shall be true and correct in all material respects at the date of the
Closing, with the same force and effect as if they had been made on and as of
said date.
(b) Performance of Obligations. Such Purchasers shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by such Purchasers on or before the Closing.
(c) Filing of Restated Charter. The Restated Charter shall have
been filed with the Secretary of State of the State of Delaware.
(d) Investor Rights Agreement. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit D shall have been executed
and delivered by the Purchasers.
(e) Co-Sale Agreement. The Co-Sale Agreement substantially in
the form attached hereto as Exhibit E shall have been executed and delivered by
the parties thereto.
(f) Voting Agreement. The Voting Agreement substantially in the
form attached hereto as Exhibit F shall have been executed and delivered by the
parties thereto.
(g) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
6. Miscellaneous.
6.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Washington as such laws are applied to agreements
between Washington residents entered into and performed entirely in Washington.
6.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
13.
<PAGE>
6.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto, the Related Agreements and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
6.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under the Agreement may be waived only
with the written consent of the holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
(c) Notwithstanding the foregoing, this Agreement may be amended
with only the written consent of the Company to include additional purchasers of
the Shares at subsequent sales pursuant to Section 2.3.
6.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Related
Agreements or the Restated Charter, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on any Purchaser's
part of any breach, default or noncompliance under this Agreement, the Related
Agreements or under the Restated Charter or any waiver on such party's part of
any provisions or conditions of the Agreement, the Related Agreements, or the
Restated Charter must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, the Related Agreements, the Restated Charter, by law, or otherwise
afforded to any party, shall be cumulative and not alternative.
14.
<PAGE>
6.8 Waiver of Conflicts. Each party to this Agreement acknowledges
that Cooley Godward LLP ("Cooley Godward"), outside general counsel to the
Company, has in the past performed and is or may now or in the future represent
one or more of the Purchasers or their affiliates in matters unrelated to the
transactions contemplated by this Agreement (the "Financing"), including
representation of such Purchasers or their affiliates in matters of a similar
nature to the Financing. The applicable rules of professional conduct require
that Cooley Godward inform the parties hereunder of this representation and
obtain their consent. Cooley Godward has served as outside general counsel to
the Company and has negotiated the terms of the Financing solely on behalf of
the Company. It is the belief of Cooley Godward that these terms and conditions
represent an arm's length transaction between the Company and the Purchasers.
Purchasers have been represented by independent legal counsel regarding the
terms of the Financing. The Company and each Purchaser hereby (a) acknowledge
that they have had an opportunity to ask for and have obtained information
relevant to such representation, including disclosure of the reasonably
foreseeable adverse consequences of such representation; (b) acknowledge that
with respect to the Financing, Cooley Godward has represented solely the
Company, and not any Purchaser or any stockholder, director or employee of the
Company or any Purchaser; and (c) gives its informed consent to Cooley Godward's
representation the Company in the Financing.
6.9 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on Exhibit A attached hereto or at such other
address as the Company or Purchaser may designate by ten (10) days advance
written notice to the other parties hereto.
6.10 Expenses. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement. The Company shall, at the Closing, reimburse the reasonable fees
of and expenses of one special counsel for the Purchasers, not to exceed
$15,000, incurred in connection with the negotiation, execution, delivery and
performance of this Agreement.
6.11 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.12 Titles and Subtitles. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
15.
<PAGE>
6.13 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 one instrument.
6.14 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 6.14 being untrue.
6.15 Exculpation Among Purchasers. Each Purchaser acknowledges that it
is not relying upon any person, firm, or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable to any other Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Shares and Conversion Shares.
6.16 Confidentiality. Each party hereto agrees that, except with the
prior written consent of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement or the Related Agreements,
discussions or negotiations relating to this Agreement or the Related
Agreements, the performance of its obligations hereunder or the ownership of the
Shares purchased hereunder. The provisions of this Section 6.16 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto.
6.17 Pronouns. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
6.18 California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
[The Remainder Of This Page Intentionally Left Blank]
16.
<PAGE>
In Witness Whereof, the parties hereto have executed the Series C Preferred
Stock Purchase Agreement as of the date set forth in the first paragraph hereof.
COMPANY:
Mercata, Inc.
By: /s/ Tom Van Horn
-----------------------
Tom Van Horn
President
SIGNATURE PAGE TO SERIES C PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
INVESTOR(S)
Vulcan Ventures Incorporated
By: /s/ William D. Savoy
-----------------------------
William D. Savoy
Vice President
/s/ William D. Savoy
--------------------------------
William D. Savoy
/s/ Bert Kolde
--------------------------------
Bert Kolde
/s/ Diane Daggatt
--------------------------------
Diane Daggatt
SIGNATURE PAGE TO SERIES C PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
INVESTOR(S):
Highland Capital Partners IV Limited Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By: /s/ Daniel Nova
-------------------------------------------
Member
Highland Entrepreneurs' Fund IV Limited Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By: /s/ Daniel Nova
-------------------------------------------
Member
SIGNATURE PAGE TO SERIES C PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
INVESTOR(S):
Amerindo Technology Growth Fund II, Inc.
By: /s/ Gary A. Tanaka
----------------------------------------
Name: Gary A. Tanaka
--------------------------------------
Title: Director
-------------------------------------
Vertex Capital II LLC
By: /s/ [ILLEGIBLE]
----------------------------------------
Name:______________________________________
Title:_____________________________________
Vertex Capital III LLC
By: /s/ [ILLEGIBLE]
----------------------------------------
Name:______________________________________
Title:_____________________________________
Sands Brothers/Amerindo Technology Associates LLC
By: /s/ Martin S. Sands
----------------------------------------
Name: Martin S. Sands
--------------------------------------
Title: Manager
-------------------------------------
Sands Brothers / Technology Associates
Institution LLC
By: /s/ Martin S. Sands
----------------------------------------
Name: Martin S. Sands
--------------------------------------
Title: Manager
-------------------------------------
Sands Brothers/Amerindo Technology Offshore
Associates LLC
By: /s/ Martin S. Sands
----------------------------------------
Name: Martin S. Sands
--------------------------------------
Title: Manager
-------------------------------------
Litton Master Trust
SIGNATURE PAGE TO SERIES C PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
By: /s/ Joaquin Garcia-Larrieu
----------------------------------
Name: Joaquin Garcia-Larrieu
--------------------------------
Title: Attorney-in-Fact
-------------------------------
/s/ James Stableford
-------------------------------------
James Stableford
Aurora Technology Fund LLC
By: /s/ [ILLEGIBLE]
----------------------------------
Name:________________________________
Title:_______________________________
SIGNATURE PAGE TO SERIES C PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
INVESTOR(S):
Global Retail Partners, L.P.
By: Global Retail Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
--------------------------------------
Name: Osamu R. watanabe
------------------------------------
Title: Vice President
-----------------------------------
DLJ Diversified Partners, L.P.
By: DLJ Diversified Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
--------------------------------------
Name: Osamu R. watanabe
------------------------------------
Title: Vice President
-----------------------------------
DLJ Diversified Partners-A, L.P.
By: DLJ Diversified Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
--------------------------------------
Name: Osamu R. Watanabe
------------------------------------
Title: Vice President
-----------------------------------
GRP Partners, L.P.
By: Global Retail Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
--------------------------------------
Name: Osamu R. Watanabe
------------------------------------
Title: Vice President
-----------------------------------
Global Retail Partners Funding, Inc.
By: /s/ Osamu R. Watanabe
--------------------------------------
Name: Osamu R. Watanabe
------------------------------------
Title: Vice President
-----------------------------------
DLJ ESC II, L.P.
By: DLJ LBO Plans Management Corporation
Its: General Partner
By: /s/ Osamu R. Watanabe
--------------------------------------
Name: Osamu R. Watanabe
------------------------------------
Title: Vice President
-----------------------------------
SIGNATURE PAGE TO SERIES C PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
INVESTOR(S):
Waelinvest
By: /s/ Freddy De Greef
---------------------------------
Name: Freddy De Greef
-------------------------------
Title:Chief Executive Officer
------------------------------
SIGNATURE PAGE TO SERIES C PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
INVESTOR(S):
TWP Mercata Investors
By: /s/ David Baylor
-----------------------------
David A. Baylor
Managing Partner
SIGNATURE PAGE TO SERIES C PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
EXhibit A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Aggregate Share
Name And Address Shares Purchase Price
<S> <C> <C>
Vulcan Ventures Incorporated 573,145 $ 6,817,068.02
110 - 110/th/ Avenue N.E., Suite 550
Bellevue, Washington 98004
Highland Capital Partners IV Limited Partnership 587,261 $ 6,984,965.73
Two International Place
Boston, Massachusetts 02110
Highland Entrepreneurs' Fund IV Limited Partnership 24,469 $ 291,037.76
Two International Place
Boston, Massachusetts 02110
Amerindo Technology Growth Fund II, Inc. 252,500 $ 3,003,270.86
c/o Amerindo Investment Advisors
399 Park Avenue, 22/nd/ Floor
New York, NY 10022
Vertex Capital II LLC 26,600 $ 316,384.18
130 West Lake Street
Wayzata, MN 55391
Attn: Matthew Fitzmaurice
Vertex Capital III LLC 8,400 $ 99,910.79
130 West Lake Street
Wayzata, MN 55391
Attn: Matthew Fitzmaurice
Sands Brothers / Amerindo 42,000 $ 499,553.96
Technology Associates LLC
c/o Amerindo Investment Advisors
399 Park Avenue, 22/nd/ Floor
New York, NY 10022
Sands Brothers/Technology Associates Institution LLC 42,000 $ 499,533.96
c/o Amerindo Investment Advisors
399 Park Avenue, 22/nd/ Floor
New York, NY 10022
</TABLE>
Aggregate Share
SCHEDULE A - SCHEDULE OF PURCHASES
1.
<PAGE>
<TABLE>
<CAPTION>
Aggregate Share
Name and Address Shares Purchase Price
<S> <C> <C>
Sands Brothers/Amerindo 42,000 $ 499,553.96
Technology Offshore Associates LLC
c/o Amerindo Investment Advisors
399 Park Avenue, 22/nd/ Floor
New York, NY 10022
Litton Master Trust 89,125 $ 1,060,065.41
c/o Amerindo Investment Advisors
399 Park Avenue, 22/nd/ Floor
New York, NY 10022
James Stableford 2,000 $ 23,788.28
c/o Amerindo Investment Advisors
43 Upper Grosvenor Street
London, England W1X 9PG
Aurora Technology Fund LLC 84,104 $ 1,000,344.92
152 West 57/th/ Street, 57/th/ Floor
New York, NY 10019
Global Retail Partners, L.P. 156,967 $ 1,866,987.79
2121 Avenue of the Stars, 30/th/ Floor
Los Angeles, CA 90067
Attention: Osamu Watanabe
with copy to:
Global Retail Partners, L.P.
277 Park Avenue, 19/th/ Floor
New York, NY 10172
Attention: Nicole Arnaboldi
</TABLE>
SCHEDULE A - SCHEDULE OF PURCHASES
2.
<PAGE>
<TABLE>
<CAPTION>
Aggregate Share
Name and Address Shares Purchase Price
<S> <C> <C>
DLJ Diversified Partners, L.P. 46,774 $ 556,336.60
277 Park Avenue, 19/th/ Floor
New York, NY 10172
Attention: Nicole Arnaboldi
with copy to:
DLJ Diversified Partners, L.P.
277 Park Avenue, 23rd Floor
New York, NY 10172
Attention: Ivy Dodes
DLJ Diversified Partners - A, L.P. 17,369 $ 206,589.35
277 Park Avenue, 19/th/ Floor
New York, NY 10172
Attention: Nicole Arnaboldi
with copy to:
DLJ Diversified Partners - A, L.P.
277 Park Avenue, 23rd Floor
New York, NY 10172
Attention: Ivy Dodes
GRP Partners, L.P. 10,205 $ 121,379.72
2121 Avenue of the Stars, 30/th/ Floor
Los Angeles, CA 90067
Attention: Osamu Watanabe
with copy to:
GRP Partners, L.P.
277 Park Avenue, 19th Floor
New York, NY 10172
Attention: Nicole Arnaboldi
Global Retail Partners Funding, Inc. 10,809 $ 128,563.78
277 Park Avenue, 19/th/ Floor
New York, NY 10172
Attention: Nicole Arnaboldi
with copy to:
Global Retail Partners Funding, Inc.
2121 Avenue of the Stars, 30/th/ Floor
Los Angeles, CA 90067
Attention: Osamu Watanabe
</TABLE>
SCHEDULE A - SCHEDULE OF PURCHASES
3.
<PAGE>
<TABLE>
<CAPTION>
Aggregate Share
Name and Address Shares Purchase Price
<S> <C> <C>
DLJ ESC II L.P. 2,702 $ 32,137.97
277 Park Avenue, 19/th/ Floor
New York, NY 10172
Attention: Ed Poletti
with copy to:
DLJ ESC II L.P.
277 Park Avenue, 23rd Floor
New York, NY 10172
Attention: Ivy Dodes
Waelinvest 420,375* $ 4,999,999.94*
102 rue Waelhem
1030 Bruxelles
Belgium
with copy to:
525 Market Street, 23/rd/ Floor
San Francisco, CA 94105
TWP Mercata Investors 56,120 $ 667,499.25
c/o Thomas Weisel Partners
1 Montgomery Street, Suite 3700
San Francisco, CA 94104
William D. Savoy 21,019 $ 250,002.97
110 - 110/th/ Avenue NE, Suite 550
Bellevue, WA 98004-5862
Diane H. Daggatt 2,102 $ 25,001.49
110 - 110/th/ Avenue NE, Suite 550
Bellevue, WA 98004-5862
Bert Kolde 4,204 $ 50,002.97
110 - 110/th/ Avenue NE, Suite 550
Bellevue, WA 98004-5862
Total 2,522,250 $29,999,999.66
========= ==============
Total (including the Notes and assuming
conversion of the Notes 3,363,000 $39,999,999.55
========= ==============
</TABLE>
_________________
* Waelinvest will also be purchasing Notes in the amount of $9,999,999.89 that
will be convertible into 840,750 shares of the Shares.
SCHEDULE A - SCHEDULE OF PURCHASES
4.
<PAGE>
Exhibit B
FORM OF CONVERTIBLE PROMISSORY NOTE
<PAGE>
Exhibit C
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
<PAGE>
Exhibit D
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE>
Exhibit E
AMENDED AND RESTATED CO-SALE AGREEMENT
<PAGE>
Exhibit F
AMENDED AND RESTATED VOTING AGREEMENT
<PAGE>
Exhibit G
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
<PAGE>
Exhibit H
FORM OF LEGAL OPINION
<PAGE>
EXHIBIT 10.16
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.
CONVERTIBLE PROMISSORY NOTE
$9,999,999.89 March 1, 2000
Bellevue, Washington
For value received, Mercata, Inc., a Delaware corporation (the "Company"),
promises to pay to Waelinvest. (the "Holder"), the principal sum of nine million
nine hundred ninety-nine thousand nine hundred ninety-nine dollars and eighty-
nine cents ($9,999,999.89). No interest shall accrue or be paid on this Note;
provided, that if this Note shall not have converted in accordance with Section
2 below on or before May 31, 2000, this Note shall bear interest accruing from
the date hereof on the unpaid principal amount at a rate equal to the lower of
(a) 7.00% per annum, compounded annually or (b) the highest rate permitted by
law. This Note is one of a series of Convertible Promissory Notes containing
substantially identical terms and conditions issued pursuant to that certain
Series C Preferred Stock Purchase Agreement, dated March 1, 2000 (the "Purchase
Agreement"). Such Notes are referred to herein as the "Notes," and the holders
thereof are referred to herein as the "Holders." This Note is subject to the
following terms and conditions.
1. Maturity. Unless converted as provided in Section 2, this Note will
automatically mature and be due and payable on May 31, 2000 (the "Maturity
Date"). Subject to Section 2 below, any interest shall accrue on this Note but
shall not be due and payable until the Maturity Date.
2. Conversion
(a) HSR Clearance. As soon as practicable after the Closing (as
defined in the Purchase Agreement), the Company and the Holder hereby agree to
file or to cause to be filed with the United States Federal Trade Commission
(the "FTC") and the Antitrust Division of the United States Department of
Justice (the "DOJ") pursuant to the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") all requisite documents and notifications in
order to provide for the conversion of this Note into shares of the Company's
Series C Preferred Stock. Upon the earlier of one business day after (i) the
date all required clearances or pre-termination notices under the HSR Act have
been received from the FTC and the DOJ (or all applicable waiting periods have
expired) or (ii) the date the Holder and the Company are no longer required by
law to make filings under the HSR to convert this Note into capital stock, the
entire principal amount of this Note shall automatically convert into fully-paid
and non-assessable shares of the Company's Series C Preferred Stock (the
"Stock"); provided,
1.
<PAGE>
however, the automatic conversion of such principal amount into shares of the
Stock shall be conditioned upon (A) the Company having provided to the Holder a
compliance certificate in the form attached hereto as Exhibit A or (B) the
Holder having waived such applicable terms, conditions or certifications
included in such certificate, either individually or in the aggregate. The
number of shares of Stock to be issued upon such conversion shall be equal to
the quotient obtained by dividing (i) the entire outstanding principal amount of
this Note by (ii) $11.894142 (as adjusted for any future stock splits, stock
dividends, recapitalizations or the like to the Stock), provided that no
fractional shares shall be issued. In the event that the required clearances
from the FTC and the DOJ are not obtained, this Note shall not be convertible
into the Stock.
(b) Redemption. In the event the Company consummates a Liquidity
Event (as defined below) prior to the conversion of this note pursuant to
Section 2(a), then the Company shall redeem this Note for an aggregate
consideration substantially equivalent to the consideration which would have
been received by the Holder had the Note been converted into Series C Preferred
Stock immediately prior to the consummation of such Liquidity Event, as
determined in the reasonable and good faith judgement of the Board of Directors
of the Company. For the Purposes of hereof "Liquidity Event" shall mean (i) any
consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization, in which the
stockholders of the Company immediately prior to such consolidation, merger or
reorganization, own less than 50% of the Company's voting power immediately
after such consolidation, merger or reorganization, or any transaction or series
of related transactions to which the Company is a party in which in excess of
50% of the Company's voting power is transferred (ii) any voluntary or
involuntary liquidation or dissolution of the Company, or (iii) the sale of all
or substantially all the assets of the Company.
(c) Mechanics and Effect of Conversion. No fractional shares of the
Company's capital stock will be issued upon conversion of this Note. In lieu of
any fractional share to which the Holder would otherwise be entitled, the
Company will pay to the Holder in cash the amount of the unconverted principal
and interest balance of this Note that would otherwise be converted into such
fractional share. Upon conversion of this Note pursuant to this Section 2, the
Holder shall surrender this Note, duly endorsed, at the principal offices of the
Company or any transfer agent of the Company. At its expense, the Company will,
as soon as practicable thereafter, issue and deliver to such Holder, at such
principal office, a certificate or certificates for the number of shares to
which such Holder is entitled upon such conversion, together with any other
securities and property to which the Holder is entitled upon such conversion
under the terms of this Note, including a check payable to the Holder for any
cash amounts payable as described herein. Upon conversion of this Note, the
Company will be forever released from all of its obligations and liabilities
under this Note with regard to that portion of the principal amount and accrued
interest being converted including without limitation the obligation to pay such
portion of the principal amount and accrued interest.
3. Payment. All payments shall be made in lawful money of the United
States of America at such place as the Holder hereof may from time to time
designate in writing to the Company. Payment shall be credited first to the
accrued interest then due and payable and the remainder applied to principal.
Prepayment of this Note may be made without penalty, if the Company's Board of
Directors has determined, in consultation with legal counsel, and with the
2.
<PAGE>
consent of the Holders of a majority of the outstanding principal amount of the
Notes, that the required clearances or pre-termination notices under the HSR Act
specified in Section 2(a) are not likely to be obtained, otherwise this note
made not prepaid without the consent of the Holders of a majority of the
outstanding principal amount of the Notes; provided, however, that the Company
may repay the Note on or after May 31, 2000 in the event the conditions to
conversion set forth in Section 2 hereof have not occurred.
4. Transfer; Successors and Assigns. The terms and conditions of this
Note shall inure to the benefit of and be binding upon the respective successors
and assigns of the parties. Notwithstanding the foregoing, the Company may not
assign, pledge or otherwise transfer this Note without the prior written consent
of the Holder, which shall not be unreasonably withheld, and the Holder may not
assign, pledge, or otherwise transfer this Note without the prior written
consent of the Company, which shall not be unreasonably withheld. Subject to the
preceding sentence, this Note may be transferred only upon surrender of the
original Note for registration of transfer, duly endorsed, or accompanied by a
duly executed written instrument of transfer in form satisfactory to the Holder.
Thereupon, a new note for the same principal amount and interest will be issued
to, and registered in the name of, the transferee. Interest and principal are
payable only to the registered holder of this Note.
5. Governing Law. This Note and all acts and transactions pursuant hereto
and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
6. Notices. Any notice required or permitted by this Note shall be in
writing and shall be deemed sufficient upon delivery, when delivered personally
or one business day after being sent by a nationally-recognized overnight
delivery service (such as Federal Express or UPS), or forty-eight (48) hours
after being deposited in the U.S. mail, as certified or registered mail, with
postage prepaid, addressed to the party to be notified at such party's address
as set forth below or as subsequently modified by written notice.
7. Amendments and Waivers. Any term of this Note may be amended only
with the written consent of the Company and at least a majority in interest of
the Holders. Any amendment or waiver effected in accordance with this Section 7
shall be binding upon the Company, the Holders and each transferee of the Notes.
8. Waiver. The Company waives presentment and demand for payment, notice
of dishonor, protest and notice of protest of this Note, and shall pay all costs
of collection when incurred, including, without limitation, reasonable
attorneys' fees, costs and other expenses.
The right to plead any and all statutes of limitations as a defense to any
demands hereunder is hereby waived to the full extent permitted by law.
3.
<PAGE>
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
COMPANY:
Mercata, Inc.
By:________________________________
Tom Van Horn
President
Address: 110-110th Avenue Northeast,
Suite 360
Bellevue, WA 98004
AGREED TO AND ACCEPTED:
Waelinvest
By:__________________________
Name:________________________
Title:_______________________
Address: 102 rue Waelhem
1030 Bruxelles
Belgium
SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE
4.
<PAGE>
Exhibit A to the Convertible Promissory Note
COMPLIANCE CERTIFICATE
The undersigned, _______________, the President and Chief Executive Officer
of Mercata, Inc., a Delaware corporation (the "Company"), certifies that he is
authorized to execute this Compliance Certificate for and on behalf of the
Company, and further certifies that:
1. The representations and warranties of the Company contained in Section
3.19 of the Series C Preferred Stock Purchase Agreement, dated ____________,
2000 (the "Purchase Agreement"), are true and correct as though made on and as
of the date hereof.
2. The Company has performed or fulfilled all covenants, agreements and
conditions contained in the Purchase Agreement and that certain Convertible
Promissory Note, dated ______________, 2000, in the amount of $9,999,999.89 of
the Company in favor of Waelinvest to be performed or fulfilled by the Company
on or prior to the date hereof.
In Witness Whereof, the undersigned has hereunto set his hand this _______
day of _________________, 2000.
Mercata, Inc.
By:_________________________
Name:_______________________
Title:______________________
EXHIBIT A -- COMPLIANCE CERTIFICATE
5.
<PAGE>
EXHIBIT 10.17
MERCATA, INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
March 1, 2000
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. GENERAL.............................................................. 1
1.1 Definitions.......................................................... 1
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER............................... 3
2.1 Restrictions on Transfer............................................. 3
2.2 Demand Registration.................................................. 4
2.3 Piggyback Registrations.............................................. 5
2.4 Form S-3 Registration................................................ 6
2.5 Expenses of Registration............................................. 7
2.6 Obligations of the Company........................................... 8
2.7 Termination of Registration Rights................................... 9
2.8 Delay of Registration; Furnishing Information........................ 9
2.9 Indemnification...................................................... 9
2.10 Assignment of Registration Rights.................................... 11
2.11 Amendment of Registration Rights..................................... 12
2.12 Limitation on Subsequent Registration Rights......................... 12
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information....... 12
2.14 Rule 144 Reporting................................................... 13
SECTION 3. COVENANTS OF THE COMPANY............................................. 13
3.1 Basic Financial Information and Reporting............................ 13
3.2 Inspection Rights.................................................... 14
3.3 Confidentiality of Records........................................... 14
3.4 Reservation of Common Stock.......................................... 14
3.5 Stock Vesting........................................................ 14
3.6 Proprietary Information and Inventions Agreement..................... 15
3.7 Assignment of Right of First Refusal................................. 15
3.8 Termination of Covenants............................................. 15
SECTION 4. RIGHTS OF FIRST REFUSAL.............................................. 15
4.1 Subsequent Offerings................................................. 15
4.2 Exercise of Rights................................................... 16
4.3 Issuance of Equity Securities to Other Persons....................... 16
</TABLE>
i.
<PAGE>
Table Of Contents
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
4.4 Sale Without Notice.................................................. 16
4.5 Termination and Waiver of Rights of First Refusal.................... 16
4.6 Transfer of Rights of First Refusal.................................. 17
4.7 Excluded Securities.................................................. 17
SECTION 5. MISCELLANEOUS........................................................ 17
5.1 Governing Law........................................................ 17
5.2 Survival............................................................. 17
5.3 Successors and Assigns............................................... 18
5.4 Entire Agreement..................................................... 18
5.5 Severability......................................................... 18
5.6 Amendment and Waiver................................................. 18
5.7 Delays or Omissions.................................................. 18
5.8 Notices.............................................................. 19
5.9 Attorneys' Fees...................................................... 19
5.10 Titles and Subtitles................................................. 19
5.11 Additional Investors................................................. 19
5.12 Counterparts......................................................... 19
5.13 Consent and Waiver................................................... 19
5.14 Amendment of Prior Investor Rights Agreement......................... 19
</TABLE>
ii.
<PAGE>
MERCATA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
This Amended and Restated Investor Rights Agreement (the "Agreement")
is entered into as of the lst day of March, 2000, by and among Mercata, Inc., a
Delaware corporation (the "Company"), the holders of the Company's Series A
Preferred Stock (the "Series A Holders"), the holders of the Company's Series B
Preferred Stock ("Series B Holders") and the purchasers of the Company's Series
C Preferred Stock (the "Series C Stock") set forth on Exhibit A of that certain
Series C Preferred Stock Purchase Agreement of even date herewith (the "Purchase
Agreement") and Exhibit A hereto. The Series A Holders, the Series B Holders
and the purchasers of the Series C Stock shall be referred to hereinafter as the
"Investors" and each individually as an "Investor."
Recitals
Whereas, the Company proposes to sell and issue up to three million
three hundred sixty three thousand (3,363,000) shares of its Series C Stock
pursuant to the Purchase Agreement;
Whereas, the Company, the Series A Holders and the Series B Holders
have entered into that certain Investor Rights Agreement, dated as of September
30, 1999, as amended (the "Prior Investor Rights Agreement"), and desire to
amend and restate such agreement with the terms and conditions of the Agreement;
and
Whereas, as a condition of entering into the Purchase Agreement, the
Investors have requested that the Company extend to them registration rights,
information rights and other rights as set forth below.
Now, Therefore, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 Definitions. As used in this Agreement the following terms shall
have the following respective meanings:
"Affiliate" of a person or entity means any person or entity who
controls, is controlled by or under common control with such person or entity
and, for each person or entity that is listed in the definition of Amerindo,
"Affiliate" shall include such other persons and entities listed in the
definition of Amerindo.
"Amerindo" means Amerindo Technology Growth Fund II, Inc.,
Vertex Captial II LLC, Vertex Capital III LLC, Sands Brothers/Amerindo
Technology Associates LLC, Sands Brothers/Amerindo Technology Associates
Institution LLC, Sands Brothers/Amerindo
1.
<PAGE>
Technology Offshore Associates LLC, Litton Master Trust, James Stableford and
Aurora Technology Fund LLC.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means (a) Common Stock of the Company that
are part of the Shares; (b) Common Stock of the Company issued or issuable upon
conversion of the Shares; and (c) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, such above-described securities.
Notwithstanding the foregoing, Registrable Securities shall not include any
securities sold by a person to the public either pursuant to a registration
statement or Rule 144 or sold in a private transaction in which the transferor's
rights under Section 2 of this Agreement are not assigned.
"Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed twenty-five thousand dollars ($25,000) of a single special counsel for
the Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
2.
<PAGE>
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Shares" shall mean the one million (1,000,000) shares of Common Stock
currently held by Vulcan Ventures Incorporated, the Company's Series A Preferred
Stock issued pursuant to that certain Series A Preferred Stock Purchase
Agreement, dated March 17, 1999, and the Company's Series B Stock issued
pursuant to that certain Series B Preferred Stock Purchase Agreement, dated
September 30, 1999, and the Company's Series C Preferred Stock issued pursuant
to the Purchase Agreement and held by the Investors listed on Exhibit A hereto
and their permitted assigns.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by the
terms of this Agreement, (B) such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners or former
partners in accordance with partnership interests, (B) a corporation to its
shareholders in accordance with their interest in the corporation, (C) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, or (D) to the Holder's family member
or trust for the benefit of an individual Holder; provided that in each case the
transferee will be subject to the terms of this Agreement to the same extent as
if he were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE
3.
<PAGE>
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the Company shall
receive a written request from the Holders (the "Initiating Holders") proposing
to sell Registrable Securities at an anticipated aggregate offering price, net
of underwriting discounts and commissions, exceeding twenty-five million dollars
($25,000,000) (a "Qualified Public Offering")), then the Company shall, within
thirty (30) days of the receipt thereof, give written notice of such request to
all Holders, and subject to the limitations of this Section 2.2, use its best
efforts to effect, as soon as practicable, the registration under the Securities
Act of all Registrable Securities that the Holders request to be registered.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be
4.
<PAGE>
reduced unless all other securities of the Company are first entirely excluded
from the underwriting and registration. Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration pursuant
to this Section 2.2:
(i) prior to one hundred eighty (180) days following the
effective date of the registration statement pertaining to the Initial Offering;
(ii) after the Company has effected two (2) registrations pursuant
to this Section 2.2, and such registrations have been declared or ordered
effective;
(iii) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than ninety (90) days after receipt of the request of the Initiating
Holders; provided that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12) month period; or
(iv) if the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 2.4 below.
2.3 Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within ten (10) days after the above-described notice from the Company,
so notify the Company in writing. Such notice shall state the intended method
of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) Underwriting. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's
5.
<PAGE>
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of the Agreement, if the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated, first, to the Company; second, to the
Holders on a pro rata basis based on the total number of Registrable Securities
held by the Holders; and third, to any shareholder of the Company (other than a
Holder) on a pro rata basis. No such reduction shall (i) reduce the securities
being offered by the Company for its own account to be included in the
registration and underwriting, or (ii) reduce the amount of securities of the
selling Holders included in the registration below twenty-five percent (25%) of
the total amount of securities included in such registration, unless such
offering is the Initial Offering and such registration does not include shares
of any other selling shareholders, in which event any or all of the Registrable
Securities of the Holders may be excluded in accordance with the immediately
preceding sentence. In no event will shares of any other selling shareholder be
included in such registration which would reduce the number of shares which may
be included by Holders without the written consent of Holders of not less than a
majority of the Registrable Securities proposed to be sold in the offering. If
any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the
underwriter, delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration. For any Holder which is a partnership or corporation, the
partners, retired partners and shareholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing person shall be deemed to be a single "Holder",
and any pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
(b) Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.
2.4 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and
6.
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distribution of all or such portion of such Holder's or Holders' Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within fifteen (15) days
after receipt of such written notice from the Company; provided, however, that
the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than two million dollars ($2,000,000), or
(iii) if within thirty (30) days of receipt of a written request
from any Holder or Holders pursuant to this Section 2.4, the Company gives
notice to such Holder or Holders of the Company's intention to make a public
offering within ninety (90) days;
(iv) if the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.4; provided, that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period, or
(v) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively.
2.5 Expenses of Registration. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not
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aware at the time of such request or (b) the Holders of a majority of
Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 2.2 or Section 2.4, as applicable, in which
event such right shall be forfeited by all Holders. If the Holders are required
to pay the Registration Expenses, such expenses shall be borne by the holders of
securities (including Registrable Securities) requesting such registration in
proportion to the number of shares for which registration was requested. If the
Company is required to pay the Registration Expenses of a withdrawn offering
pursuant to clause (a) above, then the Holders shall not forfeit their rights
pursuant to Section 2.2 or Section 2.4 to a demand registration.
2.6 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to thirty (30) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto. The
Company shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits
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to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Use its best efforts to furnish, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering addressed to the
underwriters.
2.7 Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect three
(3) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if all Registrable Securities held by
and issuable to such Holder (and its affiliates, partners, former partners,
members and former members) may be sold under Rule 144 during any ninety (90)
day period.
2.8 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the
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following statements, omissions or violations (collectively a "Violation") by
the Company: (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law in connection with the offering covered by such
registration statement; and the Company will pay as incurred to each such
Holder, partner, officer, director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers and each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party
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under this Section 2.9, deliver to the indemnifying party a written notice of
the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
2.9, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, that in no event shall any contribution by a Holder hereunder exceed
the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. 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 which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
2.10 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (a) is an
Affiliate, general partner, limited partner, retired partner, member or retired
member of a Holder, (b) is a Holder's family member or trust for the benefit of
an individual Holder, or (c) acquires at least one hundred thousand (100,000)
shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (i) the transferor shall, within ten (10) days
after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with
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respect to which such registration rights are being assigned and (ii) such
transferee shall agree to be subject to all restrictions set forth in this
Agreement.
2.11 Amendment of Registration Rights. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 2.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 Limitation on Subsequent Registration Rights. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities then outstanding, enter into
any agreement with any holder or prospective holder of any securities of the
Company that would grant such holder registration rights pari passu or senior to
those granted to the Holders hereunder.
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information. Each
Holder hereby agrees that such Holder shall not sell, transfer, make any short
sale of, grant any option for the purchase of, or enter into any hedging or
similar transaction with the same economic effect as a sale, any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act; provided
that:
(a) such agreement shall apply only to the Company's Initial Offering;
(b) all officers and directors of the Company enter into similar
agreements;
(c) such agreement shall not apply to the purchase or sale of Common
Stock (or other securities registered by the Company) acquired in the Company's
Initial Offering (other than any shares that are purchased in the Initial
Offering as part of a directed share program) or on the open market after the
Company's Initial Offering by Amerindo.
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Holder shall provide,
within ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in this Section 2.13 shall
not apply to a registration relating solely to employee benefit plans on Form S-
1 or Form S-8 or similar forms that may be promulgated in the future, or a
registration relating solely to a Commission Rule 145 transaction on Form S-4 or
similar forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities)
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subject to the foregoing restriction until the end of said one hundred eighty
(180) day period.
2.14 Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY
3.1 Basic Financial Information and Reporting.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred twenty (120) days thereafter, the
Company will furnish to each Investor a balance sheet of the Company, as at the
end of such fiscal year, and a statement of income and a statement of cash flows
of the Company, for such year, all prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be accompanied by a report
and opinion thereon by independent public accountants of national standing
selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as practicable
after the end of the first, second and third quarterly accounting periods in
each fiscal year of the Company, and in any event within forty-five (45) days
thereafter, a balance sheet of the Company as of the end of each such quarterly
period, and a statement of income and a statement of cash flows of the Company
for such period and for the current fiscal year to date, prepared in accordance
with generally accepted accounting principles, with the exception that no notes
need be attached to such statements and year-end audit adjustments may not have
been made.
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(d) So long as an Investor (with its Affiliates) shall own not less
than one million (1,000,000) shares of Registrable Securities (as adjusted for
stock splits, combinations and the like) (a "Major Investor"), the Company will
furnish each such Major Investor requesting such information as soon as
practicable after the end of each month, and in any event within twenty-one (21)
days thereafter, a balance sheet of the Company as of the end of each such month
and a statement of income and a statement of cash flows of the Company for such
month and for the current fiscal year to date prepared in accordance with
generally accepted accounting principles consistently applied, with the
exception that no notes need be attached to such statements and year-end audit
adjustments may not have been made.
3.2 Inspection Rights. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 Confidentiality of Records. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such Investor for the purpose of evaluating its investment in the Company as
long as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3.
3.4 Reservation of Common Stock. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 Stock Vesting. Unless otherwise approved by the Board of Directors,
all stock options and other stock equivalents issued after the date of this
Agreement to employees, directors, consultants and other service providers shall
be subject to vesting as follows: (a) twenty-five percent (25%) of such stock
shall vest at the end of the first year following the earlier of the date of
issuance or such person's services commencement date with the company, and (b)
seventy-five percent (75%) of such stock shall vest over the remaining three (3)
years. With respect to any shares of stock purchased by any such person, the
Company's repurchase option shall provide that upon such person's termination of
employment or service with the Company, with or without cause, the Company or
its assignee (to the extent permissible under applicable securities laws and
other laws) shall have the option to purchase at cost any unvested shares of
stock held by such person.
3.6 Proprietary Information and Inventions Agreement. The Company shall
require all employees to execute and deliver a Proprietary Information and
Inventions Agreement in the form attached to the Purchase Agreement. The
Company shall require all consultants to
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execute and deliver an agreement containing confidentiality and other reasonably
protective provisions for the Company under the circumstances.
3.7 Assignment of Right of First Refusal. In the event the Company
elects not to exercise any right of first refusal or right of first offer the
Company may have on a proposed transfer of any of the Company's outstanding
capital stock pursuant to the Company's charter documents, by contract or
otherwise, the Company shall, to the extent it may do so, assign such right of
first refusal or right of first offer to each Major Investor. In the event of
such assignment, each Major Investor shall have a right to purchase its pro rata
portion (as defined in Section 4.1) of the capital stock proposed to be
transferred.
3.8 Termination of Covenants. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor upon
the earlier of (i) the effective date of the registration statement pertaining
to the Initial Offering or (ii) upon (a) the sale, lease or other disposition of
all or substantially all of the assets of the Company or (b) an acquisition of
the Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction, provided that this
Section 3.8(ii)(b) shall not apply to a merger effected exclusively for the
purpose of changing the domicile of the Company (a "Change in Control").
SECTION 4. RIGHTS OF FIRST REFUSAL
4.1 Subsequent Offerings. So long as an Investor (with its Affiliates)
shall own not less than three hundred thousand (300,000) shares of Registrable
Securities (as adjusted for stock splits and combinations and the like) (a
"Significant Investor"), each such Significant Investor shall have a right of
first refusal to purchase its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.7 hereof. Each Investor's pro rata share is equal to the
ratio of (a) the number of shares of the Company's Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares) which
such Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock, Preferred Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Significant Investor written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the
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same. Each Significant Investor shall have fifteen (15) days from the giving of
such notice to agree to purchase its pro rata share of the Equity Securities for
the price and upon the terms and conditions specified in the notice by giving
written notice to the Company and stating therein the quantity of Equity
Securities to be purchased. Notwithstanding the foregoing, the Company shall not
be required to offer or sell such Equity Securities to any Significant Investor
who would cause the Company to be in violation of applicable federal securities
laws by virtue of such offer or sale.
4.3 Issuance of Equity Securities to Other Persons. If not all of the
Significant Investors elect to purchase their pro rata share of the Equity
Securities, then the Company shall promptly notify in writing the Significant
Investors who do so elect and shall offer such Significant Investors the right
to acquire such unsubscribed shares. The Significant Investors shall have five
(5) days after receipt of such notice to notify the Company of its election to
purchase all or a portion thereof of the unsubscribed shares. If the
Significant Investors fail to exercise in full the rights of first refusal, the
Company shall have ninety (90) days thereafter to sell the Equity Securities in
respect of which the Significant Investor's rights were not exercised, at a
price and upon general terms and conditions materially no more favorable to the
purchasers thereof than specified in the Company's notice to the Significant
Investors pursuant to Section 4.2 hereof. If the Company has not sold such
Equity Securities within ninety (90) days of the notice provided pursuant to
Section 4.2, the Company shall not thereafter issue or sell any Equity
Securities, without first offering such securities to the Significant Investors
in the manner provided above.
4.4 Sale Without Notice. In lieu of giving notice to the Significant
Investors prior to the issuance of Equity Securities as provided in Section 4.2,
the Company may elect to give notice to the Significant Investors within thirty
(30) days after the issuance of Equity Securities. Such notice shall describe
the type, price and terms of the Equity Securities. Each Significant Investor
shall have twenty (20) days from the date of receipt of such notice to elect to
purchase its pro rata share of Equity Securities (as defined in Section 4.1, and
calculated before giving effect to the sale of the Equity Securities to the
purchasers thereof). The closing of such sale shall occur within sixty (60)
days of the date of notice to the Significant Investors.
4.5 Termination and Waiver of Rights of First Refusal. The rights of
first refusal established by this Section 4 shall not apply to, and shall
terminate upon the earlier of (i) the effective date of the registration
statement pertaining to the Company's Initial Offering or (ii) a Change in
Control. The rights of first refusal established by this Section 4 may be
amended, or any provision waived with the written consent of Significant
Investors holding a majority of the Registrable Securities held by all
Significant Investors, or as permitted by Section 5.6.
4.6 Transfer of Rights of First Refusal. The rights of first refusal of
each Significant Investor under this Section 4 may be transferred to the same
parties, subject to the same restrictions as any transfer of registration rights
pursuant to Section 2.10.
16.
<PAGE>
4.7 Excluded Securities. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other Common
Stock purchase rights issued pursuant to such options, warrants or other rights)
issued or to be issued after the Original Issue Date (as defined in the
Company's Certificates of Incorporation) to employees, officers or directors of,
or consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
(b) stock issued pursuant to any rights or agreements outstanding as
of the date of this Agreement, options and warrants outstanding as of the date
of this Agreement, and stock issued pursuant to any such rights or agreements
granted after the date of this Agreement; provided that the rights of first
refusal established by this Section 4 applied with respect to the initial sale
or grant by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination;
(d) shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the Shares;
(f) any Equity Securities issued pursuant to any equipment leasing or
loan arrangement, or debt financing from a bank or similar financial or lending
institution;
(g) any Equity Securities that are issued by the Company pursuant to
a registration statement filed under the Securities Act; and
(h) shares of the Company's Common Stock or Preferred Stock issued in
connection with strategic transactions involving the Company and other entities,
including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein, has been
approved by the Company's Board of Directors.
SECTION 5. MISCELLANEOUS
5.1 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Washington as applied to agreements among Washington
residents entered into and to be performed entirely within Washington.
5.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
17.
<PAGE>
5.3 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.
5.4 Entire Agreement. This Agreement, the Exhibits and Schedules hereto,
the Purchase Agreement and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
5.5 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
5.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least seventy percent (70%) of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least a majority of the
Registrable Securities.
(c) Notwithstanding the foregoing, this Agreement may be amended with
only the written consent of the Company to include additional purchasers of
Shares as "Investors," "Holders" and parties hereto.
5.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
18.
<PAGE>
5.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
5.9 Attorneys' Fees. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.10 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 Additional Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Preferred
Stock pursuant to the Purchase Agreement, any purchaser of such shares of
Preferred Stock may become a party to this Agreement by executing and delivering
an additional counterpart signature page to this Agreement and shall be deemed
an "Investor" hereunder.
5.12 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 one instrument.
5.13 Consent and Waiver. Each "Investor" under the Prior Investor Rights
Agreement hereby:
(a) Consents, on behalf of all such "Investors", under Section 2.12
of the Prior Investor Rights Agreement, to the registration rights granted to
the Holders hereunder, and
(b) Waives, on behalf of all such "Investors", such "Investors"
rights of first refusal and related rights to notice, under Section 4 and
Section 5.6 of the Prior Rights Agreement as they apply to the purchase of
shares of stock being purchased and sold by the Company pursuant to the Purchase
Agreement.
5.14 Amendment of Prior Investor Rights Agreement. The Prior Investor
Rights Agreement is hereby amended in its entirety and restated herein. Such
amendment and restatement is effective upon the execution of the Agreement by
the Company, the holders of at least seventy percent (70%) of the "Registrable
Securities" (as defined in the Prior Investors Rights Agreement). Upon such
execution, all provisions of, rights granted and covenants made in the Prior
Agreement are hereby waived, released and amended on their entirety and shall
have no further force and effect.
19.
<PAGE>
[THIS SPACE INTENTIONALLY LEFT BLANK]
20.
<PAGE>
In Witness Whereof, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
COMPANY:
Mercata, Inc.
By: /s/ Tom Van Horn
-------------------------------
Tom Van Horn
President
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
<PAGE>
INVESTOR(S):
Vulcan Ventures Incorporated
By: /s/ William D. Savoy
---------------------------------
William D. Savoy
Vice President
/s/ William D. Savoy
------------------------------------
William D. Savoy
/s/ Bert Kolde
------------------------------------
Bert Kolde
/s/ Diane Daggatt
------------------------------------
Diane Daggatt
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
<PAGE>
INVESTOR(S):
Highland Capital Partners IV Limited
Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By: /s/ Daniel Nova
------------------------------
Member
Highland Entrepreneurs' Fund IV Limited
Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By: /s/ Daniel Nova
-------------------------------
Member
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
<PAGE>
INVESTOR(S):
Amerindo Technology Growth Fund II, Inc.
By: /s/ Gary A. Tanaka
-----------------------------------
Name: Gary A. Tanaka
--------------------------------
Title: Director
-------------------------------
Vertex Capital II LLC
By: /s/ [ILLEGIBLE]
----------------------------------
Name: [ILLEGIBLE]
---------------------------------
Title:________________________________
Vertex Capital III LLC
By: /s/ [ILLEGIBLE]
-----------------------------------
Name: [ILLEGIBLE]
---------------------------------
Title:________________________________
Sands Brothers/Amerindo Technology
Associates LLC
By: /s/ Martin S. Sands
-----------------------------------
Name: Martin S. Sands
---------------------------------
Title: Manager
--------------------------------
Sands Brothers/Technology Associates
Institution LLC
By: /s/ Martin S. Sands
-----------------------------------
Name: Martin S. Sands
---------------------------------
Title: Manager
--------------------------------
Sands Brothers/Amerindo Technology
Offshore Associates LLC
By: /s/ Martin S. Sands
------------------------------------
Name: Martin S. Sands
----------------------------------
Title: Manager
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
<PAGE>
Litton Master Trust
By: /s/ Joaguin Garcia-Larrieu
-------------------------------------
Name: Joaguin Garcia-Larrieu
-----------------------------------
Title: Attorney-in-Fact
----------------------------------
/s/ James Stableford
----------------------------------------
James Stableford
Aurora Technology Fund LLC
By: /s/ [ILLEGIBLE]
Name:___________________________________
Title:__________________________________
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
<PAGE>
INVESTOR(S):
Beagle Limited
By:_____________________________________
Name:___________________________________
Title:__________________________________
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
<PAGE>
INVESTOR(S):
Global Retail Partners, L.P.
By: Global Retail Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
-------------------------------------
Name: Osamu R. Watanabe
-----------------------------------
Title: Vice President
----------------------------------
DLJ Diversified Partners, L.P.
By: DLJ Diversified Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
-------------------------------------
Name: Osamu R. Watanabe
-----------------------------------
Title: Vice President
----------------------------------
By: DLJ Diversified Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
-------------------------------------
Name: Osamu R. Watanabe
-----------------------------------
Title: Vice President
----------------------------------
GRP Partners, L.P.
By: Global Retail Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
-------------------------------------
Name: Osamu R. Watanabe
-----------------------------------
Title: Vice President
----------------------------------
Global Retail Partners Funding, Inc.
By: /s/ Osamu R. Watanabe
-------------------------------------
Name: Osamu R. Watanabe
-----------------------------------
Title: Vice President
----------------------------------
DLJ ESC II, L.P.
By: DLJ LBO Plans Management
Corporation
Its: General Partner
By: /s/ Osamu R. Watanabe
-------------------------------------
Name: Osamu R. Watanabe
-----------------------------------
Title: Vice President
----------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
<PAGE>
INVESTOR(S):
Waelinvest
By: /s/ Freddy De Greef
-------------------------------------
Name: Freddy De Greef
-------------------------------------
Title: C.E.O.
----------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
<PAGE>
INVESTOR(S):
Watershed Capital I, L.P.
By: Watershed Capital G.P. I, L.P.
Its: General Partner
By: Watershed Capital G.P. I, L.L.C.
Its: General Partner
By: ________________________________
Ralph C. Derrickson
Managing Member
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
<PAGE>
INVESTOR(S):
TWP Mercata Investors
By: /s/ David A. Baylor
-----------------------------------
David A. Baylor
Managing Partner
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
<PAGE>
Exhibit A
SCHEDULE OF INVESTORS
Name and Address
Vulcan Ventures Incorporated
110 - 110th Avenue N.E., Suite 550
Bellevue, WA 98004
Highland Capital Partners IV Limited Partnership
Two International Place
Boston, MA 02110
Highland Entrepreneurs' Fund IV Limited Partnership
Two International Place
Boston, MA 02110
Amerindo Technology Growth Fund II, Inc.
c/o Amerindo Investment Advisors
399 Park Avenue, 22nd Floor
New York, NY 10022
Vertex Capital II LLC
130 West Lake Street
Wayzata, MN 55391
Attn: Matthew Fitzmaurice
Vertex Capital III LLC
130 West Lake Street
Wayzata, MN 55391
Attn: Matthew Fitzmaurice
Sands Brothers/Amerindo Technology Associates LLC
c/o Amerindo Investment Advisors
399 Park Avenue, 22nd Floor
New York, NY 10022
Sands Brothers/Technology Associates Institution LLC
c/o Amerindo Investment Advisors
399 Park Avenue, 22nd Floor
New York, NY 10022
EXHIBIT A - SCHEDULE OF INVESTORS
A-1
<PAGE>
Name and Address
Sands Brothers/Amerindo Technology Offshore Associates LLC
c/o Amerindo Investment Advisors
399 Park Avenue, 22nd Floor
New York, NY 10022
Litton Master Trust
c/o Amerindo Investment Advisors
399 Park Avenue, 22nd Floor
New York, NY 10022
James Stableford
c/o Amerindo Investment Advisors
43 Upper Grosvenor Street
London, England W1X 9PG
Aurora Technology Fund LLC
152 West 57th Street, 57th Floor
New York, NY 10019
Beagle Limited
c/o Hecht and Company
111 West 40th Street, 20th Floor
New York, NY 10018
Global Retail Partners, L.P.
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
Attention: Osamu Watanabe
with copy to:
Global Retail Partners, L.P.
277 Park Avenue, 19th Floor
New York, NY 10172
Attention: Nicole Arnaboldi
DLJ Diversified Partners, L.P.
277 Park Avenue, 19th Floor
New York, NY 10172
Attention: Nicole Arnaboldi
with copy to:
DLJ Diversified Partners, L.P.
277 Park Avenue, 23rd Floor
New York, NY 10172
Attention: Ivy Dodes
EXHIBIT A - SCHEDULE OF INVESTORS
A-2
<PAGE>
Name and Address
DLJ Diversified Partners - A, L.P.
277 Park Avenue, 19th Floor
New York, NY 10172
Attention: Nicole Arnaboldi
with copy to:
DLJ Diversified Partners - A, L.P.
277 Park Avenue, 23rd Floor
New York, NY 10172
Attention: Ivy Dodes
GRP Partners, L.P.
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
Attention: Osamu Watanabe
with copy to:
GRP Partners, L.P.
277 Park Avenue, 19th Floor
New York, NY 10172
Attention: Nicole Arnaboldi
Global Retail Partners Funding, Inc.
277 Park Avenue, 19th Floor
New York, NY 10172
Attention: Nicole Arnaboldi
with copy to:
Global Retail Partners Funding, Inc.
2121 Avenue of the Stars, 30th Floor
Los Angeles, CA 90067
Attention: Osamu Watanabe
DLJ ESC II L.P.
277 Park Avenue, 19th Floor
New York, NY 10172
Attention: Ed Poletti
with copy to:
DLJ ESC II L.P.
277 Park Avenue, 23rd Floor
New York, NY 10172
Attention: Ivy Dodes
EXHIBIT A - SCHEDULE OF INVESTORS
A-3
<PAGE>
Name and Address
Waelinvest
102 rue Waelhem
1030 Bruxelles
Belgium
with copy to:
525 Market Street, 23rd Floor
San Francisco, CA 94105
Watershed Capital I, L.P.
Two Union Square
601 Union Street, Suite 4200
Seattle, WA 98101
William D. Savoy
110 - 110th Avenue NE, Suite 550
Bellevue, WA 98004-5862
Diane H. Daggatt
110 - 110th Avenue NE, Suite 550
Bellevue, WA 98004-5862
Bert Kolde
110 - 110th Avenue NE, Suite 550
Bellevue, WA 98004-5862
TWP Mercata Investors
c/o Thomas Weisel Partners
1 Montgomery Street, Suite 3700
San Francisco, CA 94104
Attention: Fredericka Drum
EXHIBIT A - SCHEDULE OF INVESTORS
A-4
<PAGE>
Exhibit 10.18
MERCATA, INC.
AMENDED AND RESTATED CO-SALE AGREEMENT
This Amended and Restated Co-Sale Agreement (the "Agreement") is made and
entered into as of this lst day of March, 2000, by and among Mercata, Inc., a
Delaware corporation (the "Company"), each of the persons and entities listed on
Exhibit A hereto (the "Investors"), and Vulcan Ventures Incorporated (referred
to herein as the "Founder").
Recitals
Whereas, the Founder is the beneficial owner of an aggregate of one million
(1,000,000) shares of Common Stock of the Company, fourteen million (14,000,000)
shares of Series A Preferred Stock of the Company, one million eight hundred
eighty-eight thousand (1,888,000) shares of Series B Preferred Stock of the
Company and three million three hundred sixty-three thousand (3,363,000) shares
of Series C Preferred Stock of the Company;
Whereas, the Company, the Founder and the Investors that have entered into
that certain Co-Sale Agreement, dated as of September 30, 1999, as amended (the
"Prior Co-Sale Agreement"), and desire to amend and restate such agreement with
the terms and conditions of this agreement;
Whereas, Investors are purchasing shares of the Company's Series C
Preferred Stock (the "Series C Preferred Stock") pursuant to that certain Series
C Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date
herewith;
Whereas, such Investors were induced by the Company to purchase the Series
C Preferred Stock in part by the Company's and the Founder's agreement to enter
into this Agreement; and
Whereas, the parties desire to enter into this Agreement in order to
grant rights of co-sale to each Investor.
Now, Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and the
Purchase Agreement and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree hereto as
follows:
1. Definitions.
(a) "Co-Sale Stock" shall mean shares of the Company's Common Stock
and Preferred Stock now owned or subsequently acquired by the Founder by gift,
purchase, dividend, option exercise or any other means whether or not such
securities are only registered in a Founder's name or beneficially or legally
owned by Founder, including any interest of a spouse in any of the Co-Sale
Stock, whether that interest is asserted pursuant to marital property laws or
otherwise. The number of shares of Co-Sale Stock owned by the Founder as of the
date hereof are set forth on Exhibit B, which Exhibit may be amended from time
to time by the Company
1.
<PAGE>
to reflect changes in the number of shares owned by the Founder, but the failure
to so amend shall have no effect on such Co-Sale Stock being subject to this
Agreement.
(b) "Common Stock" shall mean the Company's Common Stock and shares
of Common Stock issued or issuable upon exercise of any option, warrant or other
security or right of any kind convertible into or exchangeable for Common Stock.
(c) "Preferred Stock" shall mean the Company's Preferred Stock and
shares of Preferred Stock issued or issuable upon exercise of any option,
warrant or other security or right of any kind convertible into or exchangeable
for Preferred Stock.
(d) For the purpose of this Agreement, the term "Transfer" shall
include any sale, assignment, encumbrance, hypothecation, pledge, conveyance in
trust, gift, transfer by request, devise or descent, or other transfer or
disposition of any kind, including, but not limited to, transfers to receivers,
levying creditors, trustees or receivers in bankruptcy proceedings or general
assignees for the benefit of creditors, whether voluntary or by operation of
law, directly or indirectly, of any of the Co-Sale Stock.
(e) "Affiliate" of a person or entity means any person or entity who
controls, is controlled by or under common control with such person or entity.
2. Transfers by the Founder.
(a) If the Founder proposes to Transfer any shares of Co-Sale Stock
then the Founder shall promptly give written notice (the "Notice")
simultaneously to the Company and to each of the Investors at least thirty (30)
days prior to the closing of such Transfer. The Notice shall describe in
reasonable detail the proposed Transfer including, without limitation, the
number of shares of Co-Sale Stock to be transferred, the nature of such
Transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the Transfer is being
made pursuant to the provisions of Section 3(a), the Notice shall state under
which section the Transfer is being made.
(b) Each Investor shall have the right, exercisable upon written
notice to the Founder within fifteen (15) days after the Notice, to participate
in such Transfer of Co-Sale Stock on the same terms and conditions. Such notice
shall indicate the number of shares of Common Stock and/or Preferred Stock such
Investor wishes to sell under his or her right to participate. To the extent one
or more of the Investors exercise such right of participation in accordance with
the terms and conditions set forth below, the number of shares of Co-Sale Stock
that the Founder may sell in the transaction shall be correspondingly reduced.
(c) Each Investor may sell all or any part of that number of shares
equal to the product obtained by multiplying (i) the aggregate number of shares
of Co-Sale Stock covered by the Notice by (ii) a fraction the numerator of which
is the number of shares of Common Stock (including shares of Preferred Stock on
an as converted basis) owned by such Investor at the time of the Transfer and
the denominator of which is the total number of shares of Common Stock
(including shares of Preferred Stock on an as converted basis) owned by Founder
and the Investors at the time of the Transfer.
2.
<PAGE>
(d) Each Investor who elects to participate in the Transfer pursuant
to this Section 2 (a "Participant") shall effect its participation in the
Transfer by promptly delivering to Founder for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent:
(i) the type and number of shares of Common Stock and/or
Preferred Stock which such Participant elects to sell; or
(ii) that number of shares of Preferred Stock which is at such
time convertible into the number of shares of Common Stock which such
Participant elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Preferred Stock in lieu of Common Stock, such
Participant shall convert such Preferred Stock into Common Stock and deliver
Common Stock as provided in Section 2(d)(i) above. The Company agrees to make
any such conversion concurrent with the actual transfer of such shares to the
purchaser.
(e) The stock certificate or certificates that the Participant
delivers to Founder pursuant to Section 2(d) shall be transferred to the
prospective purchaser in consummation of the sale of the Common Stock pursuant
to the terms and conditions specified in the Notice, and the Founder shall
concurrently therewith remit to such Participant that portion of the sale
proceeds to which such Participant is entitled by reason of its participation in
such sale. To the extent that any prospective purchaser or purchasers prohibits
such assignment or otherwise refuses to purchase shares or other securities from
a Participant exercising its rights of co-sale hereunder, the Founder shall not
sell to such prospective purchaser or purchasers any Co-Sale Stock unless and
until, simultaneously with such sale, the Founder shall purchase such shares or
other securities from such Participant on the same terms and conditions
specified in the Notice.
(f) The exercise or non-exercise of the rights of the Investors
hereunder to participate in one or more Transfers of Co-Sale Stock made by the
Founder shall not adversely affect their rights to participate in subsequent
Transfers of Co-Sale Stock subject to Section 2(a).
(g) If none of the Investors elect to participate in the sale of the
Co-Sale Stock subject to the Notice, the Founder may, not later than sixty (60)
days following delivery to the Company of the Notice, enter into an agreement
providing for the closing of the Transfer of the Co-Sale Stock covered by the
Notice within thirty (30) days of such agreement on terms and conditions not
more materially favorable to the transferor than those described in the Notice.
Any proposed transfer on terms and conditions materially more favorable than
those described in the Notice, as well as any subsequent proposed transfer of
any of the Co-Sale Stock by Founder, shall again be subject to the co-sale
rights of the Investors and shall require compliance by Founder with the
procedures described in this Section 2.
3. Exempt Transfers.
(a) Notwithstanding the foregoing, the co-sale rights of the
Investors shall not apply to (i) any transfer to the ancestors, descendants or
spouse or to trusts for the benefit of such persons or the Founder, (ii) any
transfer or transfers by a Founder to another Founder (the "Transferee-Founder")
so long as the Transferee-Founder is, at the time of the transfer, employed by
or acting as a consultant or director of the Company, (iii) any pledge of Co-
Sale
3.
<PAGE>
Stock made pursuant to a bona fide loan transaction that creates a mere security
interest, (iv) any bona fide gift, or (v) any transfer to an Affiliate; provided
that in the event of any transfer made pursuant to one of the exemptions
provided above, (A) the Founder shall inform the Investors of such pledge,
transfer or gift prior to effecting it and (B) the pledgee, transferee or donee
shall furnish the Investors with a written agreement to be bound by and comply
with all provisions of Section 2. Except with respect to Co-Sale Stock
transferred under clause (i) above (which Co-Sale Stock shall no longer be
subject to the co-sale rights of the Investors), such transferred Co-Sale Stock
shall remain "Co-Sale Stock" hereunder, and such pledgee, transferee or donee
shall be treated as the "Founder" for purposes of this Agreement.
(b) Notwithstanding the foregoing, the provisions of Section 2 shall
not apply to the sale of any Co-Sale Stock to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act").
(c) This Agreement is subject to, and shall in no manner limit the
right which the Company may have to repurchase securities from the Founder
pursuant to (i) a stock restriction agreement or other agreement between the
Company and the Founder and (ii) any right of first refusal set forth in the
Bylaws of the Company.
4. Prohibited Transfers.
(a) In the event that Founder should Transfer any Co-Sale Stock in
contravention of the co-sale rights of each Investor under this Agreement (a
"Prohibited Transfer"), each Investor, in addition to such other remedies as may
be available at law, in equity or hereunder, shall have the put option provided
below, and the Founder shall be bound by the applicable provisions of such
option.
(b) In the event of a Prohibited Transfer, each Investor shall have
the right to sell to Founder the type and number of shares of Common Stock equal
to the number of shares each Investor would have been entitled to transfer to
the purchaser under Section 2(c) hereof had the Prohibited Transfer been
effected pursuant to and in compliance with the terms hereof. Such sale shall be
made on the following terms and conditions:
(i) The price per share at which the shares are to be sold to
the Founder shall be equal to the price per share paid by the purchaser to the
Founder in such Prohibited Transfer. The Founder shall also reimburse each
Investor for any and all fees and expenses, including legal fees and expenses,
incurred pursuant to the exercise or the attempted exercise of the Investor's
rights under Section 2.
(ii) Within ninety (90) days after the date on which an Investor
received notice of the Prohibited Transfer or otherwise became aware of the
Prohibited Transfer, such Investor shall, if exercising the option created
hereby, deliver to the Founder the certificate or certificates representing
shares to be sold, each certificate to be properly endorsed for transfer.
(iii) The Founder shall, upon receipt of the certificate or
certificates for the shares to be sold by an Investor, pursuant to this Section
4(b), pay the aggregate purchase
4.
<PAGE>
price therefor and the amount of reimbursable fees and expenses, as specified in
Section 4(b)(i), in cash or by other means acceptable to the Investor.
(iv) Notwithstanding the foregoing, any attempt by a Founder to
transfer Co-Sale Stock in violation of Section 2 hereof shall be voidable at the
option of a majority in interest of the Investors if the Investors do not elect
to exercise the put option set forth in this Section 4, and the Company agrees
it will not effect such a transfer nor will it treat any alleged transferee as
the holder of such shares without the written consent of a majority in interest
of the Investors.
5. Legend.
(a) Each certificate representing shares of Co-Sale Stock now or
hereafter owned by the Founder or issued to any person in connection with a
transfer pursuant to Section 3(a) hereof shall be endorsed with the following
legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND
BETWEEN THE SHAREHOLDER, THE COMPANY AND CERTAIN HOLDERS OF STOCK
OF THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY."
(b) The Founder agrees that the Company may instruct its transfer
agent to impose transfer restrictions on the shares represented by certificates
bearing the legend referred to in Section 5(a) above to enforce the provisions
of this Agreement and the Company agrees to promptly do so. The legend shall be
removed upon termination of this Agreement.
6. Miscellaneous.
(a) Conditions to Exercise of Rights. Exercise of the Investors'
rights under this Agreement shall be subject to and conditioned upon, and the
Founder and the Company shall use their best efforts to assist each Investor in,
compliance with applicable laws.
(b) Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Washington as applied to agreements among
Washington residents entered into and to be performed entirely within
Washington.
(c) Amendment. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by the written consent of (i)
as to the Company, only the Company, (ii) as to the Investors, persons holding
more than a majority in interest of the Common Stock (including shares of
Preferred Stock on an as converted basis) held by the Investors and their
assignees, pursuant to Section 6(d) hereof, and (iii) as to the Founder, only
the Founder; provided, that no consent of the Founder shall be necessary for any
amendment and/or restatement which includes additional holders of Preferred
Stock or other preferred stock of the Company as "Investors" and parties hereto.
Any amendment or waiver effected in
5.
<PAGE>
accordance with clauses (i), (ii), and (iii) of this Section 6(c) shall be
binding upon each Investor, its successors and assigns, the Company and the
Founder.
(d) Assignment of Rights. This Agreement constitutes the entire
agreement between the parties relative to the specific subject matter hereof.
Any previous agreement among the parties relative to the specific subject matter
hereof is superseded by this Agreement. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
Each Investor may transfer or assign its rights hereunder only along with the
corresponding shares of Common Stock or Preferred Stock and any purported
transfer in violation of the foregoing shall be void and of no effect.
(e) Term. This Agreement shall continue in full force and effect from
the date hereof through the earliest of the following dates, on which date it
shall terminate in its entirety:
(i) the date of the closing of a firmly underwritten public
offering of the Common Stock pursuant to a registration statement filed with the
Securities and Exchange Commission, and declared effective under the Securities
Act of 1933, as amended;
(ii) the date of the closing of a sale, lease, or other
disposition of all or substantially all of the Company's assets or the Company's
merger into or consolidation with any other corporation or other entity, or any
other corporate reorganization, in which the holders of the Company's
outstanding voting stock immediately prior to such transaction own, immediately
after such transaction, securities representing less than fifty percent (50%) of
the voting power of the corporation or other entity surviving such transaction,
provided, that this Section 6(e)(ii) shall not apply to a merger effected
exclusively for the purpose of changing the domicile of the Company; or
(f) the date as of which the parties hereto terminate this Agreement
by written consent of a majority in interest of the Investors (excluding Vulcan)
and a majority in interest of the Founder.
(g) Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature page hereof or
at such other address as such party may designate by ten (10) days advance
written notice to the other parties hereto.
(h) Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this
6.
<PAGE>
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
(i) Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
(j) Entire Agreement. This Agreement and the Exhibits hereto, along
with the Purchase Agreement and each of the Exhibits thereto, constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
(k) Additional Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Series C
Preferred Stock pursuant to the Purchase Agreement, any purchaser of such shares
of Series C Preferred Stock may become a party to this Agreement by executing
and delivering an additional counterpart signature page to this Agreement and
shall be deemed an "Investor" hereunder.
(l) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(m) Amendment of Prior Co-Sale Agreement. The Prior Co-Sale Agreement
is hereby amended in its entirety herein. Such amendment and restatement is
effective upon the execution of this Agreement by the Company, the Founders and
the holders of a majority in interest of the Common Stock (on an as converted
basis) held by the Investors and their assigns outstanding as of the date of
this Agreement. Upon such execution, all provisions of, rights granted and
covenants made in the Prior Co-Sale Agreement are hereby waived, released and
amended in their entirety and shall have no further force or effect.
[THIS SPACE INTENTIONALLY LEFT BLANK]
7.
<PAGE>
The foregoing Amended and Restated Co-Sale Agreement is hereby executed as
of the date first above written.
COMPANY:
Mercata, Inc.
By: /s/ Tom Van Horn
--------------------------------
Tom Van Horn
President
SIGNATURE PAGE TO AMENDED AND RESTATED
CO-SALE AGREEMENT
<PAGE>
FOUNDER:
Vulcan Ventures Incorporated
By: /s/ William D. Savoy
-------------------------------------
William D. Savoy
Vice President
INVESTORS:
/s/ William D. Savoy
----------------------------------------
William D. Savoy
/s/ Bert Kolde
----------------------------------------
Bert Kolde
/s/ Diane Daggatt
----------------------------------------
Diane Daggatt
SIGNATURE PAGE TO AMENDED AND RESTATED
CO-SALE AGREEMENT
<PAGE>
INVESTORS(S):
Highland Capital Partners IV Limited Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By: /s/ Daniel Nova
-----------------------------------
Member
Highland Entrepreneurs' Fund IV Limited
Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By: /s/ Daniel Nova
-----------------------------------
Member
SIGNATURE PAGE TO AMENDED AND RESTATED
CO-SALE AGREEMENT
<PAGE>
INVESTORS(S):
Amerindo Technology Growth Fund II, Inc.
By: /s/ Gary A. Tanaka
--------------------------------------
Name: Gary A. Tanaka
------------------------------------
Title: Director
-----------------------------------
Vertex Capital II LLC
By: /s/ [ILLEGIBLE]
--------------------------------------
Name: ------------------------------------
Title: -----------------------------------
Vertex Capital III LLC
By: /s/ [ILLEGIBLE]
--------------------------------------
Name:-------------------------------------
Title:------------------------------------
Sands Brothers/Amerindo Technology Associates LLC
By: /s/ Martin S. Sands
--------------------------------------
Name: Martin S. Sands
------------------------------------
Title: Manager
-----------------------------------
Sands Brothers/Technology Associates Institution
LLC
By: /s/ Martin S. Sands
--------------------------------------
Name: Martin S. Sands
------------------------------------
Title: Manager
-----------------------------------
Sands Brothers/Amerindo Technology Offshore
Associates LLC
By: /s/ Martin S. Sands
--------------------------------------
Name: Martin S. Sands
------------------------------------
Title: Manager
-----------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED
CO-SALE AGREEMENT
<PAGE>
Litton Master Trust
By: /s/ Joaquin Garcia-Larrieu
--------------------------------------
Name: Joaquin Garcia-Larrieu
------------------------------------
Title: Attorney-in-Fact
------------------------------------
/s/ James Stableford
------------------------------------------
James Stableford
Aurora Technology Fund LLC
By: /s/ [ILLEGIBLE]
--------------------------------------
Name: ------------------------------------
Title: -----------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED
CO-SALE AGREEMENT
<PAGE>
INVESTORS(S):
Beagle Limited
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
SIGNATURE PAGE TO AMENDED AND RESTATED
CO-SALE AGREEMENT
<PAGE>
INVESTOR(S):
Global Retail Partners, L.P.
By: Global Retail Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
--------------------------------------
Name: Osamu R. Watanabe
------------------------------------
Title: Vice President
-----------------------------------
Dlj Diversified Partners, L.P.
By: DLJ Diversified Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
--------------------------------------
Name: Osamu R. Watanabe
------------------------------------
Title: Vice President
-----------------------------------
Dlj Diversified Partners-A, L.P.
By: DLJ Diversified Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
--------------------------------------
Name: Osamu R. Watanabe
------------------------------------
Title: Vice President
-----------------------------------
GRP Partners, L.P.
By: Global Retail Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
--------------------------------------
Name: Osamu R. Watanabe
------------------------------------
Title: Vice President
-----------------------------------
Global Retail Partners Funding, INC.
By: /s/ Osamu R. Watanabe
--------------------------------------
Name: Osamu R. Watanabe
------------------------------------
Title: Vice President
-----------------------------------
DLJ ESC II, L.P.
By: DLJ LBO Plans Management Corporation
Its: General Partner
By: /s/ Osamu R. Watanabe
--------------------------------------
Name: Osamu R. Watanabe
------------------------------------
Title: Vice President
-----------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED
CO-SALE AGREEMENT
<PAGE>
INVESTOR(S):
Waelinvest
By: /s/ Freddy De Greef
--------------------------------------
Name: Freddy De Greef
------------------------------------
Title: Chief Executive Officer
-----------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED
CO-SALE AGREEMENT
<PAGE>
INVESTOR(S):
Watershed Capital I, L.P.
By: Watershed Capital G.P. I, L.P.
Its General Partner
By: Watershed Capital G.P. I, L.L.C.
Its General Partner
By: __________________________________________
Ralph C. Derrickson
Managing Member
SIGNATURE PAGE TO AMENDED AND RESTATED
CO-SALE AGREEMENT
<PAGE>
INVESTOR(S):
TWP Mercata Investors
By: /s/ David Baylor
--------------------------------
David A. Baylor
Managing Partner
SIGNATURE PAGE TO AMENDED AND RESTATED
CO-SALE AGREEMENT
<PAGE>
Exhibit A
LIST OF INVESTORS
Highland Capital Partners IV Limited Partnership
Highland Entrepreneurs' Fund IV Limited Partnership
Amerindo Technology Growth Fund II, Inc. (referred to as "ATGF II in the
Prior Co-Sale Agreement)
Vertex Capital II LLC
Vertex Capital III LLC
Sands Brothers/Amerindo Technology Associates LLC
Sands Brothers/Amerindo Technology Associates Institution LLC
Sands Brothers/Amerindo Technology Offshore Associates LLC
Litton Master Trust
James Stableford
Aurora Technology Fund LLC
Beagle Limited
Global Retail Partners, L.P.
DLJ Diversified Partners, L.P.
DLJ Diversified Partners - A, L.P.
GRP Partners, L.P.
Global Retail Partners Funding, Inc.
DLJ ESC II L.P.
Waelinvest
Watershed Capital I, L.P.
William D. Savoy
Diane H. Daggatt
Bert Kolde
TWP Mercata Investors
EXHIBIT A - LIST OF INVESTORS
<PAGE>
Exhibit B
CO-SALE STOCK OWNERSHIP
Name of Founder Co-Sale Stock
Vulcan Ventures Incorporated 1,000,000 shares of Common Stock
14,000,000 shares of Series A Preferred Stock
1,888,000 shares of Series B Preferred Stock
573,145 shares of Series C Preferred Stock
EXHIBIT B - CO-SALE STOCK OWNERSHIP
<PAGE>
Exhibit 10.19
MERCATA, INC.
AMENDED AND RESTATED VOTING AGREEMENT
This Amended and Restated Voting Agreement (this "Agreement") is made and
entered into as of this lst day of March, 2000, by and among Mercata, Inc., a
Delaware corporation (the "Company"), the persons and entities listed on Exhibit
A hereto (the "Investors").
Witnesseth
Whereas, the Investors are purchasing shares of the Company's Series C
Preferred Stock (the "Series C Preferred Stock"), pursuant to that certain
Series C Preferred Stock Purchase Agreement (the "Purchase Agreement") of even
date herewith (the "Financing");
Whereas, the Company and the Investors have entered into that certain
Voting Agreement, dated as of September 30, 1999, as amended (the "Prior Voting
Agreement"), and desire to amend and restate such agreement with the terms and
conditions of this agreement; and
Whereas, in connection with the consummation of the Financing, the Company
and the Investors have agreed to provide for the future voting of their shares
of the Company's capital stock as set forth below.
Now, Therefore, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Agreement
1. Voting
1.1 Investor Shares. The Investors each agree to hold all shares of
voting capital stock of the Company registered in their respective names or
beneficially owned by them as of the date hereof and any and all other
securities of the Company legally or beneficially acquired by each of the
Investors after the date hereof (hereinafter collectively referred to as the
"Investor Shares") subject to, and to vote the Investor Shares in accordance
with, the provisions of this Agreement.
1.2 Election of Directors. For so long as at least 10,000,000 shares of
Preferred Stock remain outstanding (subject to adjustment for stock splits,
dividends or the like) and the authorized size of the Company's Board of
Directors is seven (7) or more, on all matters relating to the election of
directors of the Company, the Investors agree to vote all Investor Shares held
by them (or the holders thereof shall consent pursuant to an action by written
consent of the holders of capital stock of the Company) so as to elect a member
of the Company's Board of Directors as follows:
1.
<PAGE>
(a) At each election of directors in which the holders of Common
Stock and holders of Preferred Stock, voting together as a single class, are
entitled to elect directors of the Company, the Investors shall vote all of
their respective Investor Shares so as to elect: one (1) representative of
Global Retail Partners Funding, Inc. so long as it or its affiliates hold not
less than 1,792,000 shares of Preferred Stock (as adjusted for stock splits,
dividends and the like); provided, that in no event will this provision require
the Investors to vote any shares so as to elect more than one (1) representative
of Global Retail Partners Funding, Inc. to the Company's Board of Directors at
any one time. Any vote taken to remove any director elected pursuant to this
Section 1.2(a), or to fill any vacancy created by the resignation or death of a
director elected pursuant to this Section 1.2(a), shall also be subject to the
provisions of this Section 1.2(a).
(b) At each election of directors in which the holders of Series
A Preferred Stock, voting as a separate class, are entitled to elect directors
of the Company, the Investors shall vote all of their respective Investor Shares
so as to elect two (2) representatives of Vulcan Ventures Incorporated so long
as it holds not less than 11,200,000 shares of Series A Preferred Stock (as
adjusted for stock splits, dividends and the like). Any vote taken to remove any
director elected pursuant to this Section 1.2(b), or to fill any vacancy created
by the resignation or death of a director elected pursuant to this Section
1.2(b), shall also be subject to the provisions of this Section 1.2(b);
(c) At each election of directors in which the holders of Series
B Preferred Stock, voting as a separate class, are entitled to elect directors
of the Company, the Investors shall vote all of their respective Investor Shares
so as to elect one designee of Highland Capital Partners IV Limited Partnership
so long as it holds not less than 4,480,000 shares of Series B Preferred Stock
(as adjusted for stock splits, dividends and the like). Any vote taken to remove
any director elected pursuant to this Section 1.2(c), or to fill any vacancy
created by the resignation or death of a director elected pursuant to this
Section 1.2(c), shall also be subject to the provisions of this Section 1.2(c).
(d) At each election of directors in which the holders of Common
Stock, voting as a separate class, are entitled to elect directors of the
Company, the Investors shall vote all of their respective Investor Shares so as
to elect: (i) the person serving as Chief Executive Officer of the Company, or
if there is no duly elected Chief Executive Officer, one (1) individual
nominated by the holders of a majority in interest of the Common Stock and (ii)
one (1) individual nominated by the holders of a majority in interest of the
Common Stock. Any vote taken to remove any director elected pursuant to this
Section 1.2(d), or to fill any vacancy created by the resignation or death of a
director elected pursuant to this Section 1.2(d), shall also be subject to the
provisions of this Section 1.2(d).
1.3 Legend
(a) Concurrently with the execution of this Agreement, there
shall be imprinted or otherwise placed, on certificates representing the
Investor Shares the following restrictive legend (the "Legend"):
2.
<PAGE>
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS AND CONDITIONS OF A VOTING AGREEMENT WHICH PLACES
CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED
HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE
DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS
OF SUCH AGREEMENT. A COPY OF SUCH VOTING AGREEMENT WILL BE
FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE
UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF
BUSINESS."
(b) The Company agrees that, during the term of this Agreement,
it will not remove, and will not permit to be removed (upon registration of
transfer, reissuance of otherwise), the Legend from any such certificate and
will place or cause to be placed the Legend on any new certificate issued to
represent Investor Shares theretofore represented by a certificate carrying the
Legend.
1.4 Successors. The provisions of this Agreement shall be binding upon
the successors in interest to any of the Investor Shares. The Company shall not
permit the transfer of any of the Investor Shares on its books or issue a new
certificate representing any of the Investor Shares unless and until the person
to whom such security is to be transferred shall have executed a written
agreement, substantially in the form of this Agreement, pursuant to which such
person becomes a party to this Agreement and agrees to be bound by all the
provisions hereof as if such person were an Investor.
1.5 Other Rights. Except as provided by this Agreement or any other
agreement entered into in connection with the Financing, each Investor shall
exercise the full rights of a holder of capital stock of the Company with
respect to the Investor Shares.
2. Termination
2.1 This Agreement shall continue in full force and effect from the
date hereof through the earliest of the following dates, on which date it shall
terminate in its entirety:
(a) the date of the closing of a firmly underwritten public
offering of the Common Stock pursuant to a registration statement filed with the
Securities and Exchange Commission, and declared effective under the Securities
Act of 1933, as amended;
(b) at such time as less than 10,000,000 shares of Preferred
Stock remain outstanding (as adjusted for stock splits, dividends or the like);
(c) ten (10) years from the date of this Agreement;
(d) the date of the closing of a sale, lease, or other
disposition of all or substantially all of the Company's assets or the Company's
merger into or consolidation with any other corporation or other entity, or any
other corporate reorganization, in which the holders of the Company's
outstanding voting stock immediately prior to such transaction own, immediately
after such transaction, securities representing less than fifty percent (50%) of
the
3.
<PAGE>
voting power of the corporation or other entity surviving such transaction,
provided that this Section 2.1(d) shall not apply to a merger effected
exclusively for the purpose of changing the domicile of the Company; or
(e) the date as of which the parties hereto terminate this
Agreement by written consent of the holders of seventy percent (70%) in interest
of the Investors.
3. Miscellaneous
3.1 Specific Performance. The parties hereto hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
or to their heirs, personal representatives, or assigns by reason of a failure
to perform any of the obligations under this Agreement and agree that the terms
of this Agreement shall be specifically enforceable. If any party hereto or his
heirs, personal representatives, or assigns institutes any action or proceeding
to specifically enforce the provisions hereof, any person against whom such
action or proceeding is brought hereby waives the claim or defense therein that
such party or such personal representative has an adequate remedy at law, and
such person shall not offer in any such action or proceeding the claim or
defense that such remedy at law exists.
3.2 Governing Law. This Agreement, and the rights of the parties
hereto, shall be governed by and construed in accordance with the laws of the
State of Washington as such laws apply to agreements among Washington residents
made and to be performed entirely within the State of Washington.
3.3 Amendment or Waiver. This Agreement may be amended (or provisions
of this Agreement waived) only by an instrument in writing signed by (a) the
Company and (b) seventy percent (70%) in interest of the Investors. Any
amendment or waiver so effected shall be binding upon the Company, each of the
parties hereto and any assignee of any such party.
3.4 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
3.5 Successors. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, successors, assigns,
administrators, executors and other legal representatives.
3.6 Additional Shares. In the event that subsequent to the date of
this Agreement any shares or other securities are issued on, or in exchange for,
any of the Investor Shares by reason of any stock dividend, stock split,
combination of shares, reclassification or the like, such shares or securities
shall be deemed to be Investor Shares for purposes of this Agreement.
3.7 Addition of Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Preferred
Stock pursuant to the Purchase Agreement, any purchaser of such shares of
Preferred Stock may become a party to this
4.
<PAGE>
Agreement by executing and delivering an additional counterpart signature page
to this Agreement and shall be deemed an "Investor" hereunder.
3.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same agreement.
3.9 Waiver. No waivers of any breach of this Agreement extended by any
party hereto to any other party shall be construed as a waiver of any rights or
remedies of any other party hereto or with respect to any subsequent breach.
3.10 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
3.11 Notices. Any notices required in connection with this Agreement
shall be in writing and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified, (b) when sent by confirmed facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written notification of receipt. All notices shall be
addressed to the holder appearing on the books of the Company or at such address
as such party may designate by ten (10) days advance written notice to the other
parties hereto.
3.12 Entire Agreement. This Agreement and the Exhibits hereto, along
with the Purchase Agreement and each of the Exhibits thereto, constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
3.13 Amendment of Prior Voting Agreement. The Prior Voting Agreement is
hereby amended in its entirety and restated herein. Such amendment and
restatement is effective upon the execution of this Agreement by the Company,
seventy percent (70%) in interest of the "Investors" (as defined in the Prior
Voting Agreement). Upon such execution, all provisions of rights granted and
covenants made in the Prior Voting Agreement are hereby waived, released and
terminated in their entirety and shall have no further force or effect.
[This Space Intentionally Left Blank]
5.
<PAGE>
In Witness Whereof, the parties hereto have executed this Amended and
Restated Voting Agreement as of the date first above written to become effective
as of the date set forth in the first paragraph hereof.
COMPANY:
Mercata, Inc.
By: /s/ Tom Van Horn
---------------------------
Tom Van Horn
President
SIGNATURE PAGE TO AMENDED AND RESTATED
VOTING AGREEMENT
<PAGE>
INVESTOR(S):
Vulcan Ventures Incorporated
By: /s/ William D. Savoy
-------------------------------
William D. Savoy
Vice President
/s/ William D. Savoy
----------------------------------
William D. Savoy
/s/ Bert Kolde
----------------------------------
Bert Kolde
/s/ Diane Daggatt
----------------------------------
Diane Daggatt
SIGNATURE PAGE TO AMENDED AND RESTATED
VOTING AGREEMENT
<PAGE>
INVESTOR(S):
Highland Capital Partners IV Limited
Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By:/s/ Daniel Nova
-------------------------------
Member
Highland Entrepreneurs' Fund IV Limited
Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By:/s/ Daniel Nova
-------------------------------
Member
SIGNATURE PAGE TO AMENDED AND RESTATED
VOTING AGREEMENT
<PAGE>
INVESTOR(S):
Amerindo Technology Growth Fund II, Inc.
By: /s/ Gary A. Tanaka
-----------------------------------
Name: Gary A. Tanaka
---------------------------------
Title: Director
--------------------------------
Vertex Capital II LLC
By: /s/ [ILLEGIBLE]
Name:_________________________________
Title:________________________________
Vertex Capital III LLC
By: /s/ [ILLEGIBLE]
Name:_________________________________
Title:________________________________
Sands Brothers/Amerindo Technology Associates LLC
By: /s/ Martin S. Sands
-----------------------------------
Name: Martin S. Sands
---------------------------------
Title: Manager
--------------------------------
Sands Brothers/Technology Associates Institution
LLC
By: /s/ Martin S. Sands
-----------------------------------
Name: Martin S. Sands
---------------------------------
Title: Manager
--------------------------------
Sands Brothers/Amerindo Technology Offshore
Associates LLC
By: /s/ Martin S. Sands
-----------------------------------
Name: Martin S. Sands
---------------------------------
Title: Manager
--------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED
VOTING AGREEMENT
<PAGE>
Litton Master Trust
By: /s/ Joaquin Garcia-Larrieu
-----------------------------------
Name: Joaquin Garcia-Larrieu
---------------------------------
Title: Attorney-in-Fact
--------------------------------
/s/ James Stableford
--------------------------------------
James Stableford
Aurora Technology Fund LLC
By: /s/ [ILLEGIBLE]
-----------------------------------
Name:_________________________________
Title:________________________________
SIGNATURE PAGE TO AMENDED AND RESTATED
VOTING AGREEMENT
<PAGE>
INVESTOR(S):
Beagle Limited
By:___________________________________
Name:_________________________________
Title:________________________________
SIGNATURE PAGE TO AMENDED AND RESTATED
VOTING AGREEMENT
<PAGE>
INVESTOR(S):
Global Retail Partners, L.P.
By: Global Retail Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
----------------------------------
Name: Osamu R. Watanabe
---------------------------------
Title: Vice President
--------------------------------
DLJ Diversified Partners, L.P.
By: DLJ Diversified Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
----------------------------------
Name: Osamu R. Watanabe
---------------------------------
Title: Vice President
--------------------------------
DLJ Diversified Partners-A, L.P.
By: DLJ Diversified Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
----------------------------------
Name: Osamu R. Watanabe
---------------------------------
Title: Vice President
--------------------------------
GRP Partners, L.P.
By: Global Retail Partners, Inc.
Its: General Partner
By: /s/ Osamu R. Watanabe
----------------------------------
Name: Osamu R. Watanabe
---------------------------------
Title: Vice President
--------------------------------
Global Retail Partners Funding, Inc.
By: /s/ Osamu R. Watanabe
----------------------------------
Name: Osamu R. Watanabe
---------------------------------
Title: Vice President
--------------------------------
DLJ ESC II, L.P.
By: DLJ LBO Plans Management Corporation
Its: General Partner
By: /s/ Osamu R. Watanabe
----------------------------------
Name: Osamu R. Watanabe
---------------------------------
Title: Vice President
--------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED
VOTING AGREEMENT
<PAGE>
INVESTOR(S):
Waelinvest
By: /s/ Freddy De Greef
--------------------------------------
Name: Freddy De Greef
------------------------------------
Title: Chief Executive Officer
-----------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED
VOTING AGREEMENT
<PAGE>
INVESTOR(S):
Watershed Capital I, L.P.
By: Watershed Capital G.P. I, L.P.
Its General Partner
By: Watershed Capital G.P. I, L.L.C.
Its General Partner
By:______________________________________
Ralph C. Derrickson
Managing Member
SIGNATURE PAGE TO AMENDED AND RESTATED
VOTING AGREEMENT
<PAGE>
INVESTOR(S):
TWP Mercata Investors
By: /s/ David Baylor
-----------------------------------
David A. Baylor
Managing Partner
SIGNATURE PAGE TO AMENDED AND RESTATED
VOTING AGREEMENT
<PAGE>
Exhibit A
LIST OF INVESTORS
Investors
Vulcan Ventures Incorporated
Highland Capital Partners IV Limited Partnership
Highland Entrepreneurs' Fund IV Limited Partnership
Amerindo Technology Growth Fund II, Inc. (referred to as "ATGF II" in the
Prior Voting Agreement")
Vertex Capital II LLC
Vertex Capital III LLC
Sands Brothers/Amerindo Technology Associates LLC
Sands Brothers/Amerindo Technology Associates Institution LLC
Sands Brothers/Amerindo Technology Offshore Associates LLC
Litton Master Trust
James Stableford
Aurora Technology Fund LLC
Beagle Limited
Global Retail Partners, L.P.
DLJ Diversified Partners, L.P.
DLJ Diversified Partners - A, L.P.
GRP Partners, L.P.
Global Retail Partners Funding, Inc.
DLJ ESC II L.P.
Waelinvest
Watershed Capital I, L.P.
William D. Savoy
Diane H. Daggatt
Bert Kolde
TWP Mercata Investors
EXHIBIT A - LIST OF INVESTORS
<PAGE>
EXHIBIT 10.20
*** Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 CFR (S)(S) 200.80(b)(4),
200.83 and 240.24b-2
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Advertising Agreement
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Go2Net Insertion Order # IL 4040-99-1311
999 Third Avenue Suite 4700 Rep: J. Lefebvre Coordinator: Josh V
Seattle, WA 98104 Date: 5/25/99
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Advertiser: Mercata, Inc. Parent Company:
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Advertising Contact: Jerome Pache Agency N/A
- -------------------------------------------------------------------------------------------------------------------------
Contact's Telephone: 425-468-9800 Fax: 425-468-9989
- -------------------------------------------------------------------------------------------------------------------------
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Advertiser's Address: 110 110th Avenue East
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- -------------------------------------------------------------------------------------------------------------------------
City: Bellevue State/Province: WA Zip/Postal Code: 98004 Country: USA
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Billing Address: 110 110th Ave East, Bellevue, WA 98004
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Billing Contact: Accounts Payable - Pete Crouch Telephone: 425-468-9800
- -------------------------------------------------------------------------------------------------------------------------
Billing email address: [email protected]
-----------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
URL Advertisement is to be linked to: www.mercata.com
---------------
- -------------------------------------------------------------------------------------------------------------------------
Email address of ad created contact: Randy Nargi - [email protected]
------------------
- -------------------------------------------------------------------------------------------------------------------------
Alt Text:
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Advertising Package:
<S> <C> <C> <C> <C> <C>
- ----------- ----------- ---------- ----------------
MC main page MC Keywords StockSite Go2net ROS Silicon investor HyperMart
- ----------- ----------- ---------- ----------------
----------- ----------------
MC run-of-site Marketplace PlaySite MetaSpy MC Marketplace WebMarket
----------- ----------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Start Date: 6/7/99 End Date: 3/7/2000
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Keywords: To be determined by Mercata, subject to availability
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Pricing: Total Impressions: [...***...] over term of contract*
Total Cost per Month: Q1: [...***...]*. net/per month, Q2: [...***...]. net per Month, Q3: [...***...].
net per month
Revenue Share: Go2Net to receive [...***...] of Mercata's net sales derived from customer sessions originating
directly through links from the Go2Net Network of sites. For purposes of this provision, "net sales" shall mean
sales minus any shipping and handling charges, sales tax, and returns. * -- see impression guarantee.
- -------------------------------------------------------------------------------------------------------------------------
Billing Terms: Net 20 Days, payable monthly.
----------------------------
Advertiser's P.O. or Reference number for Invoicing:_____________________________________
- -------------------------------------------------------------------------------------------------------------------------
Contract Placements and details:
Go2Net will mange and maintain placement of all creative and links. Mercata shall have the right to change
keywords and any creative material as necessary. Such changes shall be made within 3 business days. If
Mercata finds any placement of its links or ads to be objectionable, Mercata shall provide prompt notice to
Go2Net, and Go2Net will work in good faith with Mercata to resolve any outstanding issues regarding placement.
Go2Net and Mercata will issue a joint press release announcing advertising agreement. This press release which
will not be issued without the consent of both parties.
BONUS IMPRESSIONS: Go2Net will allocate to Mercata [...***...] of Go2Net Run of Network unused monthly inventory,
subject to availability.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------
* Confidential Treatment Requested
1
<PAGE>
- --------------------------------------------------------------------------------
Placement Detail
All ad and link placements shall appear as of the first day of each quarter in
the manner specified below and, except as to MetaCrawler Keywords and banner
ads, shall appear continuously throughout the time periods designated below.
1st Q =[...***...]* net/mo
(A) NEW - create a new category in the Shopping channel and Webmarket called
"Group Buying" between Gift and Music. All current PowerBuys are listed
under this category. Mercata will be the exclusive merchant in this
Shopping Channel/WebMarket category through the terms of the contract.
(B) Shopping Channel Links - "Current PowerBuys from Mercata" located above the
fold on each page view within the Shopping Channel.
(C) Shopping Channel Buttons - 120 X 60 buttons on each page view within the
Shopping Channel.
(E) MetaCrawler Keywords - [...***...] available keyword impressions/Month
(F) WebMarket Front Page permanent Button or text link positioned above the
fold - "Go to Mercata for PowerBuys of the day!"
2ND Q - [...***...] net/mo
In addition to previous period placements
(G) Silicon Investor Marketplace link - link to be placed in the top 5
Marketplace links over the term of the contract.
(H) 120x60 MetaCrawler Front page button - [...***...] impressions/Month
3rd Q - [...***...] net/mo
In addition to previous period placements
(X) MetaCrawler/Go2Net.com MarketPlace Text link to Mercata.com - link to be
placed in the top 5 Marketplace links over the term of the contract.
(J) MetaCrawler Keywords - [...***...] additional keyword impressions/Month
(K) WebMarket Category Specific text links, located above the fold, in the
following categories: Consumer Electronics, Department Stores, General
Merchandise, Gifts, and Sporting Goods.
(L) Silicon Investor ROS 468x60 Banners - [...***...] impressions/Month (banners
are located at the top of each page)
(M) Webmarket ROS 468x60 Banners - [...***...] impressions/Month (banners are
located at the top of each page)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Estimated Start Date: 6/7/99
Revenue Share:
Until such time as Mercata is able to track transaction revenue based on the
origin of each customer visit, the revenue shares under this agreement shall be
based on the percentage of Mercata's overall monthly net sales likely to have
resulted from Go2Net links. This percentage will be calculated by Mercata based
on the percentage of overall user sessions received through links from the
Go2Net site. Such percentage will be applied to Mercata's overall net sales on a
monthly basis to get the net sales permanently attributable to Go2Net. Go2Net's
revenue share will be [...***...] of such presumed net sale. The parties agree
not to artificially inflate the number of reported click throughs by their own
visits to the linked web page or other inappropriate means.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Impression Delivery Guarantee:
Go2Net agrees to guarantee Mercata [...***...] impressions over the course of
this advertising agreement. Should Go2Net fail to deliver all [...***...]
impressions prior to the expiration of this advertising agreement, Go2Net will
deliver the remainder of the impressions owed within 90 days of the contract
expiration at no extra charge.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Reporting Confidentiality/Audit Rights:
Within 3 business days of the first of each month, Go2Net will provide Mercata
with detailed monthly reports accurately stating the click through traffic from
each Go2Net link to the Mercata site on a daily basis, as well as all
impressions delivered. Within 10 days after receipt for such reports, Mercata
will provide Go2Net with monthly reports accurately stating overall user
sessions per month and overall sales, and will present Go2Net with calculations
specifying the portion of net sales presumably attributable to Go2Net (per the
formula above), upon which the [...***...] revenue share will be applied.
Mercata's overall traffic, sales data and customer information is highly
confidential and proprietary to Mercata. As such, Go2Net agrees to hold all such
information in strict confidence and only use it for the purposes of reviewing
the revenue share calculations provided by Mercata. Either party shall have the
right, at its own expense and upon reasonable notice, to audit reports supplied
by the other party and the party supplying the reports in question shall
cooperate in good faith to facilitate any audit that is requested.
Mercata may utilize a third-party partner to track and report transaction
revenue and make payments to Go2Net. In this matter, Go2Net agrees to work in
good faith with Mercata to negotiate an amendment to this agreement so that it
will be consistent with this third-party's tracking and payment practices.
- --------------------------------------------------------------------------------
- ------------------------
* Confidential Treatment Requested
2
<PAGE>
- --------------------------------------------------------------------------------
Cancellation:
Go2Net will require 6 months of this contract to be completed before Mercata may
cancel. After 5 months has been completed, Mercata would be required to provide
Go2Net with 30 day written notice of contract cancellation.
- --------------------------------------------------------------------------------
Advertising Agreement Terms and Conditions
The advertiser named on this Advertising Order attached hereto ("Order") desires
to have certain material developed and published on the World Wide Web/Internet
by Go2Net, Inc. ("Go2Net") upon the terms and conditions set forth herein and on
the terms and conditions set forth in the Advertising Order attached hereto
(together, this "Agreement").
Billing
Mercata will be invoiced on the 1st of each month for the term of this
advertising agreement. Payment will be net 20 days terms. A late charge of 1.5
percent per month of the outstanding balance will be applied to each payment not
made within 20 days from receipt of the invoice. All non-sufficient fund checks
will be subject to a $50 charge.
Accounts billing less than $500 per month require a $500 pre-pay in order the
launch the campaign. All subsequent invoices will be billed in advance, either
in $500 increments, or for the remaining balance of the campaign.
If keywords are being purchased exclusively, the cost per month for these
keywords will vary according to actual impressions delivered. This may exceed
or fall short of the estimated cost per month quoted in this agreement.
Go2Net shall have the right to hold Advertiser and/or its agency or agent
jointly and severally liable for such monies Go2Net is due and payable on
publication of the advertisement. If payments are not made in a timely manner
Go2Net, at its option, may terminate this Agreement.
Materials
- ---------
All materials that Advertiser desires to have Go2Net place online are subject
to Go2Net's approval. Got2Net expressly reserves the right, at its sole
discretion and at any time, to reasonably cancel any Advertising Order or reject
any advertising material, including withdrawing any advertising material which
are currently on display or have previously been published. If any advertising
materials are withdrawn or canceled, prior to display, Go2Net's only obligation
to Advertiser will be to refund any fees paid to advance for the canceled
advertising.
Termination, Representatives, Warranties and Indemnitees
- --------------------------------------------------------
The terms of the advertising shall be as set forth on the Advertising Order
incorporated above. Either party may terminate this Agreement at any time in
the event of a material breach by the other party, which remains uncured after
thirty days written notice thereof. Notice shall be deemed to have been
received five days after mailing such notice if sent by first class mail or on
the day transmitted if sent by facsimile transmission. For any reason other
than a material breach by Go2Net, Advertiser may not terminate this agreement
except as specified above. Advertiser is solely responsible for any legal
- -------------------------
liability arising out of or relating to the material, including keywords, that
Advertiser desires to have Go2Net place online for purposes of the advertising
("Advertising Material") or any Web site linked to from such Advertising
Material. Advertiser represents and warrants that the Advertising Material it
seeks to have Go2Net place online and any Web site linked to from such
Advertising Material complies with all local, state, federal and foreign
regulations and laws; and that the use reproduction, distribution, or
transmission, of the Advertising Material will not violate the rights of any
third parties, including, but not limited to, such violations as infringement or
misappropriation of any copyright, patent, trademark, trade secret, music,
image, or other proprietary or property right, false advertising, unfair
competition, de_____, invasion of privacy or rights of celebrity, violation of
any anti-discriminatory law or regulation, or any other right of any person or
entity. Advertiser agrees to indemnity Go2Net and to hold Go2Net harmless from
any and all liability, loss, damages, claims, or causes of action, including
reasonable legal fees and expenses that may be incurred by Go2Net, arising out
of or related to Advertiser's breach of any of the foregoing representations and
warranties.
Go2Net is not responsible or liable for any errors in content or omissions or
consequences, damages, costs, refunds or rebates of any kind arising from any
interruption of service or other unavailability of the Internet or Web site in
which the advertising is displayed for whatever reason.
Go2Net makes no representations or warranties relating to the results of
Advertiser's advertising by means of the Internet, including without limitation,
the number of page views or click-throughs such advertising will receive and
any promotional effect thereof.
Press Releases
- --------------
Neither an Advertiser nor its agency will make or lease any external press
statement regarding the terms of this Agreement unless (a) it has received the
express written consent of Go2Net or Mercata which will not be unreasonably
-------
withheld or (b) it is required to do so by Law or the rules of any securities
market.
Advertiser Initials _________
Dispute Resolution
- ------------------
This Agreement shall be governed by and construed in accordance with the laws of
the State of Washington, without giving effect to its conflicts of laws rules.
Any dispose or controversy arising under or related to this Agreement shall be
adjudicated in a court of competent jurisdiction within the City of Seattle,
State of Washington. The parties hereto each hereby waive any jurisdiction,
venue and inconvenient forum objections to any state or federal court sitting in
the City of Seattle, Washington.
This Agreement supersedes and replaces any existing written or oral agreements
between Go2Net and Advertiser and may be modified only in writing signed by both
parties. Any failure by Go2Net or Mercata to enforce any provision of this
Agreement shall not constitute a waiver of any
3
<PAGE>
term hereof. This Agreement contains the entire agreement between the parties
with respect to the subject matter hereof. If any provision of this Agreement is
determined to be invalid, illegal or unenforceable, the enforceability of the
remaining provisions shall not be affected.
- --------------------------------------------------------------------------------
We ask that all ad banners/buttons be sent to Go2Net in email as attached
files. The email should also include:
1) the alt tag(s) desired for banner(s)
2) the url(s) the ad(s) should be linked to
3) If ad(s) correspond to specific keywords, a detailed listing of which ad(s)
corresponds to which word(s) is also required.
4) Specific text for any keyword textlinks.
Send ads to:/s/ Jackie @Go2Net.com
-------------------------------------------
Private URL for checking ad delivery and click-throughs will be provided when ad
goes live.
Please send all payments and direct any billing questions attn: Accounts
Receivable.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
AD SPECS:
- --------
<S> <C>
MetaCrawler:
Banner: 230x33; 6k file size
Banner: 468x60; 12k file size Note: Please submit one creative per 1 million
Square (portal) 125x125; 8k file size impressions. Review
Marketplace: 120x60; 6k file size ad specs at
PlaySite www.go2net.com/ads/adspecs.htm
Banner: 468x60; 12k file size
Go2Net consent (StockSite/Useless Pages):
Banner: 468x60; 12k file size
Square (portal): 125x125
We ONLY accept image advertising in GIF, JPEG, and HTML format to be run on the Go2Net sites. No shockwave, cgi script, real
audio, image maps, pull-down means, or Java.
Advertiser's Initials_______________ Go2Net /s/ EC
-----------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Must Select One:
Ads will be served (please check one):
[X]from Go2Net's servers
[ ]by advertiser
[ ]by agency
[ ]by 3rd party ________________________________ (specify)
The undersigned is legally empowered to enter into this Agreement and agrees to
be bound by the terms and conditions of this Agreement. Sign contract and
-----------------
return to Go2Net, Inc.
- ----------------------
Advertiser:
Signature: /s/Dennis J. Shepard Title: Chief Operating Officer
----------------------- ----------------------------
Print Name: Dennis J. Shepard Date: June 2, 1999
---------------------- ----------------------------
Go2Net, Inc.
Signature: /s/ Ethan K. Caldwell Title: GM
------------------------- -----------------------------
Print Name: Ethan K. Caldwell Date: 6-2-99
------------------------ -----------------------------
4
<PAGE>
EXHIBIT 10.21
SPONSORSHIP AGREEMENT
THIS AGREEMENT, dated for reference purposes as of July 12, 1999 (the
"Agreement"), is by and between FOOTBALL NORTHWEST LLC, a Washington limited
liability company ("FNW") and MERCATA, Inc., a Delaware corporation ("Sponsor").
R E C I T A L S
---------------
A. Pursuant to that certain Consent to Assignment and Amendment of Use
Agreement dated January 7, 1997, as amended, between King County, Washington
("King County") and FNW, FNW is granted the exclusive right to and revenue from
all advertising both inside and outside the King County Domed Stadium (the
"Kingdome") and the Kingdome Pavilion, including on adjacent parking lots.
B. The Kingdome is located in Seattle, Washington and currently serves as
the home venue for the National Football League ("NFL") franchise for the
Seattle Seahawks.
C. FNW owns and, during the term of this Agreement, FNW or its successor
or assign will retain the exclusive signage and advertising rights for the
Kingdome.
D. Sponsor desires to acquire from FNW certain sponsorship rights in the
areas described below and FNW is vested with the authority to grant and desires
to grant such rights to Sponsor in accordance with the terms and provisions of
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereby agree as follows:
1. Sponsorship Benefits. Sponsor shall during the term of this Agreement
--------------------
receive the following sponsorship benefits:
A. Television
1. Three (3) :30 second Sponsor produced commercials ("Concept
Ads") to air within each of three (3) preseason telecasts.
2. Three (3) :30 second Seahawks produced commercials ("Products
Ads") to air within each of three (3) preseason telecasts.
Content shall be reviewed and approved by Sponsor. Shawn
Springs will be featured in the commercial.
3. Opening/closing billboards in each of three (3) Seahawks
preseason games including Sponsor logo.
4. Sponsorship of one (1) feature ("Instant Replay") in three (3)
preseason games including billboard and Sponsor logo visual.
Total of three (3) features, billboards and logo
identifications.
5. Three (3) Sponsor logo exposures in the Hawk Box Scoreboards per
quarter during three (3) preseason games.
6. Sponsor a minimum of three (3) "live" power buy announcements
("Live Ads") during the course of three (3) telecasts.
Announcement format to be determined.
7. Production: Seahawks will cover all hard costs to create, direct
and produce one (1) :30 second TV spot to be used in three (3)
preseason telecasts. Sponsor
1.
<PAGE>
will provide creative direction for the production and shall
have the right to use such commercial where appropriate in its
general advertising campaign or within certain promotional
material during the 1999 season.
8. The sequence of TV appearance should always be:
. FIRST appearance: Concept Ad (before last commercial series
prior to a break)
. SECOND appearance: Products Ad (last commercial series prior
to a break)
. THIRD appearance: Live Ad (during the break)
One sequence per quarter from 1st to 3rd quarter.
B. Kingdome Promotion/DiamondVision
1. Two (2) DiamondVision announcements per game for three (3)
games. Total of six (6) DiamondVision announcements. Content
will have to be reviewed and approved by Sponsor.
2. Sponsor opportunity to run :30 second television spot on
DiamondVision during pregame warm-ups for three (3) preseason
games. Total of three (3) spots
3. Sponsor (Promotional) road trip for two (2) including airfare,
hotel and game tickets. Must participate in Sponsor/Seahawks
Sweepstakes to be eligible for road trip. Designated road trip:
Seattle @ Chicago on September 19, 1999. The value of this
package is less $5,000 and shall be provided by FNW.
C Seahawks.com
1. One (1) rotating banner ad on Seahawks.com for sixty (60) days
(August through September 1999) Extension beyond the sixty (60)
days to offered to Sponsor at favorable cpm based rate.
2. Seahawks to promote Sponsor online store from Seahawks.com's
front page by providing a graphic and a text link directing
visitors to Mercata.com. Text and graphics to be provided by
Sponsor, and reviewed and approved by Seahawks.com.
3. Sponsor acknowledgement on Seahawks Television network web page
on Seahawks.com
4. Sponsor will feature an online Seahawks-themed store selling
Seahawks merchandising at Mercata.com.
D. VIP Benefits
1. Two (2) season tickets with option to purchase two (2) playoff
tickets
2. Twenty (20) tickets to two (2) preseason home games, August 14
and August 28, 1999.
3. One half-page color ad in Seahawks Insider for the 1999 season.
Deadline for ad July 23, 1999. If Sponsor cannot meet the
deadline, Seahawks will provide similar opportunity to be
determined (i.e.: letter to season ticket holders introducing
Mercata).
4. One (1) trip for two (2) to Training Camp. Includes
transportation, hotel and entertainment
5. One "Advertorial" in first pre-season issue of NFL Insider to
explain the Mercata 'story' and groundbreaking partnership with
the Seahawks (Mercata to write and provide advertorial).
6. Mercata's use of Seahawks trademarks for promotional purposes
extends throughout the 1999 season.
2.
<PAGE>
2. Term. The term of this Agreement shall commence on July 19, 1999 and shall
----
thereafter continue until all above described Sponsor benefits are completed,
but in no event beyond the end of the 1999 season (the "Term"). This
Agreement is noncancellable by either party except for termination in
accordance with Paragraph 7, below, and may be mutually extended by written
agreement of the parties.
3. Consideration. In consideration of the sponsorship rights and other services
-------------
and products granted and provided to Sponsor by FNW hereunder, Sponsor hereby
agrees to pay FNW a sponsorship fee in the amount of Forty thousand Dollars
($40,000 net) (the "Sponsorship Fee").
3.1. Invoices and Payment. FNW will send Sponsor invoices Sponsorship Fee in
--------------------
two (2) monthly installments beginning September 1, 1999. Invoices are
payable thirty (30) days after receipt. A five percent (5%) late fee
will be added to all invoices which become past due and interest at a
rate of twelve percent (12%) per annum will be charged on all balances
not paid within thirty (30) days of the date they are due.
4. Sponsor's Content and Design. The content and design of Sponsor's creative
----------------------------
material shall be within the discretion of Sponsor. However, if FNW objects
to any such material when it is provided or thereafter, it shall notify
Sponsor as soon as possible and Sponsor shall take prompt action to address
FNW's concerns.
5. Trademarks
----------
5.1. Use of Sponsor's Trademarks. FNW shall not, by this Agreement, obtain
---------------------------
any right, title or interest in the trademarks or other proprietary
property of Sponsor, nor shall this Agreement give FNW the right to use,
refer to, or incorporate in marketing or other materials the name,
logos, trademarks, designs, identifications, or copyrights of Sponsor in
any manner except as authorized by Sponsor. Sponsor acknowledges that
FNW and parties conducting events within the Kingdome may televise,
videotape, or take still photographs of events occurring in the
Kingdome. Sponsor hereby consents to the commercial exploitation of such
television broadcasts, video tapes and still photographs notwithstanding
the fact that the content and design of Sponsor's images may be visible
in such television broadcasts, video tapes and still photographs.
5.2. Use of FNW and Seattle Seahawks Trademarks. Sponsor shall not, by this
------------------------------------------
Agreement, obtain any right, title or interest in the trade names or
trademarks of FNW, the Seattle Seahawks, the NFL, NFL Enterprises, L.P.,
NFL Properties, Inc. or any affiliate of such, nor shall any such
agreements give Sponsor the right to use, refer to, or incorporate in
marketing or other materials the names, logos, trademarks, designs,
identifications or copyrights of FNW, the Seattle Seahawks, the NFL, NFL
Enterprises, L.P., and NFL Properties, Inc. without the prior written
approval of FNW, which approval may be withheld in FNW's reasonable
discretion. Sponsor may use Seahawks trademarks for promotional purposes
as necessary to convey the Sponsor benefits described herein. However,
all such rights shall expire at the end of the 1999 regular season.
6. Indemnification. FNW agrees to defend, indemnify and hold Sponsor harmless
---------------
from and against all claims, suits, liabilities, costs and expenses,
including reasonable attorney costs and fees, for injury to, including death
of, persons (whether they be third persons or employees of either of the
parties hereto) or any loss of or damage to property in any manner arising
from or relating to the rights
3.
<PAGE>
conveyed herein, with the understanding that this obligation shall not apply
to, and Sponsor agrees to defend, indemnify and hold FNW and its officers,
directors, employees and agents harmless from and against, all losses,
claims, suits, demands, actions, liabilities, costs and expenses, including
reasonable attorney costs and fees, for injury to, including death of,
persons (whether they be third persons or employees of either of the parties
hereto) or any loss of or damage to property in any manner arising from the
content of any advertising copy supplied by Sponsor or the negligence or
intentional misconduct of Sponsor or its officers, employees or agents.
7. Termination. FNW and Sponsor shall each have the right but not the
-----------
obligation to terminate this Agreement upon forty-five (45) days prior written
notice, without further liability except as otherwise provided by this Paragraph
7 if any of the following shall occur:
(a) Damage to or destruction of the Kingdome to the extent that the
Kingdome is closed for a period of greater than thirty (30)
days, in which case the refund provisions of this Paragraph 7
shall apply.
(b) The cancellation or termination of FNW's NFL franchise or the
relocation of FNW's NFL franchise to a location more than 50
miles from Seattle, Washington.
(c) The other party materially defaults in the performance of its
material obligations under this Agreement and such other party
fails to correct such breach within thirty (30) days of written
notice.
If this Agreement is so terminated by Sponsor, Sponsor shall be entitled
to a pro rata refund of any payments under this Agreement.
8. Remedies
--------
8.1 Generally. In the event that either party fails to fully comply with
---------
any of its obligations under this Agreement, the other party shall be
entitled to all remedies set forth in this Agreement and, except as
otherwise provided herein, all remedies otherwise available at law or in
equity.
8.2 Limitation on Damages. In no event shall either party be liable for
---------------------
any special, incidental or consequential damages arising out of or in
connection with this Agreement or the performance thereof. FNW's liability
for any breach of this Agreement shall be strictly limited to refunding to
Sponsor that portion of any consideration paid by Sponsor for which Sponsor
has not received the rights granted to it herein.
9. Limitations. This Agreement is subject to the Constitution and Bylaws and
-----------
other rules and regulations of the NFL, the statutes and regulations of the
State of Washington, and the ordinances and rules of King County, Washington
and the City of Seattle, Washington as they presently exist or as they may
from time-to-time be amended, including without limitation, any rule or
regulation of the NFL or any agreement to which the NFL is a party which
restricts the visibility of signage within the Kingdome during NFL games
which are televised nationally. The obligations of either party to perform
under this Agreement shall be excused if such failure to perform or any
delay is caused by matters such as acts of God, strikes, lockout, work
stoppage, picketing, damage or concerted action by any employee or labor
organization, civil commotion, riots, war, acts of government, or any other
cause whether similar or dissimilar to those enumerated which are reasonably
beyond the control of the party obligated to perform. Upon the occurrence
of such
4.
<PAGE>
event, the duties and obligations of the party shall be suspended for the
duration of the event preventing performance.
10. Entire Agreement. The entire agreement between the parties pertaining to
----------------
the subject matter of this Agreement is incorporated into this document.
This Agreement may not be modified or amended except by a writing duly
executed by the parties hereto. This Agreement supersedes any and all prior
agreements and understandings between the parties.
11. Successor Interests. Neither this Agreement nor any of the rights or
-------------------
obligations of either FNW or Sponsor hereunder may be assigned, transferred
or conveyed by operation of law or otherwise by either party, nor shall such
agreements or rights inure to the benefit of any trustee in bankruptcy,
receiver, creditor, or trustee of either party's business or its properties
whether by operation of law or otherwise, except with the prior written
consent of the other party, which consent shall not be unreasonably
withheld, and the delivery of a written document in which the assignee
assumes all of the obligations of the assigning party and the assigning
party acknowledges that it will continue to be bound to such obligations if
not performed by the assignee. For purposes of this Paragraph 11, the
transfer of a fifty percent (50%) or greater ownership interest in a party
shall be deemed to be an assignment of this Agreement. Notwithstanding the
foregoing, no assignment or attempted assignment by Sponsor shall be valid
except to a party which intends to continue the business of Sponsor as
presently conducted. Sponsor does hereby consent to any transfer or
assignment by FNW of its rights under this Agreement to an affiliate of FNW
without any additional prior consent of Sponsor. Subject to the foregoing,
this Agreement shall be binding upon and shall inure to the benefit of all
successors and assigns of the parties.
12. Confidentiality. Each of the parties deems the provisions of this Agreement
---------------
to be confidential and proprietary in nature. FNW and Sponsor each agree
that the terms of this Agreement will be kept confidential and will not be
disclosed in any manner whatsoever, in whole or in part, by either party
without the prior written consent of the other party except to the extent
necessary for such party to enforce its rights under this Agreement or as
either party may be advised by its legal counsel that it is obligated to
disclose the terms of such agreements. Moreover, each party agrees to
disclose the terms of this Agreement only to its respective officers,
employees, agents and representatives who need to know of such terms and who
agree to be bound by the confidentiality terms of this Paragraph. Each
party shall be responsible for any breach of this Paragraph by its
respective officers, employees, agents and representatives. The terms of
this Paragraph shall survive the expiration or termination of this Agreement
for whatever reason for a period of three (3) years after such expiration or
termination. Notwithstanding the foregoing, FNW may disclose the terms of
this Agreement to King County, Washington and to lenders, legal counsel, and
financial advisors.
13. Washington Law. This Agreement shall be deemed to have been made in the
--------------
state of Washington and shall be construed in accordance with the laws of
the state of Washington. The exclusive venue for any suits or actions
arising out of this Agreement shall be in the Superior Court for the State
of Washington for King County or in the United States District Court for the
Western District of Washington.
14. Notices. All notices under this Agreement shall be in writing and shall be
-------
deemed to have been duly given if personally delivered, sent by telecopier,
sent by overnight courier service or sent by registered or certified mail,
postage prepaid, and shall be deemed given upon the earlier of actual
5.
<PAGE>
receipt or one day after it is sent, if sent by overnight courier, or three
days after it is sent by registered or certified mail. All notices or other
communications shall be made as follows:
To FNW: 11220 N.E. 53rd Street
Kirkland, WA 98033
Attn: Scott Patrick
V.P./Corporate Sales
With a Copy to: Richard E. Leigh, Jr.
Vice President/General Counsel
110 - 110th Ave. N.E., Suite 550
Bellevue, WA 98004
If to Sponsor. Jerome Pache, Director Business Development
Leslie Wallis, General Counsel
MERCATA, Inc.
110 110th Avenue NE
Bellevue, WA 98004-5840
15. Arbitration. Any controversy or claim arising out of or relating to this
-----------
Agreement, including, but not limited to a claim based on or arising from an
alleged tort will, at the request of any party be determined by arbitration
in accordance with the Federal Arbitration Act (9 U.S.C. Section 1, et seq.)
under the auspices and rules of the American Arbitration Association
("AAA"). The AAA will be instructed by either or both parties to prepare a
list of judges who have retired from the Superior Court of the State of
Washington, a higher Washington court or any federal court. 'Within 10 days
of receipt of this list, each party may strike one name from the list. The
AAA will then appoint an arbitrator from the name(s) remaining on the list.
The arbitration will be conducted from Seattle, Washington. Any controversy
in interpretation or enforcement of this provision or whether a dispute is
arbitrable, will be determined by the arbitrators. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial
relief or in pursuit of an ancillary remedy, does not constitute a waiver of
the right of any party, including the plaintiff, to submit the controversy
or claim to arbitration.
16. Attorneys' Fees. In the event any suit or action is brought or an
---------------
arbitration or bankruptcy proceeding is initiated (including, without
limitation, appeals of the foregoing) to enforce or interpret any of the
provisions of this Agreement, or which is based thereon, the prevailing
party shall be entitled to reasonable attorney fees in connection therewith.
The determination of who is the prevailing party and the amount of
reasonable attorney fees to be paid to the prevailing party shall be decided
by the court or courts, including any appellate court, in which such matter
is tried, heard or decided, including the court which hears any exceptions
made to an arbitration award submitted to it for confirmation as a judgment
(with respect to attorneys' fees incurred in such confirmation proceedings),
or by the arbitrator(s) (with respect to attorneys' fees incurred prior to
and during the arbitration proceedings), as the case may be.
17. Relationship of Parties. The parties are acting herein as independent
-----------------------
contractors and independent employers. Nothing herein contained shall
create or be construed as creating a partnership, joint venture or agency
relationship between the parties and no party shall have the authority to
bind the other in any respect.
6.
<PAGE>
18. Agreement Approval. Each party hereby represents and warrants that all
------------------
necessary approvals for this Agreement have been obtained, and the person
whose signature appears below has the authority necessary to execute this
Agreement on behalf of the parties indicated.
19. Captions. Paragraph headings herein are for convenience only and shall not
--------
affect the construction or meaning of this Agreement.
7.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written:
FOOTBALL NORTHWEST LLC MERCATA, INC.
By: /s/ Scott S. Patrick By: /s/ Tom Van Horn
---------------------------- ----------------------------
Name: Scott S. Patrick Name: Tom Van Horn
-------------------------- --------------------------
(printed or typed) (printed or typed)
Title: VP/Corporate Sales Title: President & CEO
------------------------- -------------------------
8.
<PAGE>
EXHIBIT 10.22
SPONSORSHIP EXTENSION AGREEMENT
THIS AGREEMENT, dated for reference purposes as of August 24, 1999 (the
"Agreement"), is by and between FOOTBALL NORTHWEST LLC, a Washington limited
liability company ("FNW") and MERCATA, INC., a Delaware Corporation ("Sponsor").
R E C I T A L S
---------------
A. Pursuant to that certain Consent to Assignment and Amendment of Use
Agreement dated January 7, 1997, as amended, between King County, Washington
("King County") and FNW, FNW is granted the exclusive right to and revenue from
all advertising both inside and outside the King County Domed Stadium (the
"Kingdome") and the Kingdome Pavilion, including on adjacent parking lots.
B. The Kingdome is located in Seattle, Washington and currently serves as
the home venue for the National Football League ("NFL") franchise for the
Seattle Seahawks.
C. FNW owns and, during the term of this Agreement, FNW or its successor
or assign will retain the exclusive signage and advertising rights for the
Kingdome.
D. Sponsor desires to acquire from FNW certain sponsorship rights in the
areas described below and FNW is vested with the authority to grant and desires
to grant such rights to Sponsor in accordance with the terms and provisions of
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereby agree as follows:
1. Sponsorship Benefits. Sponsor shall during the term of this Agreement
--------------------
receive the following sponsorship benefits:
a. Seahawks Network Television-"Seahawks Saturday"
1. Sponsorship of "The Mercata Minute" showcasing weekly Power Buy
Updates for a total of seventeen (17) shows and seventeen (17)
'Mercata Minutes'.
2. Right of first refusal to sponsor "The Mercata Minute" on some or
all post-season "Seahawks Saturday" shows
3. Talent fees for Rich Waltz are inclusive within this agreement.
4. Talent fee for Shawn Springs will be paid directly by sponsor
($700) separate from this agreement.
b. In-Stadium Promotion
1. 60,000 Seahawks/Sponsor window clings that promote Mercata to be
distributed at the October 3, 1999 game at Kingdome, (Seahawks
vs. Oakland Raiders)
2. One (1) DiamondVision announcement promoting tune-in to "Seahawks
Saturday Show" and sponsor involvement with show. Content shall
be subject to Sponsor's review and approval.
c. Print
1.
<PAGE>
1. Mid-season Sponsor/Seahawks advertorial featuring "Power Buy"
scoreboard. Location, content and format shall be subject to
Sponsor's review and approval.
d. Seahawks.com
1. Sponsor to retain high profile home page presence with
Seahawks.com, including a text and graphic link directing
visitors to Mercata.com. Text and graphics shall be provided by
Sponsor, and subject to Seahawks.com's review and approval.
2. Seahawks and Sponsor to track click through performance during
1999 regular season to measure visits to Mercata site from
Seahawks.com. Any information voluntarily shared by the parties
in connection with this Paragraph 1(d)(2) shall be subject to the
confidentiality provisions in Paragraph 12.
d. Other Opportunities
1. Seahawks shall make appropriate introductions and otherwise use
best faith efforts to assist Sponsor in working on similar
marketing programs with the NFL and its member franchises
2. Mercata's right to use Seahawks trademarks for promotional
purposes shall extend throughout the 1999 regular season.
2. Term. The term of this Agreement shall commence on August 24, 1999,
----
and shall thereafter continue until all above Sponsor benefits are completed,
but in no event beyond the end of the 1999 season (the "Term"). This Agreement
is noncancellable by either party except for termination in accordance with
Paragraph 7, below, and may be mutually extended by written agreement of the
parties.
3. Consideration. In consideration of the sponsorship rights and other
-------------
services and products granted and provided to Sponsor by FNW hereunder, Sponsor
hereby agrees to pay FNW a sponsorship fee in the amount of Sixty eight thousand
Dollars ($67,800) (the "Sponsorship Fee").
3.1 Invoices and Payment. FNW will send Sponsor invoices for the
--------------------
Sponsorship Fee in two (2) monthly installments beginning October 1, 1999.
Invoices are payable thirty (30) days after receipt. A five percent (5%) late
fee will be added to all invoices which become past due and interest at a rate
of twelve percent (12%) per annum will be charged on all balances not paid
within thirty (30) days of the date they are due.
4. Sponsor's Content and Design. The content and design of Sponsor's
----------------------------
creative material shall be within the discretion of Sponsor. However, if FNW
objects to any such material when it is proved or thereafter, it shall notify
Sponsor as soon as possible and Sponsor shall take prompt action to address
FNW's concerns.
5. Trademarks
----------
5.1 Use of Sponsor's Trademarks. FNW shall not, by this Agreement,
---------------------------
obtain any night, title or interest in the trademarks or other proprietary
property of Sponsor, nor shall this Agreement give FNW the right to use, refer
to, or incorporate in marketing or other materials the name, logos, trademarks,
designs, identifications, or copyrights of Sponsor in any manner except as
authorized by Sponsor. Sponsor acknowledges that FNW and parties conducting
events within the Kingdome may televise, video tape, or take still photographs
of events occurring in the Kingdome. Sponsor hereby consents to the commercial
exploitation of such television broadcasts, video tapes and still photographs
notwithstanding the fact that the content and design of Sponsor's images may be
visible in such television broadcasts, video tapes and still photographs.
2.
<PAGE>
5.2 Use of FNW and Seattle Seahawks Trademarks. Sponsor shall not, by
------------------------------------------
this Agreement, obtain any right, title or interest in the trade names or
trademarks of FNW, the Seattle Seahawks, the NFL, NFL Enterprises, L.P., NFL
Properties, Inc. or any affiliate of such, nor shall any such agreements give
Sponsor the right to use, refer to, or incorporate in marketing or other
materials the names, logos, trademarks, designs, identifications or copyrights
of FNW, the Seattle Seahawks, the NFL, NFL Enterprises, L.P., and NFL
Properties, Inc. without the prior written approval of FNW, which approval may
be withheld in FNW's reasonable discretion. Sponsor may use Seahawks trademarks
for promotional purposes as necessary to convey the Sponsor benefits described
herein. However, all such rights shall expire at the end of the 1999 regular
season.
6. Indemnification. FNW agrees to defend, indemnify and hold Sponsor
---------------
harmless from and against all claims, suits, liabilities, costs and expenses,
including reasonable attorney costs and fees, for injury to, including death of,
persons (whether they be third persons or employees of either of the parties
hereto) or any loss of or damage to property in any manner arising from or
relating to the rights conveyed herein, with the understanding that this
obligation shall not apply to, and Sponsor agrees to defend, indemnify and hold
FNW and its officers, directors, employees and agents harmless from and against,
all losses, claims, suits, demands, actions, liabilities, costs and expenses,
including reasonable attorney costs and fees, for injury to, including death of,
persons (whether they be third persons or employees of either of the parties
hereto) or any loss of or damage to property in any manner arising from the
content of any advertising copy supplied by Sponsor or the negligence or
intentional misconduct of Sponsor or its officers, employees or agents.
7. Termination. FNW and Sponsor shall each have the right but not the
-----------
obligation to terminate this Agreement upon forty-five (45) days prior written
notice, without further liability except as otherwise provided by this Paragraph
7 if any of the following shall occur:
(a) Damage to or destruction of the Kingdome to the extent that the
Kingdome is closed for a period of greater than thirty (30) days,
in which case the refund provisions of this Paragraph 7 shall
apply.
(b) The cancellation or termination of FNW's NFL franchise or the
relocation of FNW's NFL franchise to a location more than 50 miles
from Seattle, Washington.
(c) The other party materially defaults in the performance of its
material obligations under this Agreement and such other party
fails to correct such breach within thirty (30) days of written
notice.
If this Agreement is so terminated by Sponsor, Sponsor shall be
entitled to a pro rata refund of any payments under this Agreement.
8. Remedies
--------
8.1 Generally. In the event that either party fails to fully comply
---------
with any of its obligations under this Agreement, the other party shall be
entitled to all remedies set forth in this Agreement and, except as otherwise
provided herein, all remedies otherwise available at law or in equity.
8.2 Limitation on Damages. In no event shall either party be liable
---------------------
for any special, incidental or consequential damages arising out of or in
connection with this Agreement or the performance thereof. FNW's liability for
any breach of this Agreement shall be strictly limited to
3.
<PAGE>
refunding to Sponsor that portion of any consideration paid by Sponsor for which
Sponsor has not received the rights granted to it herein.
9. Limitations. This Agreement is subject to the Constitution and Bylaws
-----------
and other rules and regulations of the NFL, the statutes and regulations of the
State of Washington, and the ordinances and rules of King County, Washington and
the City of Seattle, Washington as they presently exist or as they may from
time-to-time be amended, including without limitation, any rule or regulation of
the NFL or any agreement to which the NFL is a party which restricts the
visibility of signage within the Kingdome during NFL games which are televised
nationally. The obligations of either party to perform under this Agreement
shall be excused if such failure to perform or any delay is caused by matters
such as acts of God, strikes, lockout, work stoppage, picketing, damage or
concerted action by any employee or labor organization, civil commotion, riots,
war, acts of government, or any other cause whether similar or dissimilar to
those enumerated which are reasonably beyond the control of the party obligated
to perform. Upon the occurrence of such event, the duties and obligations of
the party shall be suspended for the duration of the event preventing
performance.
10. Entire Agreement. The entire agreement between the parties pertaining
----------------
to the subject matter of this Agreement is incorporated into this document.
This Agreement may not be modified or amended except by a writing duly executed
by the parties hereto. This Agreement supersedes any and all prior agreements
and understandings between the parties.
11. Successor Interests. Neither this Agreement nor any of the rights or
-------------------
obligations of either FNW or Sponsor hereunder may be assigned, transferred or
conveyed by operation of law or otherwise by either party, nor shall such
agreements or rights inure to the benefit of any trustee in bankruptcy,
receiver, creditor, or trustee of either party's business or its properties
whether by operation of law or otherwise, except with the prior written consent
of the other party, which consent shall not be unreasonably withheld, and the
delivery of a written document in which the assignee assumes all of the
obligations of the assigning party and the assigning party acknowledges that it
will continue to be bound to such obligations if not performed by the assignee.
For purposes of this Paragraph 11, the transfer of a fifty percent (50%) or
greater ownership interest in a party shall be deemed to be an assignment of
this Agreement. Notwithstanding the foregoing, no assignment or attempted
assignment by Sponsor shall be valid except to a party which intends to continue
the business of Sponsor as presently conducted. Sponsor does hereby consent to
any transfer or assignment by FNW of its rights under this Agreement to an
affiliate of FNW without any additional prior consent of Sponsor. Subject to
the foregoing, this Agreement shall be binding upon and shall inure to the
benefit of all successors and assigns of the parties.
12. Confidentiality. Each of the parties deems the provisions of this
---------------
Agreement to be confidential and proprietary in nature. FNW and Sponsor each
agree that the terms of this Agreement will be kept confidential and will not be
disclosed in any manner whatsoever, in whole or in part, by either party without
the prior written consent of the other party except to the extent necessary for
such party to enforce its rights under this Agreement or as either party may be
advised by its legal counsel that it is obligated to disclose the terms of such
agreements. Moreover, each party agrees to disclose the terms of this Agreement
only to its respective officers, employees, agents and representatives who need
to know of such terms and who agree to be bound by the confidentiality terms of
this Paragraph. Each party shall be responsible for any breach of this
Paragraph by its respective officers, employees, agents and representatives.
The terms of this Paragraph shall survive the expiration or termination of this
Agreement for whatever reason for a period of three (3) years after such
expiration or termination.
4.
<PAGE>
Notwithstanding the foregoing, FNW may disclose the terms of this Agreement to
King County, Washington and to lenders, legal counsel, and financial advisors.
13. Washington Law. This Agreement shall be deemed to have been made in
--------------
the state of Washington and shall be construed in accordance with the laws of
the state of Washington. The exclusive venue for any suits or actions arising
out of this Agreement shall be in the Superior Court for the State of Washington
for King County or in the United States District Court for the Western District
of Washington.
14. Notices. All notices under this Agreement shall be in writing and
-------
shall be deemed to have been duly given if personally delivered, sent by
telecopier, sent by overnight courier service or sent by registered or certified
mail, postage prepaid, and shall be deemed given upon the earlier of actual
receipt or one day after it is sent, if sent by overnight courier, or three days
after it is sent by registered or certified mail. All notices or other
communications shall be made as follows:
To FNW: 11220 N.E. 53rd Street
Kirkland, WA 98033
Attn: Scott Patrick
V.P./Corporate Sales
With a Copy to: Richard E. Leigh, Jr.
Vice President/General Counsel
110-110th Avenue NE., Suite 550
Bellevue, WA 98004
If to Sponsor: Jerome Pache, Vice President Business Development
Leslie Wallis, General Counsel
MERCATA, Inc.
110 110th Avenue NE
Bellevue, WA 98004-5840
15. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, including, but not limited to a claim based on or arising from
an alleged tort will, at the request of any party be determined by arbitration
in accordance with the Federal Arbitration Act (9 U.S.C. Section 1, et. seq.)
under the auspices and rules of the American Arbitration Association ("AAA").
The AAA will be instructed by either or both parties to prepare a list of judges
who have retired from the Superior Court of the State of Washington, a higher
Washington court or any federal court. Within 10 days of receipt of this list,
each party may strike one name from the list. The AAA will then appoint an
arbitrator from the name(s) remaining on the list. The arbitration will be
conducted from Seattle, Washington. Any controversy in interpretation or
enforcement of this provision or whether a dispute is arbitrable, will be
determined by the arbitrators. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. The institution
and maintenance of an action for judicial relief or in pursuit of an ancillary
remedy, does not constitute a waiver of the right of any party, including the
plaintiff, to subject the controversy or claim to arbitration.
16. Attorneys' Fees. In the event any suit or action is brought or an
---------------
arbitration or bankruptcy proceeding is initiated (including, without
limitation, appeals of the foregoing) to enforce or interpret any of the
provisions of this Agreement, or which is based thereon, the prevailing party
shall be entitled to reasonable attorney fees in connection therewith. The
determination of who is the prevailing party and
5.
<PAGE>
the amount of reasonable attorney fees to be paid to the prevailing party shall
be decided by the court or courts, including any appellate court, in which such
matter is tried, heard, or decided, including the court which hears any
exceptions made to an arbitration award submitted to it for confirmation as a
judgment (with respect to attorneys' fees incurred in such confirmation
proceedings), or by the arbitrator(s) (with respect to attorneys' fees incurred
prior to and during the arbitration proceedings), as the case may be.
17. Relationship of Parties. The parties are acting herein as independent
-----------------------
contractors and independent employers. Nothing herein contained shall create or
be construed as creating a partnership, joint venture or agency relationship
between the parties and no party shall have the authority to bind the other in
any respect.
18. Agreement Approval. Each party hereby represents and warrants that
------------------
all necessary approvals for this Agreement have been obtained, and the person
whose signature appears below has the authority necessary to execute this
Agreement on behalf of the parties indicated.
19. Captions. Paragraph headings herein are for convenience only and
--------
shall not affect the construction or meaning of this Agreement.
6.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FOOTBALL NORTHWEST LLC MERCATA, INC.
By: /s/ Scott Patrick By: /s/ Jerome Pache
------------------------------ --------------------------------
Name: Scott Patrick Name: Jerome Pache
---------------------------- ------------------------------
(printed or typed) (printed or typed)
Title: VP/Corporate Sales Title: VP, Business Development
--------------------------- -----------------------------
7.
<PAGE>
EXHIBIT 10.23
TELEVISION LETTER AGREEMENT
---------------------------
The parties to this Agreement are TRAIL BLAZERS INC. ("Trail Blazers" or
"TBI") and MERCATA, INC. ("Advertiser"). Advertiser wishes to reserve
commercial time for advertising during television telecasts of the Trail
Blazers' National Basketball Association ("NBA") basketball games in accordance
with the provisions of this Agreement.
The parties agree as follows:
1. Sponsorship. This Agreement commences with the Trail Blazers' first
-----------
pre-season game of the 1999-2000 NBA season and terminates with the last playoff
game in which the Trail Blazers participate following the 1999-2000 regular
season. The Trail Blazers will telecast, on a commercial television station in
the Portland, Oregon metropolitan area, 26 preseason and/or regular season games
each season. In addition, the Trail Blazers may telecast some playoff games on
a commercial television station in the Portland, Oregon metropolitan area.
Advertiser hereby agrees to sponsor all games telecast by the Trail Blazers on a
commercial television station in the Portland, Oregon metropolitan area. Up to
five additional preseason and/or regular season games may be added by TBI in its
sole discretion upon reasonable notice to Advertiser and with a corresponding
proportionate increase in the Annual Fee. Except for "Bonus Coverage" as may be
set forth on the attached Schedule A, nothing contained in this Agreement will
entitle Advertiser to commercial time or obligate Advertiser to pay any fees
with respect to games cablecast or otherwise transmitted on other than a
commercial television station in the Portland, Oregon metropolitan area.
Advertiser's commercials will be telecast on an equal rotation basis within the
air time segment.
Advertiser hereby reserves and purchases the following commercial time
during telecasts of Trail Blazer games:
Thirty commercial seconds in the play-by-play portion of telecasts of
Trail Blazers games.
Format: One 30-second commercial
2. Promotions. In addition to the commercial time purchased above,
----------
Advertiser shall be entitled to the additional promotions and media specified in
the attached Schedule A, which is incorporated herein by reference.
3. Fees and Payment Schedule. In consideration for the commercial time
---- --- ------- --------
and additional promotions and media to be received by Advertiser hereunder,
Advertiser agrees to pay a non-cancelable Annual Fee for each NBA season covered
by this Agreement and to pay a non-cancelable Additional Playoff Fee for each
playoff game in accordance with the following:
(a)
----------------------------------------------
Season Net Annual Fee/1/
----------------------------------------------
1999-2000 $130,000
----------------------------------------------
(b) The Annual Fee is payable as follows: TBI will send invoices to
Advertiser for the Annual Fee in six equal monthly installments beginning
November 1 of each season. Invoices will be considered to be past due if not
paid within 30 days after receipt.
______________________________
/1/ The Advertiser must provide all broadcast material in a ready-to-use
condition. Advertiser agrees to pay market rates for any production/creative
services provided by the Trail Blazers at Advertiser's written request.
-1-
<PAGE>
(c) An Additional Playoff Fee of $5,000 per game shall be charged for
each playoff game which is telecast by the Trail Blazers on a commercial
television station in the Portland, Oregon metropolitan area during the term of
this Agreement.
(d) Any Additional Playoff Fees will be payable as follows: TBI will,
following each playoff round in which the Trail Blazers televise games, send
invoices to Advertiser for the Additional Playoff Fees for playoff games
televised in such round. Invoices will be considered to be past due if not paid
within 30 days after receipt.
(e) A 1.5 percent late fee will be added to all invoices which become
past due and interest at a rate of 18 percent per annum will be charged on all
balances not paid within 30 days of when they are due.
4. Protection and Operative Clauses.
---------- --- --------- -------
(a) No rights of exclusivity are granted to Advertiser by this
Agreement and nothing contained herein shall limit in any manner the rights of
the Trail Blazers to sell commercial time during any of its telecasts for
advertisements to any other entity or for the advertisement of any product or
service.
(b) The script and tone of any advertising must conform to the
policies of the Trail Blazers and the telecasting station, each of which shall
have the continuing right to reject or edit telecast material to the extent
necessary to conform to such policies and as may be in the public interest. In
addition, Advertiser acknowledges that the Trail Blazers maintain a variety of
commercial relationships and, therefore, in the interest of protecting the
interests of all its sponsors, the Trail Blazers have the unilateral discretion
to reject advertising based on product category exclusivity, the incompatibility
or antithetical nature of the advertising, the tenor and object of the
advertising, or the promotion of a product or service either not in the category
for which Advertiser contracted or of an entity other than Advertiser. If any
advertising is so rejected, the Trail Blazers will provide Advertiser with 10
days' written notice of such rejection to allow Advertiser to furnish suitable
substitute advertising prior to the next scheduled telecast. Advertiser will be
entitled to a pro rata refund or a make good for any commercials it does not
receive as a result of such rejection.
(c) All advertisements will be in the form of videotape recordings,
half-inch, three-fourths-inch, one-inch or Beta format. Advertiser shall be
responsible for the content and quality of all commercial materials. All
advertising and commercial code-traffic instructions shall be delivered to the
Trail Blazers 10 days prior to telecast. Advertiser may change the content on 7
days' advance notice.
(d) If Advertiser's telecast material or code-traffic instructions are
not furnished by Advertiser in a timely manner, the Trail Blazers may utilize
any previously furnished material of Advertiser to fill spots reserved for
Advertiser for upcoming telecasts. No requirement as to air time product
separation regarding the scheduling of advertisements for competitive products
applies to this Agreement. Unless otherwise stated herein, no exclusivity
rights are granted to Advertiser.
(e) Advertiser will receive written deadline and specifications for
any print media referenced in this Agreement. Advertiser shall be responsible
for the content and quality of any print commercial productions. If
Advertiser's printed material is not furnished in a timely manner, the benefits
in this Agreement which involve printed material will be forfeited with no
financial rebates.
(f) All advertising material furnished to the Trail Blazers which is
not retrieved by Advertiser within two months following the end of the term of
this Agreement shall become the property of the Trail Blazers. This paragraph
is not intended to, nor shall it be construed to, give TBI any right, title or
interest in any of the trademarks, trade names, advertising slogans or
copyrighted material belonging to Advertiser, nor does this paragraph give TBI
use of the Advertising materials for any purpose other than to the extent
permitted herein during the term of this Agreement or the destruction of such
materials.
-2-
<PAGE>
(g) (1) Advertiser shall be entitled to, from time to time, make
reasonable use of TBI's name, trade names, trademarks and logos in connection
with advertising by Advertiser in the state of Oregon and the Portland, Oregon
metropolitan area; provided, however, that Advertiser shall only do so with the
prior written approval of TBI, which approval may be withheld in TBl's sole
discretion, and provided further that any advertising material making use of
such shall identify Advertiser as a "Proud Trail Blazers Sponsor." TBI
understands and agrees that Advertiser is the exclusive owner of Advertiser's
proprietary business models and technology, including but not limited to its
PowerBuy(TM) method of group buying, its We-Commerce(TM) technology and any
subsequent developments thereof. Advertiser does not grant TBI any right or
license, express or implied, in Advertiser's proprietary business models or
technology.
(2) TBI shall not, by this Agreement, obtain any right, title or
interest in Advertiser's name, trade names or logos, or Advertiser's proprietary
business methods and technology, including but not limited to its PowerBuy(TM)
method of demand aggregation. However, Advertiser grants TBI a royalty-free,
non-exclusive, worldwide license to organize, reproduce, create derivative works
from, publicly display, distribute and otherwise use Advertiser's name, trade
names or logos to provide the promotions and media described in Schedule A. All
such rights shall immediately terminate upon the termination of this Agreement.
(h) This Agreement is subject to all federal, state and municipal
laws and regulations now or hereafter in effect, including regulations,
decisions, actions and orders of the Federal Communications Commission, and in
addition is subject to the terms of any telecast license held by the television
station. This Agreement shall be construed in accordance with the laws of the
state of Oregon.
(i) (1) Advertiser shall indemnify, defend, and hold the Trail
Blazers harmless from and against any and all claims, damages, loss, liability
or expense, including attorneys' fees and the cost of any legal proceedings,
arising out of the advertisements furnished by Advertiser, including but not
limited to claims, actions or proceedings, and any appeal, for libel, slander,
invasion of privacy, infringement of copyright or license, unfair or improper
trade practices, other wrongful business conduct, or conduct in violation of the
rules and regulations of the Federal Trade Commission and analogous state
agencies. This indemnity shall specifically extend to the television station
telecasting such advertisements.
(2) TBI shall indemnify, defend, and hold Advertiser harmless
from and against any and all claims, damages, loss, liability or expense,
including attorney fees and the cost of any legal proceedings, arising out of
TBI's improper use of the advertisements, trademarks, trade names or logos
furnished by Advertiser.
(j) If legal proceedings or arbitration proceedings are initiated by
either party to enforce or interpret this Agreement, the party prevailing in any
suit, action or proceeding, and in any appeal therefrom, shall be entitled to
recover its reasonable attorney fees as fixed by the court in which the action
is tried or in which the appeal is heard or by the arbitrator who hears the
proceeding. Additionally, in the event that Advertiser seeks the protection of
or becomes the subject of proceedings in the United States Bankruptcy Court, the
Trail Blazers shall be entitled to recover its reasonable attorney fees incurred
in such proceedings as fixed by such court.
(k) If after 7 days advance written notice from TBI, Advertiser fails
to pay any overdue invoice (a "Default"), the entire Annual Fee for the
remainder of the term of this Agreement shall become immediately due and
payable. If the entire Annual Fee is not paid within 7 days of receipt by
Advertiser of a notice of Default, the Trail Blazers may immediately terminate
this Agreement in addition to seeking whatever other relief is afforded by
applicable law.
(l) Either party may terminate this Agreement upon the cancellation
or termination of the Trail Blazers' NBA franchise or the relocation of the
Trail Blazers' franchise to a location more than 50 miles from Portland, Oregon.
In such event, Advertiser will receive a pro rata refund based upon the number
of commercials not delivered.
-3-
<PAGE>
(m) In no event shall either party be liable for any special,
incidental, or consequential damages or loss of profits arising out of or
relating to any breach of this Agreement. The exclusive remedies for Advertiser
in the event of a breach by TBI shall be a suitable make good and a pro rata
compensating credit for lost time.
(n) Neither this Agreement nor the rights hereunder may be assigned
by Advertiser without the prior written consent of the Trail Blazers which
consent may be withheld in the sole discretion of the Trail Blazers.
5. Right of Refusal. Subject to another advertiser purchasing
----- -- -------
exclusivity in the retail e-commerce web site category, Advertiser shall have a
right of first refusal with respect to advertising time offered by the Trail
Blazers for local telecasts of selected games for the 2000-2001 season, on terms
and conditions then being offered by the Trail Blazers. This right shall only
apply to placements the same as those provided for in this Agreement and must be
exercised by executing and returning to the Trail Blazers the Letter Agreement
for the 2000-2001 season within 15 days after it is presented to either
Advertiser or Advertiser's agent.
6. Limitations. This contract requires Advertiser to abide by the
-----------
Constitution and Bylaws and other rules and regulations of the National
Basketball Association as they presently exist or as they may from time to time
be amended.
7. Notices. All notices to be given pursuant to this Agreement shall be
-------
in writing and shall be deemed received when personally delivered or three
business days after deposit in regular mail addressed to the address as set
forth below. Either party may change such address by written notice to the
other party of such change.
8. Entire Agreement. This Agreement constitutes the entire agreement and
------ ---------
understanding between the parties and may be amended only by a written
instrument executed by them.
EXECUTED as of this 1st day of October, 1999.
TRAIL BLAZERS INC. ADVERTISER
By: /s/ E. Hubert By: /s/ Tom Van Horn
-------------------------- ---------------------------
Title: VP Sales & Service Title: President and CEO
One Center Court, Suite 200 110 - 110th Ave. NE
Portland, Oregon 97227 Bellevue, WA 98004-5840
-4-
<PAGE>
SCHEDULE A
----------
. Advertiser will receive one full page, four-color ad in Hoop Magazine
(artwork to be provided color separated and camera-ready by sponsor)
starting with the December issue. Advertiser will be subject to the same
requirements as other Hoop Magazine advertisers.
. Advertiser will receive, as a bonus, 13 commercials on the Blazers
statewide television/cable network.
. Advertiser will receive sponsorship of one (1) in-game feature ("Mercata
Power Play of the Game") in 26 games on KGW-TV and 25 BlazerVision cable
games. The feature will include an on-screen graphic and a live announcer
read such as "Tonight's Mercata Power Play of the Game, brought to you by
Mercata. Go on-line and check out tonight's Mercata PowerBuy Deals, such as
. . ."
. Advertiser will receive one "live" half-time PowerBuy announcement each
game. Announcement will include a graphic of Mercata's home page and a
special PowerBuy announcement featuring the "PowerBuy Deal of the Day" and
its price at the start of the game. PowerBuy feature will come from one of
Mercata's key categories: Appliances, Baby, Home and Kitchen, Consumer
Electronics, Gifts and Gadgets, Hobbies, Holiday, Lawn and Garden, Luggage,
Hand and Power Tools, Watches and Jewelry, or Sports and Fitness.
. Advertiser will receive one in-arena promotion: a minimum of twenty (20)
AstroVision features during Blazers games that will include logo
identification for Mercata.
. Advertiser will receive two (2) "Mercata Minute" commercials during each of
six half-hour TV specials on KGW-TV. The "Mercata Minute" will showcase
weekly PowerBuy updates and the Mercata home page.
. Advertiser will receive a total of 12 "Mercata Minute" features during six
(6) half-hour TV specials on KGW-TV.
. Advertiser will receive two (2) opening, middle or closing billboards
during each of six (6) half-hour TV specials on KGW-TV.
. Advertiser will receive banner advertisements on ROSEQUARTER.COM together
with a direct "hotlink" to Advertiser's home page, currently located at
mercata.com.
. Advertiser will receive a banner advertisement on BLAZERS.COM, TBI's
Internet team home page on NBA.COM, together with a "hotlink" to
Advertiser's home page, subject to the following: (1) this Agreement, any
link from such banner (the "Link"), the banner artwork and the destination
page of the Link must be submitted to, and approved by in writing, NBA
Properties, in its sole discretion, before posting, (2) the Link must be
directly to Advertiser's web site and not to any "bridge" or transactional
page or stand alone site (unless otherwise required by the NBA), (3) if the
Advertiser is engaged in an advertising category in which an NBA sponsor
competes, the Link must not point to any information on the sponsor's site
that is related to basketball, the NBA, or include any content that creates
the impression that Advertiser is associated or affiliated with the NBA or
another team, a player in uniform, or a coach, (4) this Agreement and
specifically this benefit are subject to the Constitution and Bylaws and
other rules and regulations of the NBA as they presently exist or as they
may from time to time be amended, and (5) this benefit will expire on the
earlier of the end of this contract or October 1, 2000, unless the NBA
allows such links to continue for subsequent seasons.
. Subject to NBA approval, Advertiser will receive 20 pieces of Blazers
merchandise, at cost, to be featured on the Mercata web site.
5.
<PAGE>
EXHIBIT 10.24
*** Text Omitted and Filed Separately
[LOGO OF BEFREE, INC.] SERVICE ORDER Confidential Treatment Requested
Under 17 C.F.R. (S)(S) 200.80(b)(4),
200.83 and 240.24b-2
This Agreement is made and entered into as of August 5, 1999 (the "Agreement
Date") by and between Be Free, Inc. ("Be Free"), having its principal place of
business at 154 Crane Meadow Road, Suite 100, Marlborough, Massachusetts 01752,
and Mercata, Inc. ("Merchant"), having its principal place of business at 110
110th Ave NE, Bellevue, WA 98004. In consideration of the mutual covenants and
conditions contained in this Service Order and in Be Free's Terms of Service in
the form attached hereto (collectively the "Agreement"), and intending to be
legally bound hereby, the parties mutually agree as follows:
- --------------------------------------------------------------------------------
PART A - BFAST SERVICES
- --------------------------------------------------------------------------------
1. BFAST(sm) Services
1.1 Be Free and Merchant agree to the BFAST Services set forth in Part C of
this Service Order and the BFAST fees set forth below.
1.2 Merchant agrees to pay Be Free a BFAST Implementation Fee of $2,500 upon
execution of this Agreement and $2,500 upon Program Launch.
1.3 Merchant agrees to pay Be Free a BFAST Service Fee equal to the greater of:
(a) [...***...]* of monthly Net Sales generated each month through the
Affiliate Sales Channel (for purposes of this Section, Net Sales shall be
defined as gross sales less shipping charges, taxes and returns); or
(b) a minimum BFAST Service Fee of [...***...] each month after
Program Launch.
(c) Be Free agrees to pay up to [...***...] for one-half of the costs
of mutually agreed upon market development programs to promote Merchant's
Affiliate Sales Channel.
(d) Merchant is entitled to an emailing campaign to a target list of
up to [...***...] opt-in affiliate sites, at no charge.
- --------------------------------------------------------------------------------
PART B - OPTIONAL SERVICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
1. BFAST Auto-Merchandising Services Declined Accepted /DJS/
----- -----
1.1 Provided that Merchant has initialed or checked "Accepted" above, Be Free and Merchant agree to the Auto-Merchandising
Services set forth in Part C of this Service Order and the Auto-Merchandising fees set forth below.
1.2 Merchant agrees to pay Be Free an Auto-Merchandising Implementation Fee of 0 upon Program Launch.
1.3 Merchant agrees to pay Be Free each month an Auto-Merchandising Service Fee of [...***...] per one thousand Impressions served
via BFAST Auto-Merchandising Services, with a maximum annual payment not to exceed [...***...].
2. Open Affiliate Outreach & FastApp Services Declined Accepted /DJS/
----- -----
2.1 Provided that Merchant has initialed or checked "Accepted" above and is participating in the Be Free FastApp program, Be Free
and Merchant agree to the Open Affiliate Outreach and FastApp Services set forth in Part C of this Service Order.
2.2 Open Affiliate Outreach & FastApp Service Fees are included in the BFAST Service Fee set forth above at no additional charge.
3. Affiliate Commission Payment Services Declined Accepted /DJS/
----- -----
3.1 Provided that Merchant has initialed or checked "Accepted" above and has transferred to Be Free amounts owed to Affiliates by
Merchant for BFAST-monitored transactions, Be Free and Merchant agree to the Affiliate Commission Payment Services set forth
in Part C of this Service Order and the Affiliate Commission Payment fees set forth below.
3.2 Merchant agrees to pay Be Free each month an Affiliate Commission Payment Service Fee of $1.00 plus actual postage costs for
each check distributed.
Only Level I &
Level I Support Level II Support
4. Affiliate Support Services Declined Accepted Accepted /DJS/
----- ----- -----
4.1 Provided that Merchant has initialed or checked "Accepted" above, Be Free and Merchant agree to the applicable Affiliate
Support Services set forth in Part C of this Service Order and the applicable Affiliate Support fees set forth below.
4.2 Merchant agrees to pay Be Free each month after Program Launch a Level I Affiliate Support Service Fee of [...***...] per
Affiliate per month for the first six months, and [...***...] per Affiliate per month for all subsequent months.
4.3 Merchant agrees to pay Be Free each month after Program Launch a Level II Affiliate Support Service Fee of $1,500 per month.
5. Affiliate Application Review Services Declined /DJS/ Accepted
----- -----
5.1 Provided that Merchant has initialed or checked "Accepted" above, Be Free and Merchant agree to the Affiliate Application
Review Services set forth in Part C of this Service Order and the Affiliate Application Review fees set forth below.
5.2 Merchant agrees to pay Be Free each month an Affiliate Application Review Service Fee of $4.00 per Affiliate application
reviewed.
6. Image Hosting & Serving Services Declined /DJS/ Accepted
----- -----
6.1 Provided that Merchant has initialed or checked "Accepted" above, Be Free and Merchant agree to the Image Hosting & Serving
Services set forth in Part C of this Service Order and the Image Hosting set forth below.
6.2 Merchant agrees to pay Be Free each month an Image Hosting & Serving Service Fee of $0.35 per one thousand Impressions served.
</TABLE>
- ---------------------
* Confidential Treatment Requested
<PAGE>
[LOGO OF BE FREE, INC.] SERVICE ORDER
- --------------------------------------------------------------------------------
PART C - SERVICE DESCRIPTIONS
- --------------------------------------------------------------------------------
1. Certain Definitions.
1.1 "Affiliate" shall mean the person or entity that displays Merchant's
products, services and/or promotions on its Internet site in exchange for
receiving remuneration from Merchant for such display.
1.2 "Affiliate Site" shall mean the Affiliate's Internet site or sites which
display products, services, and/or promotions provided by Merchant.
1.3 "Affiliate Sales Channel" shall mean Merchant's group of Affiliates and
related Affiliate Sites.
1.4 "End User" shall mean a person or entity who visits the Affiliate Site.
1.5 "Tag" shall mean a form of HTML information display code that causes a
browser to generate a request to the BFAST Service Bureau to display a Text Link
or a Graphic Link.
1.6 "Link" shall mean a listing or display of merchandise or services offered
by Merchant on an Affiliate Site. Links will typically result in the display of
an invisible graphic (in the case of a text Link) or a product graphic (in the
case of a graphic Link) resulting from a request to the BFAST Service Bureau.
1.7 "Impression" shall mean each occurrence that a text or graphic Link is
served.
1.8 "End User Clickthrough" shall mean the event caused by an End User clicking
or otherwise activating a Link. Typically, this will result in a request to the
BFAST Service Bureau resulting in the link to and display of a page on the
Merchant's Internet site.
1.9 "Program Launch" shall mean the first date upon which Merchant receives a
BFAST Affiliate application.
2. BFAST Services.
2.1 BFAST (Be Free Affiliate Serving Technology(sm)) is a set of technologies
and methods, accessible by Merchant and Affiliates through Internet connections
to Be Free servers (the "BFAST Service Bureau"). BFAST Services (a) enable
Merchant to establish and manage one Affiliate Sales Channel including the terms
and conditions of its relationship with Affiliates; (b) connect End Users from
Affiliate Sites to the Merchant's Internet site for the purpose of purchasing
goods or services from the Merchant; and (c) measure and report the related
activity.
2.2 The BFAST Service Bureau provides Affiliate Sales Channel transactional
services which (a) respond to the request resulting from text Tags by serving an
invisible pixel; (b) respond to the request resulting from graphical Tags by
directing the request to Merchant's servers to serve a graphic; (c) respond to
End User Clickthroughs by directing End Users' browser to an address at the
Merchant's Internet site; and (c) track and report Impressions, End User
Clickthroughs and sales (or other services offered by Merchant).
2.3 Affiliates access the BFAST Service Bureau via reporting.net, a Merchant-
branded Internet site through which Affiliates may (a) generate Tags to be used
in the Affiliate Site; and (b) access Affiliate activity reports.
2.4 Merchant accesses the BFAST Service Bureau via a Merchant graphical user
interface (GUI). Through the GUI, Merchant may (a) approve Affiliate
applications; (b) approve Affiliate commission voucher data; (c) add or remove
Tags available to Affiliates on reporting.net; (d) modify Affiliate profiles;
(e) access Affiliate Sales Channel reports; (f) download certain Affiliate Sales
Channel data; and (g) initiate up to 10,000 Affiliate-targeted broadcast e-mails
(the "Standard Level") per calendar month (Merchant may initiate up to a maximum
of 30,000 Affiliate-targeted broadcast e-mails each calendar month for an Excess
E-mail Fee of $0.10 per e-mail over the Standard Level). Merchant is hereby
granted a non-exclusive, non-transferable right to use the Merchant GUI software
for use with the Affiliate Sales Channel activities anticipated by this
Agreement during the Term and any Additional Terms. Such right includes all
related software and documentation delivered to Merchant.
2.5 BFAST implementation shall include the installation of the Merchant GUI and
assistance with the initial setup of (a) the Merchant's profile and security
configuration; (b) the Merchant's Affiliate application form; (c) the Affiliate
commission structure (including commission rates, payment frequency and minimum
payment levels); (e) the reporting.net site configuration; and (f) the Catalog
and Transaction Files. BFAST training is provided via telephone or at Be Free
facilities for up to 4 Merchant employees.
2.6 BFAST Merchant support shall be provided by a client service representative
and is available Mondays through Fridays from 8:30 am to 5:30 pm ET. Client
service representatives will provide support services including (a) project
coordination for implementation and training; (b) ongoing coordination of any
necessary Be Free resources; (c) technical issue resolution and trouble-
shooting; (d) communication and support for product enhancements; (e) Affiliate
Sales Channel analyses; and (f) communication of Affiliate Sales Channel best
practices techniques.
3. BFAST Auto-Merchandising Services. Auto-Merchandising enables Merchant,
rather than Affiliates, to control the Links that are served on Affiliate Sites.
Through Auto-Merchandising Tags, Merchant may automate Link generation based on
Merchant-identified criteria such as Affiliate content category, End User
browser or operating system, and/or date and time of day.
4. Open Affiliate Outreach & FastApp Services. Open Affiliate Outreach
Services include initiatives to expand the Affiliate Sales Channel through Be
Free sponsored Affiliate recruitment programs. Affiliates recruited by Be Free
on behalf of Merchant may be provided the option of joining other Be Free
customers' affiliate sales channels through FastApp, a consolidated Be Free-
branded on-line Affiliate application form and, if requested by the Affiliate,
through direct solicitation by Be Free. Affiliates recruited through the Open
Affiliate Outreach & FastApp Services may modify their Affiliate account data;
provided such form includes Merchant's standard terms for the Affiliate Sales
Channel.
5. Affiliate Commission Payment Services. Affiliate Commission Payment
Services include Be Free's printing and mailing of Merchant-branded Affiliate
commission checks based upon commission periods and commission amounts approved
by merchant in the Merchant GUI. Such services shall be provided by the end of
each calendar month provided that funds have been received by Be Free by the
twentieth of that month. Commission payments will be mailed by the end of the
following month for funds received after the twentieth. A transaction log will
be provided to Merchant for audit purposes. Merchant shall reimburse Be Free
for bank fees associated with Merchant-requested stop payment orders.
6. Affiliate Support Services
6.1 Level I Affiliate Support includes the following technical and marketing
support services including (a) assisting potential Affiliates with application
completion; (b) assisting Affiliates with link generation; (c) assisting
Affiliates with the resolution of broken links; (d) logging all emails and
tracking known Affiliate issues; (e) responding to Affiliate e-mails within one
business day; (f) providing a set of Affiliate frequently asked questions (FAQs)
and an answer data base; (g) escalating Affiliate issues to the appropriate
contacts in Merchant's organization; (h) notifying Affiliates of product
enhancements; (i) corresponding with inactive Affiliates to remind them of how
to set up links; (j) providing Merchant with monthly summaries of outstanding
and resolved issues and statistics including type and frequency; (k) assisting
with the interpretation of Affiliate reports; (l) responding to Affiliate
requests to assist with improving sales (or other services offered by Merchant);
and (m) an increase of the Standard Level of Affiliate-targeted broadcast e-
mails to 20,000 per calendar month.
6.2 Level II Affiliate Support is a marketing enhancement service that includes
corresponding with the top 250 sites (based on revenue generated through the
Affiliate Sales Channel) to (a) notify them of Merchant developed promotions
such as seasonal offerings, new Affiliate offerings and new product offerings;
(b) recommend sales enhancement techniques and best selling methods; and (c)
ensure that they understand and use Affiliate generated reports to maximize
their traffic and sales. Level II Affiliate Support also includes an increase
of the Standard Level of Affiliate-targeted broadcast e-mails to 30,000 per
calendar month.
7. Affiliate Application Review Services. Affiliate Application Review
Services include (a) reviewing Affiliate applications for completeness and
communicating any omitted information; (b) reviewing Affiliate Site (at the time
of the Affiliate application) for appropriateness based on written Merchant
guidelines; (c) approving or rejecting application based on written Merchant
guidelines; (d) corresponding with Affiliate applicants to inform them of
acceptance or rejection; (e) providing Merchant with monthly summaries of number
of applications reviewed, approved and rejected and the most common reasons for
rejection.
8. Image Hosting & Serving Services. Image Hosting Services include the
hosting of Merchant graphic files on Be Free Service Bureau and serving such
files in response to Impression requests. Each calendar month, the average size
of graphic files served may not exceed 15 kilobytes per file. The size of any
single graphic file hosted or served by may not exceed 35 kilobytes.
AGREED AND ACCEPTED BY BE FREE: AGREED AND ACCEPTED BY MERCHANT:
By: /s/ W. Blair Heavey By: /s/ Dennis J. Shepard
------------------------------- ----------------------------
Name: W. Blair Heavey Name: Dennis J. Shepard
----------------------------- --------------------------
Title: Vice President Sales Title: Chief Operating Officer
---------------------------- -------------------------
Date: August 9, 1999 Date: August 5, 1999
----------------------------- --------------------------
<PAGE>
1. Term And Termination.
1.1 This Agreement will begin on the Agreement Date and end one year from the
Program Launch ("Term"). The Agreement will automatically renew for additional
one-year periods ("Additional Terms") unless terminated in writing by either
party before 90 days prior to the end of the Term or Additional Terms.
Notwithstanding any other provision of this Agreement, Merchant may terminate
any Optional BFAST Service upon 60 days written notice to Be Free. Sections
1.1, 2.1, 3.3, 4..1, 4.2, 5, 6, 7.4, 7.5, 7.6 and 7.7 shall survive any
expiration or termination of this Agreement.
1.2 Provided that a party is not in default of any payment or other material
breach, that party may terminate this Agreement upon 60 days written notice (the
"Notice Period") upon any material breach or default of a provision of this
Agreement by the other party. Any termination under this section shall become
effective at the end of the Notice Period unless the party in violation cures
the material breach or default, or has commenced reasonable efforts to cure the
breach or default within such period.
2. Be Free Obligations.
2.1 Be Free represents and warrants that (a) all software provided hereunder is
free from material defects; shall perform in accordance with it's documentation;
is free of any viruses, trojan horses, trap doors, Easter eggs, worms time
bombs, cancelbots, or other programming routines that are intended to damage,
interfere with intercept or expropriate any system, data or information of
Merchant or its Affiliates; and will not be adversely affected by the advent of
the Year 2000 date change; (b) all services provided hereunder shall, in all
material respects, be performed in a professional manner and in accordance with
service descriptions; and (c) any software used by Be Free to perform its
obligations hereunder shall record, store, process and present calendar dates
falling on or after January 1, 2000 in substantially the same manner and with
substantially the same degree of performance and functionality as prior to that
date.
2.2 The BFAST Service Bureau shall respond to Impression and End User
Clickthrough requests at a rate not greater than the expected peak request rate
with a first-byte latency of less than ninety-five hundredths (0.95) of a
second, as measured at its router nearest its Internet point of presence (the
"Performance Obligation"). Due to the complexity of the Internet, the
variability of user hardware and software capabilities and the provision of
services to End Users by various providers, Be Free does not guarantee end-to-
end response times or transmission rates. Should Be Free fail to provide
services in accordance with the Performance Obligation for greater than 60
consecutive minutes during any calendar day, Be Free shall discount BFAST
Service Fees for that day by 5%. For purposes of Section 1.2, a material breach
of the Performance Obligation shall be failure to meet those obligations for 72
consecutive hours.
2.3 Unless otherwise specified, Be Free shall (a) invoice all fees for calendar
month periods; (b) invoice fixed and minimum fees at the beginning of each such
month; and (c) invoice any amounts exceeding minimum fees in the subsequent
month.
3. Merchant Obligations.
3.1 Merchant shall provide Be Free, on a regular basis, with a file that
accurately reflects the merchandise or services available on the Merchant's
Internet site (the "Catalog File"). Merchant shall (a) accept and record a
transaction identifier for each End User Clickthrough passed from the BFAST
Service Bureau; and (b) provide Be Free, not less than once each business day,
with a file that includes sales (or other services offered by Merchant) orders,
returns or refunds, and the related transaction identifier (the "Transaction
File"). The Catalog and Transaction Files shall be formatted in accordance with
Be Free's specifications and provided via a Be Free approved method.
3.2 Merchant shall, upon written request and during normal business hours (but
not more frequently than once each calendar year), provide access to accounting
records to an independent accounting firm chosen by Be Free for purposes of an
audit. Such accounting firm shall be required to sign an agreement protecting
Merchant's confidential information and shall only be authorized to report on
the accuracy of the Merchant's Transaction File for the period requested. Be
Free shall bear the costs of the audit unless it is determined by the auditor
that there was an error in the Transaction File resulting in a 5% or greater
underpayment of BFAST Service Fees in any calendar quarter period. In such
event, Merchant shall bear the reasonable costs of the audit for the period
requested.
3.3 Unless otherwise specified, Merchant shall pay Be Free's invoices within 30
days of the invoice date. Merchant shall be responsible for all taxes (except
any income taxes of Be Free) related to the transactions contemplated hereunder.
3.4 If Merchant elects the optional BFAST Open Affiliate Outreach & FastApp
Services the Merchant will be required to place a "call to action" button on
their Website.
4. Indemnification.
4.1 Be Free shall, at its expense, indemnify, defend and hold Merchant harmless
from any and all damages and costs (including reasonable attorneys' fees)
incurred by Merchant arising out of any claim that the services provided by Be
Free hereunder infringe any patent, copyright, trademark, trade secret or other
proprietary right, provided that Merchant (a) promptly notifies Be Free in
writing of any such claim; (b) gives Be Free full control of the defense and
settlement of any such claim; and (c) cooperates with Be Free, at Be Free's
expense, in defending or settling such claims.
4.2 Each party shall defend, indemnify and hold harmless the other party from
and against any loss, cost or expense (including reasonable attorneys' fees)
incurred by the other party due to, or in connect with, (a) the indemnifying
party's violation of any privacy rights of a third party; and (b) any claim by
the indemnifying party's employees, agents, and consultants related to this
agreement (except to the extent the result of the indemnified party's breach of
this agreement, negligence or willful misconduct); provided that the indemnified
party (i) promptly notifies the indemnifying party in writing of any such claim;
(ii) gives the indemnifying party full control of the defense and settlement of
any such claim; and (iii) cooperates with the indemnifying party, at the
indemnifying party's expense, in defending or settling such claims.
5. Ownership.
5.1 Notwithstanding any other provision in this Agreement, each party shall be
the sole and exclusive owner of its intellectual property which includes,
without limitation, technology (including, in the case of Be Free, BFAST, its
source code and its configuration for Merchant), trademarks, service marks,
trade names, patents, copyrights, trade secrets and confidential information.
Neither party shall use the intellectual property of the other without the prior
written permission of the owner.
5.2 Except for Affiliate names and addresses obtained by Be Free through the
Open Affiliate Outreach & FastApp Services, Merchant shall be the sole and
exclusive owner of names, addresses, transactional data and other personal
identifying information of Affiliates and End Users, and Be Free shall treat
such information as confidential business information. Be Free shall have the
right to use general demographic and non-personally-identifying information of
End Users, provided however, that any such use does not identify Merchant as the
source of any such data. Upon expiration or termination of this Agreement,
Merchant shall retain the right to use the Affiliate names and addresses
obtained by Be Free through the Open Affiliate Outreach & FastApp Services
subject to the confidentiality obligations in Section 6.
6. Confidentiality.
2.
<PAGE>
6.1 Each party acknowledges that during the Term or any Additional Terms of
this Agreement, it may obtain access to trade secrets and confidential business
information of the other party. A trade secret generally consists of valuable,
secret information or ideas that a party collects or uses in order to keep its
competitive edge. Trade secrets include, without limitation, system designs,
program materials (including source code and any documentation which has not
been publicly distributed or disclosed), operating processes, equipment design,
product specifications, and any other proprietary technology. Confidential
business information consists of all other competitively sensitive information
kept in confidence by a party and includes, without limitation, contract terms,
selling and pricing information and procedures.
6.2 Each party agrees not to use or disclose any trade secrets or confidential
business information of the other party, except as may be necessary to employees
of a party who have a specific need to know in order to coordinate the operation
of the Affiliate Sales Channel and, specifically, shall not disclose any trade
secret or confidential business information at any time to any third party
without the prior express written permission of the owner of such trade secret
or confidential business information. These restrictions do not apply to (a)
any information that is or becomes generally available to the public except in
breach of any other provision hereunder; (b) any information properly obtained
from a completely independent source; or (c) any information that may be
necessary to establish rights hereunder, or as may be required by law or
governmental regulations or authority.
6.3 Merchant, for itself and its employees, agents, and consultants, (a) shall
not attempt in any manner to decompile or reverse-engineer the source code of Be
Free's software; and (b) shall not allow any other individual(s) or entity(ies)
to do or attempt to do so.
7. Miscellaneous.
7.1 During the Term or any Additional Terms of this Agreement, Be Free shall be
the sole provider of Online Affiliate Technology to Merchant for a Sales
Affiliate Program. For purposes of this Section, "Online Affiliate Technology"
shall mean any set of software or services that enables Merchant to serve
advertisements or other promotions on Affiliate Sites or e-mail messages and to
pay for such advertisements or promotions based on the traffic to or sales
generated from Merchant's internet site by the advertisement or promotion. For
purposes of this Section, a "Sales Affiliate Program" means a program whereby
Merchant develops a network of affiliate sites substantially similar to the
network supported by BeFree pursuant to this Agreement. Such network consists
of affiliate sites that carry offers and links for products or services of
Merchant in exchange for payment based on the traffic to or sales generated by
such advertisement or promotion pursuant to a set of terms that are
substantially standard (e.g., negotiated relationships with strategic partners,
relationships with advertising agencies and direct marketing activities would
all be outside of the Sales Affiliate Program).
7.2 The parties agree to announce this Agreement shortly after the its
execution. Each party shall have the right to approve the other party's
announcement before it is made public, which approval shall not unreasonably be
withheld.
7.3 This Agreement is not assignable, except that it may be assigned by a party
in the event of its merger or acquisition, and then only to the merged or
acquiring company. Any attempted assignment in contravention of this section
shall be null and void.
7.4 EXCEPT AS EXPRESSLY STATED, NEITHER PARTY MAKES ANY REPRESENTATIONS OR
WARRANTIES, WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED, REGARDING THIS
AGREEMENT'S SUBJECT MATTER. EACH PARTY HEREBY DISCLAIMS ALL WARRANTIES IMPLIED
IN LAW OR OTHERWISE, INCLUDING WITHOUT LIMITATION, IMPLIED WARRANTIES OF
MERCHANTIBILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7.5 Other than breaches of Section 6 (Confidentiality) and the indemnification
obligations in Section 4, it is expressly agreed that, in the event of any
breach or purported breach of this Agreement, the remedy shall be limited to
equitable remedies or an action at law for money damages, if any were actually
suffered. OTHER THAN BREACHES OF SECTION 6 (CONFIDENTIALITY) AND THE
INDENIFICATION OBLIGATIONS IN SECTION 4, NEITHER PARTY SHALL BE LIABLE UNDER
THIS AGREEMENT FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES,
WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT, TORT (INCLUDING
NEGLIGENCE OR STRICT LIABILITY) OR OTHERWISE, EVEN IF THE OTHER PARTY HAS WARNED
OF THE POSSIBILITY OF SUCH DAMAGES.
7.6 Neither party shall be liable to the other party for any delay or default
hereunder to the extent due to any cause beyond its reasonable control, if such
party notifies the other of the cause and the expected duration of such delay or
default. All such obligations shall return to full force and effect upon the
termination of such cause. A "cause beyond the reasonable control" includes any
act of God, act of any government authority, labor dispute, fire, explosion,
accident, power failure, flood, riot or declared or undeclared war.
7.7 This Agreement is the entire agreement between the parties regarding its
subject matter, supersedes any other agreements or understandings between them,
and may only be amended by a writing signed by both parties. A party's waiver
of, or failure to enforce, any right hereunder on one occasion shall not be
deemed a waiver of any other right on the same occasion or the same right on any
other occasion. If a court having competent jurisdiction declares any provision
of this Agreement invalid or unenforceable, the remainder of this Agreement
shall continue in full force and effect. This Agreement shall be construed and
governed according to the laws of Commonwealth of Massachusetts applicable to
contracts made, and fully performed, in Massachusetts.
3.
<PAGE>
EXHIBIT 10.25
*** Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. (S)(S)
200.80(B)(4), 200.83 AND
240.24B-2
CyberSource On-Demand Commerce Applications(TM) and Services Agreement
This CyberSource On-Demand Commerce Applications and Services Agreement
(the "Agreement") is entered into by and between CyberSource Corporation, a
Delaware corporation ("CyberSource"), and Mercata, Inc., a Delaware corporation
("Customer").
Customer desires to obtain and CyberSource is willing to supply certain
services on the terms and subject to the conditions set forth in this Agreement.
For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, CyberSource and Customer hereby agree as follows:
1. Certain Definitions
-------------------
The following definitions shall apply to this Agreement.
a) "Confidential Information." Any data or information, oral or written,
treated as confidential that relates to either party's (or, if either party is
bound to protect the confidentiality of any third party's information, such
third party's) past, present, or future research, development or business
activities, including any unannounced products and services, any information
relating to services, developments, inventions, processes, plans, financial
information, forecasts, and projections and the financial terms of this
Agreement. Notwithstanding the foregoing, Confidential information shall not be
deemed to include information if: (i) it was already known to the receiving
party prior to the date of this Agreement as established by documentary
evidence; (ii) it is in or has entered the public domain through no breach of
this Agreement or other wrongful act of the receiving party; (iii) it has been
rightfully received by the receiving party from a third party and without breach
of any obligation of confidentiality of such third party to the owner of the
Confidential Information; (iv) It has been approved for release by written
authorization of the owner of the Confidential Information; (v) it has been
independently developed by a party without access to the Confidential
Information of the other party; or (vi) it is required to be disclosed pursuant
to final binding order of a governmental agency or court of competent
jurisdiction, provided that the owner of the Confidential Information has been
given reasonable notice of the pendency of such an order and the opportunity to
contest it.
b) "Intellectual Property." All (i) copyrights (including, without limitation,
the right to reproduce, distribute copies of, display and perform the
copyrighted work and to prepare ____ works; copyright registrations and
applications, trademark rights (including, without limitation, registrations and
applications), patent rights, trade names, mask-work rights, trade secrets,
moral rights, author's rights, privacy rights, publicity rights, algorithms,
rights in packaging, goodwill and other proprietary rights, and all renewals and
extensions thereof, regardless of whether any of such rights arise under the
laws of the United States or any other state, country or jurisdiction, (ii)
intangible legal rights or interests evidenced by or embodied in any idea,
design, concept, technique, Invention, discovery, enhancement or improvement,
regardless of patentability, but including patents, patent applications, trade
secrets, and know-how; (iii) all derivatives of any of the foregoing.
c) "On-Demand Commerce Applications(TM) and Services." Those products and
services of CyberSource to be provided to Customer hereunder (collectively the
"Services").
d) "Products." Those products, content and/or services that Customer purports
to own or have rights to for which the Services of CyberSource will be rendered
under this Agreement.
e) "Account." Customer identification created and maintained in the
CyberSource system to enable Customer's use of ON-DEMAND COMMERCE
APPLICATIONS(TM) and Services.
2. Services and Fees
-----------------
a) CyberSource shall provide Customer with the service(s) selected below:
[ ] Easy Start(TM) Implementation _______ (Customer's Initials)
[X] SCMP Implementation (Enterprise) /s/ JCE (Customer's Initials)
-------
[ ] Global Rights Registry _______ (Customer's Initials)
[ ] Other_______________ _______ (Customer's Initials)
b) Customer may add (an) additional Service(s) by submitting a Service
Enhancement Request that shall be incorporated into this Agreement. Services
added subsequently to the execution of this Agreement will be provided to
Customer at the then current price.
c) CyberSource will deliver to Customer an Invoice for Services rendered
during the billing period in the amounts set forth in the Price Annex to this
Agreement on or near the fifteenth (15th) calendar day of each month following
the month in which the Services are provided. Customer shall remit the amount(s)
due under the invoice no later than thirty (30) calendar days from the date of
said invoice.
d) Interest shall accrue at the lesser of 1.0% per month or the maximum amount
permitted by applicable law for any fees that remain unpaid more than thirty
(30) calendar days past the date of the applicable invoice.
e) CyberSource shall be entitled to revise any and all of the aforesaid fees
provided that CyberSource gives written notice to Customer at least sixty (60)
calendar days prior to the effective date of the fee change.
f) Except as otherwise provided in his Agreement, Customer hereby grants
CyberSource such royalty-free, limited, non-exclusive right, authorization, and
license to Customer's Intellectual Property as necessary in connection with the
Products to perform the Services for Customer in accordance with this Agreement.
3. Term and Termination
--------------------
a) The initial term of this Agreement shall be one (1) year beginning from the
Effective Date. Thereafter, this Agreement will renew automatically for
additional terms of one (1) year ("Additional Term") unless either party
provides written notice to the other party at least thirty (30) days prior to
any such renewal that the Agreement shall not so renew.
b) The Agreement may be terminated by either party at any time in the event of
a material breach by the other party that remains uncured after thirty (30)
calendar days written notice thereof. The parties acknowledge that nonpayment of
fees constitutes a material breach of this Agreement.
c) Notwithstanding any provision in this Agreement to the contrary, this
Agreement may be terminated by either party at any time without cause with sixty
(60) days prior written notice thereof.
d) In the event that CyberSource reasonably believes that Customer's conduct
or its Products violate applicable law, injure the reputation of CyberSource, or
pose a threat to CyberSource's systems, equipment, processes, or Intellectual
Property (the "Offending Condition"), CyberSource may suspend providing the
Services to Customer with one (1) day prior written notice and thereafter may
terminate this Agreement without notice if the offending condition remains
uncured more than thirty (30) calendar days after said notice.
e) The Agreement may be terminated by either party effective immediately and
without any requirement of notice, in the event that (i) the other party files a
petition, in bankruptcy, seeking any reorganization, arrangement, composition,
or similar relief under any law regarding insolvency or relief for debtors, or
makes an assignment for the benefit of creditors' (ii) a received, trustee, or
similar officer is appointed for the business or property of such
<PAGE>
party; (iii) any involuntary petition or proceeding, under bankruptcy or
insolvency laws, is instituted against such party and not stayed, enjoined, or
discharged within sixty (60) days; or (iv) the other party adopts a resolution
for discontinuance of its business or for dissolution.
f) Except as otherwise provided in this Agreement, within five (5) business
days of termination of this Agreement, each of the parties shall return to the
other party all materials belonging to the other party that constitutes said
party's Confidential Information and/or Intellectual Property.
4. Intellectual Property
---------------------
a) Except as expressly set forth in this Agreement, neither party will acquire
any right, title, or interest in the other's Intellectual Property. Except as
otherwise provided in this Agreement, CyberSource agrees that as between
CyberSource and Customer all right, title, and interest in any Products provided
to CyberSource under this Agreement shall remain with Customer. Except as
otherwise provided in this Agreement, Customer agrees that as between
CyberSource and Customer all Intellectual Property originally created by
CyberSource and its authorized agents and/or contractors in connection with this
Agreement, including, without limitation, all fraud, export and other screening
histories, and all documentation (in any and all media), renewals and extensions
thereof, shall be entirely CyberSource's property, free of any claims whatsoever
by Customer.
b) Should Customer use CyberSource's Global Rights Registry(TM) Services to
manage Customer's Intellectual Property, CyberSource will exercise commercially
reasonable efforts to protect such Intellectual Property while under
CyberSource's care.
5. Confidential Information
------------------------
a) Each party ("Receiving Party") agrees that any Confidential Information
received from the other party ("Disclosing Party") (i) shall not be used except
as necessary to perform the obligations required under this Agreement, (ii)
shall be disclosed only to those of its employees as are necessary for the
purposes hereunder, (iii) shall not be disclosed to third parties without the
written consent of the Disclosing Party during the term of this Agreement and
three (3) years thereafter, and (iv) shall be kept in safe care as if would keep
its own, similar confidential information (which care shall not in any case be
less than reasonable).
b) Upon termination of this Agreement, and except as otherwise provided in
this Agreement, each party shall promptly deliver to the other party all of the
other party's Confidential Information.
6. Limitation of Liability
-----------------------
a) UNDER NO CIRCUMSTANCES (i) SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY
FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF
THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), SUCH AS, BUT
NOT LIMITED TO, LOSS OF REVENUE, PROFITS OR BUSINESS, COSTS OF DELAY, COSTS OF
LOST OR DAMAGED DATA OR DOCUMENTATION, OR SUCH PARTY'S LIABILITIES TO THIRD
PARTIES ARISING FROM ANY SOURCE; OR (ii) SHALL CYBERSOURCE BE LIABLE TO CUSTOMER
WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT,
NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY AMOUNTS
IN EXCESS, IN THE AGGREGATE, OF FEES PAID TO CYBERSOURCE, HEREUNDER DURING THE
TWELVE-MONTH PERIOD PRIOR TO THE DATE THE CAUSE OF ACTION AROSE. THE EXCLUSIONS
AND LIMITATIONS OF THIS SECTION DO NOT APPLY TO LIABILITY ARISING FOR BODILY
INJURY OF A PERSON OR IN STATES THAT PROHIBIT THE EXCLUSION OR LIMITATION OF
INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LIMITATIONS ON THE DURATION OF AN IMPLIED
WARRANTY.
b) Customer shall bear (i) all collection risk (including, without limitation,
credit card fraud and any other type of credit card fraud) with respect to sales
of its Products; and (ii) all responsibility and liability for the proper
payment of all taxes which may be levied or assessed, including, without
limitation, sales taxes.
c) Customer is solely responsible for maintaining complete backup records of
all information relating to its customers' orders, inquiries and purchases and
any other customer information, once such information has been provided to
Customer by CyberSource.
d) Both parties agree that CyberSource has no obligation to monitor or
regulate the content of the Products or to ascertain Customer's right to have
CyberSource perform the Services with respect to the Products under this
Agreement.
7. Warranties
----------
a) CyberSource hereby represents and warrants that the Services provided to
customer hereunder will conform substantially to specifications set forth and
contained in CyberSource marketing materials, the CyberSource website, and
support documentation provided to Customer by CyberSource.
b) CyberSource hereby represents and warrants (i) that the Services do not
infringe the Intellectual Property rights of any third party; (ii) that any
software created by CyberSource to perform the Services hereunder is Year 2000
complaint, in that, it will accurately process, address, store, and calculate
date and time data from, into, and beyond the calendar years 1999, 2000, and
2001 A.D. including leap year calculations and that it will not produce abnormal
or invalid results or cease operations due to the change from calendar years
1999, 2000, 2001 A.D., and beyond; and (iii) that any software created and used
by CyberSource to perform the Services under this Agreement will be virus-free.
c) Customer hereby represents and warrants (i) that the Products do not
infringe upon any third party Intellectual Property Rights and are not
defamatory, libelous, or obscene; (ii) that Customer has all necessary
authorizations to permit CyberSource to perform the Services with respect to the
Products; and (iii) that Customer has obtained all necessary governmental
permits, licenses, and authorizations for the distribution of the Products to
the territories, countries, and entities that are contained in instructions to
CyberSource.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, CYBERSOURCE HEREBY SPECIFICALLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE
SERVICES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NON-INFRINGEMENT AND ANY IMPLIED WARRANTIES ARISING FROM
COURSE OR DEALING OR COURSE OF PERFORMANCE.
8. Indemnification
---------------
a) Subject to Section 6 of this Agreement, each Party (the "Indemnifying
Party") will defend at its expense any legal cause of action brought against the
other party (the "Indemnified Party"), to the extent that such cause of action
is based upon a claim that any services or products of the Indemnifying Party
provided hereunder infringe a copyright, United States patent, trade secret, or
other intellectual property rights of a third party (other than claims relating
to conducting internet commerce generally). The Indemnifying Party will pay
those costs and damages finally awarded against the Indemnified Party which are
attributable to any such claim, provided that (i) Indemnified Party notifies
Indemnifying Party in writing immediately after Indemnified Party becomes aware
of such claim or the possibility thereof, and, (ii) Indemnifying Party has sole
control of the settlement, compromise, negotiation, and defense of any such
action; and, (iii) Indemnified Party cooperates in good faith, in the defense of
any such legal action.
b) Should any of Indemnifying Party's products or services become, or in
Indemnifying Party's opinion is highly likely to become, the subject of a
2.
<PAGE>
claim of infringement, Indemnifying Party may, at its option, (i) obtain the
right for Indemnified Party to continue using the Services; (ii) replace or
modify the Indemnifying Party's products and services so it is no longer
infringing or reduces the likelihood that it will be determined to be
infringing, or (iii) if neither of the foregoing options is commercially
reasonable, terminate this Agreement, provided that Indemnifying Party refunds
any fees received from or remits any amounts due to Indemnified Party hereunder,
whichever applicable.
c) Indemnifying Party shall have no liability for any claim of infringement
based on (i) products or services of the Indemnifying Party which have been
modified by parties other than Indemnifying Party; (ii) Indemnified Party's use
of Indemnifying Party's products or services in conjunction with data where use
with such data gave rise to the infringement claim; or (iii) Indemnified Party's
use of Indemnifying Party's products or services with non-Indemnifying Party
software or hardware, where use with such other software or hardware gave rise
to the infringement claim.
9. Marketing
---------
CyberSource shall be entitled to disclose the existence of the relationship
formed hereunder between Customer and CyberSource through the use of media
releases, public announcements, and customer reference materials. CyberSource
agrees to use commercially reasonable efforts to coordinate the release of its
announcements in conjunction with related announcements of the other party.
Customer hereby grants CyberSource a limited, non-exclusive, non-transferable
royalty-free license to use its trademarks and service marks solely for the
issuance of media releases and public announcements; provided that CyberSource
agrees to change, at CyberSource's expense, any displays of Logos which Customer
reasonably determines to be a misuse of Licensor's Logos.
10. Relationship of Parties
-----------------------
The parties shall perform all of their duties under this Agreement as
independent contractors. Nothing in this Agreement shall be construed to give
either party the power to direct or control the daily activities of the other
party, or to constitute the parties as principal and agent, employer and
employee, franchiser and franchiseee, partners, joint venturers, co-owners, or
otherwise as participants in a joint undertaking. The parties understand and
agree that, except as specifically provided in this Agreement, neither party
grants the other party the power or authority to make or give any agreement,
statement, representation, warranty, or other commitment on behalf of the other
party, or to enter into any contract or otherwise incur any liability or
obligation, express or implied, on behalf of the other party, or to transfer,
release, or waive any right, title, or interest of such other party.
11. Government Law; Consent to Jurisdiction
---------------------------------------
This Agreement will be deemed entered into in California and will be governed by
and interpreted in accordance with the laws of the State of California,
excluding (i) that body of law known as conflicts of law and (ii) the United
Nations Convention on Contracts for the International Sale of Goods. The parties
agree that any dispute arising under this Agreement, which is not subject to
Section 12 below, will be resolved in the state or federal courts in Santa Clara
County, California, and the parties hereby expressly consent to jurisdiction
therein.
12. Arbitration
-----------
a) Except that the parties shall be entitled to apply to the courts for
mandatory or injunctive equitable relief, any controversy or claim arising out
of or relating to this Agreement, or the breach thereof, will be settled by
arbitration before three (3) arbitrators in accordance with the rules then
prevailing of the American Arbitration Association, and judgment upon the reward
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. In any such proceeding the arbitrators shall make every reasonable
effort to resolve the matter expeditiously and to reduce the costs of the
proceeding, by limiting discovery and other means; and neither party shall be
entitled under any circumstances to receive punitive exemplary damages. Unless
the parties otherwise agree in writing, such arbitration shall be conducted in
San Jose, California, and the parties consent to jurisdiction and venue in the
courts of California located in Santa Clara County, California. Judgment of
arbitrator shall be final and binding. Each party hereto waives its right to an
appeal and/or a jury.
13. Assignment
----------
This Agreement may not be transferred to assigned by either party without the
prior written consent of the other party, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, consent of the other party
shall not be required for assignment or transfer made by (i) operation of law or
(ii) to an entity that acquires substantially all of its stock, assets or
business.
14. Employee Hiring
---------------
During the term of this Agreement and for six (6) months thereafter, neither
party shall directly solicit or recruit any employee or consultant of the other
party for itself or for any other company or individual, without the prior
written consent of the other party. Nothing in the foregoing sentence shall be
construed to prevent either party from hiring an employee of the other party
resulting from (i) advertising of open positions, participating in job fairs or
the like, or other forms of soliciting candidates for employment which are
general in nature or not directed specifically and solely at a given employee of
the other party, (ii) unsolicited inquiries about employment opportunities or
possibilities from headhunters or other agents acting for unidentified
principals, or (iii) unsolicited inquiries about employment opportunities from
any employee.
15. Force Majeure
-------------
Neither party hereto shall be responsible for any failure to perform its
obligations under this Agreement (other than obligations under Sections 4 and 5)
if such failure is caused by acts of God, war, strikes, revolutions, lack or
failure of transportation, facilities, laws or governmental regulations or other
causes that are beyond the reasonable control of such party. Obligations
hereunder, however, shall in no event be excused but shall be suspended only
until the cessation of any cause of such failure. In the event that such force
majeure should obstruct performance of this Agreement for more than thirty (30)
calendar days, the parties hereto shall consult with each other to determine
whether this Agreement should be modified or terminated. The party facing an
event of force majeure shall use reasonably commercial efforts to remedy that
situation as well as to minimize its effects. A case of force majeure shall be
notified to the other party by facsimile within five (5) days after its
occurrence and shall be confirmed by a letter.
16. Entire Agreement
----------------
This Agreement constitutes and contains the entire agreement between the parties
with respect to the subject matter hereof and supersedes any prior oral or
written agreements. Each party acknowledges and agrees that the other has not
made any representations, warranties or agreements of any kind, except as
expressly set forth herein.
17. Modifications, Amendments, and Waivers
--------------------------------------
This Agreement may not be modified or amended, including by custom, usage of
trade, or course of dealing, except by an instrument in writing signed by duly
authorized employees of both of the parties hereto.
The waiver by either party of a breach of any provision contained herein shall
be in writing and shall in no way be construed as a waiver of any subsequent
breach of such provision or the waiver of the provision itself.
18. Counterparts
------------
This Agreement may be executed in counterparts, including counterpart
transmitted by facsimile, each of which shall be deemed an original, and all
such counterparts shall constitute one and the same agreement.
19. Survival
--------
3.
<PAGE>
The provisions of this Agreement relating to payment of any fees or other
amounts owed, payment of any interest on unpaid fees, confidentiality,
warranties, limitation of liability, and indemnity shall survive any termination
or expiration of this Agreement.
20. Severability
------------
If any provision of this Agreement shall be held illegal or unenforceable, that
provision shall be limited or eliminated to the minimum extent necessary so that
this Agreement shall otherwise remain in full force and effect and enforceable.
21. Headings
--------
The headings in this Agreement are intended for convenience or reference and
shall not affect the Agreement's interpretation.
22. Notices
-------
Any notice, approval, request, authorization, direction or other communication
under this Agreement shall be given in writing at the address set forth below
and shall be deemed to have been delivered and given for all purposes (i) on the
delivery date, if delivered manually to the party to whom the same is directed;
(ii) one (1) business day after deposit with a commercial overnight carrier,
with written verification of receipt; and (iii) upon completion of transmission.
If sent via facsimile with a confirmation of successful transmission.
In witness whereof, the parties have executed this Agreement, as of the
date last below written ("Effective Date").
CUSTOMER:
Attn: _________________________________________________
Address: 110 - 110th Avenue, Suite 390
Bellevue, WA 98004-5840
Phone: 425-468-9836 Fax: 425-468-9936
By: /s/ Jon Engman
-------------------------------------------------
Name Jon Engman Title: VP, Finance & Admin.
--------------------- ----------------------
E-mail: [email protected]
-------------------------------------------------
Date: 3/29/99
-------------------------------------------------
CYBERSOURCE CORPORATION
550 S. Winchester Boulevard, 3/rd/ Floor
San Jose, CA 95128-2545
(408) 556-9100 Fax: (408) 241-8270
By: /s/ David Kim
-------------------------------------------------
(Signature of authorized CyberSource employee)
Name David Kim Title: Counsel
-------------------------- -----------------
E-mail: [email protected]
-------------------------------------------------
Date: March 29th, 1999
-------------------------------------------------
4.
<PAGE>
First Amendment to the CyberSource
On-Demand Commerce Applications(TM) and Services Agreement
The Agreement referenced above dated 3/29/99, by and between CyberSource
-------
Corporation ("CyberSource"), and Mercata, Inc. ("Customer"), in consideration of
the mutual promises of the parties, is amended as follows:
1. Section 2a. The lines for "Global Rights Registry" and "Other" are
----------
deleted.
[...***...]*
3. Section 2f. The paragraph is deleted in its entirety.
----------
4. Section 3d. The paragraph is deleted in its entirety and replaced with the
----------
following:
"In the event that CyberSource reasonably believes that Customer's conduct or
its Products violate applicable law, inure the reputation of CyberSource, or
pose a threat to CyberSource's systems, equipment, processes, or Intellectual
Property (the "Threatening Condition"), CyberSource may suspend providing the
Services to Customer with ten (10) days prior written notice and thereafter may
terminate this Agreement without further notice if the Threatening Condition
remains uncured more than thirty (30) calendar days after said notice.
Notwithstanding the foregoing, CyberSource may suspend providing the Services to
Customer with one (1) day notice if the Threatening Condition, in CyberSource's
good faith and reasonable belief, is imminently and materially dangerous to
CyberSource's systems, equipment, processes, or intellectual Property, and
thereafter may terminate this Agreement without further notice if said
Threatening Condition remains uncured more than thirty (30) calendar days after
said notice."
5. Section 6a. Subpart (ii) of the paragraph is deleted and replaced with the
----------
following:
"(ii) SHALL EITHER PARTY BE LIABLE TO THE OTHER WITH RESPECT TO ANY SUBJECT
MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR
OTHER LEGAL OR EQUITABLE THEORY FOR ANY AMOUNTS IN EXCESS, IN THE AGGREGATE, OF
FEES PAID TO CYBESOURCE HEREUNDER DURING THE TWELVE-MONTH PERIOD PRIOR TO THE
DATE THE CAUSE OF ACTION AROSE."
6. Section 9.
---------
The following phrase shall be added to the end of the first sentence:
", provided that it has secured prior written consent from the Customer on each
usage."
The second sentence is deleted and replaced with the following:
"Neither party shall issue any press releases without the written consent of the
other party."
7. Section 11. The last sentence of the paragraph is deleted in its entirety.
----------
___________________________
* Confidential Treatment Requested
<PAGE>
8. Section 12. The third sentence of the paragraph is deleted in its entirety.
9. All other provisions of the Agreement remain unchanged.
UNDERSTOOD AND AGREED:
CYBERSOURCE CORPORATION MERCATA, INC.
Signature: /s/ David J. Kim Signature: /s/ Jon Engman
----------------------- -------------------------
Printed Name: David J. Kim Printed Name: Jon Engman
-------------------- ----------------------
Title: Counsel Title: VP, Finance & Admin.
--------------------------- -----------------------------
Date: March 29,1999 Date: 3/29/99
---------------------------- ------------------------------
6.
<PAGE>
On-Demand Commerce Applications (TM) & Services U.S. Price Annex BS1
2/99
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
On-Demand Commerce Applications
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Monthly Minimum Transaction Commitment $ 95
Volume Tier Base 1 2 3 4 5 6 7
-----------------------------------------------------------------------------
Minimum Monthly Volume 0 1,001 3,001 7,501 15,001 30,001 50,001 75,001
-----------------------------------------------------------------------------
Maximum Monthly Volume 1,000 3,000 7,500 15,000 30,000 50,000 75,000
-----------------------------------------------------------------------------
Discount Applied 0% 5% 10% 15% 25% 30% 35% 45%
- ------------------------------------------------------------------------------------------------------------------------------------
Order
- ------------------------------------------------------------------------------------------------------------------------------------
GeoPay(TM) (US $) Authorization $0.100 $0.095 $0.090 $0.085 $0.075 $0.070 $0.065 $0.055
- ------------------------------------------------------------------------------------------------------------------------------------
Settlement $0.070 $0.067 $0.063 $0.060 $0.053 $0.049 $0.046 $0.039
- ------------------------------------------------------------------------------------------------------------------------------------
Credit $0.100 $0.095 $0.090 $0.085 $0.075 $0.070 $0.065 $0.055
- ------------------------------------------------------------------------------------------------------------------------------------
IVS TM fraud screen $0.390 $0.371 $0.351 $0.332 $0.293 $0.273 $0.254 $0.215
- ------------------------------------------------------------------------------------------------------------------------------------
Delivery Address Verification $0.120 $0.114 $0.108 $0.102 $0.090 $0.084 $0.078 $0.066
- ------------------------------------------------------------------------------------------------------------------------------------
GlobalTax (TM) (United States and Canada) $0.120 $0.114 $0.108 $0.102 $0.090 $0.084 $0.078 $0.066
- ------------------------------------------------------------------------------------------------------------------------------------
TerritoryManager(TM) Includes U.S. Government Export $0.120 $0.114 $0.108 $0.102 $0.090 $0.084 $0.078 $0.066
Compliance check. Denied Parties List check and
Merchant-defined territory restrictions.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NOTIFY EDI Quote
- ------------------------------------------------------------------------------------------------------------------------------------
NOTIFY email/FTP pull $0.290 $0.276 $0.261 $0.247 $0.218 $0.203 $0.189 $0.160
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SmartCert(TM) Fee charged for each valid Sm@rtCert $0.500 $0.475 $0.450 $0.425 $0.375 $0.350 $0.325 $0.275
certificate ("Tab") issued based on the number of
access rights issued (product quantity) on each
certificate. Includes issuance, subsequent validation
and U.S. Government export compliance. Issuance of $0.200 $0.190 $0.180 $0.170 $0.150 $0.140 $0.130 $0.110
promotional Sm@rtCert Tab. e.g.. those not containing
a x.509 certificate not requiring validation after
issuance.
- ------------------------------------------------------------------------------------------------------------------------------------
Digital Download $0.350 $0.350 $0.350 $0.350 $0.350 $0.350 $0.350 $0.350
for digital warehousing and rights management services
see the CyberSource Global Rights Registry price
schedule
- ------------------------------------------------------------------------------------------------------------------------------------
Cancel/Return License or Key $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50
cancels electronic issued license for returned products
Global Rights Registry service fees may also apply
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Note: transaction pricing is based on total monthly use of all On-Demand Commerce Applications
- ------------------------------------------------------------------------------------------------------------------------------------
Account Setup and 60 Day Implementation Support
- ------------------------------------------------------------------------------------------------------------------------------------
Enterprise Set Up includes GlobalTax, GeoPay, IVS, Delivery Address Verification, Territory Manager, supports one $ 5.495
CyberSource Merchant ID. Assigned Merchant Support Engineer. 1hr remote project briefing; 1 day on-site customer
support Training (trave. And lodging not included) 7x24 technical support (1hr response during business hours,
on-call non-business hours).
Includes access to the Merchant Support site and associated tools.
Project Set Up includes GlobalTax, GeoPay, IVS, Delivery Address Verification, Territory Manager, supports one........... $ 2,495
CyberSource Merchant ID, 1 hr. orientation call; and toll-free access to the merchant support center
(email or 800#) M-F 7am-7pm PST (2hr response commitment). Includes access to the Merchant Support Site and
associated tools.
Merchant"s Initials*:/s/ JCE
-------
</TABLE>
*By initialing each page of this Annex, Merchant understands that all of the
described services are available to Merchant but that Merchant is free to
utilize only those of the services suitable to Merchant, unless the service, by
its nature, requires the utilization of another service (C) 1999 CyberSource
Corporation
<PAGE>
On-Demand Commerce Applications(TM) & Services U.S. Price Annex BSI
2/99
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Single Application Options
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Setup additional terminal IDs (each) $ 495
NOTIFY fulfillment messaging setup for email or FTP pull (each warehouse required) $ 995
NOTIFY EDI setup and configuration Quote
SmartCert digital fulfillment setup $1,495
- ------------------------------------------------------------------------------------------------------------------------------------
Ongoing Support Packages
- ------------------------------------------------------------------------------------------------------------------------------------
Enterprise Support $ 995 per month, 12 month minimum
Assigned Merchant Support Engineer, 7x24 technical support (1 hr response during
business hours, on-call off-hours to assigned engineer or backup, response
non-business hours). Includes online access to the Merchant Support site and
associated tools.
On-Demand Support
Toll-free access to the merchant support center (email or 800#) M-F 7am- $ 295 per month, 12 month minimum
7pm PST, 2hr response commitment. Includes online access to the
Merchant Support site and associated tools.
- ------------------------------------------------------------------------------------------------------------------------------------
Per Incident Training and Support Services
- ------------------------------------------------------------------------------------------------------------------------------------
On-Site Training $ 1,000 per day
Does not include travel expenses, one-day minimum.
On-Site System Engineer Support $ 1,500 per day
Does not include travel expenses, one-day minimum.
System Engineer Support $ 250 per day
One hour minimum. Remote support only.
Merchant's Initials*: /s/ JCE
--------
</TABLE>
*By initialing each page of this Annex, Merchant understands that all of the
described services are available to Merchant but that Merchant is free to
utilize only those of the services suitable to Merchant, unless the service, by
its nature, requires the utilization of another service (C) 1999 CyberSource
Corporation.
<PAGE>
<TABLE>
Mercata, Inc. Purchase Order No. 2082
110- 110th Ave. NE
Suite 390
Bellevue, WA 98004-5840
Purchase Order
To: CyberSource Corp. Ship To: Mercata, Inc.
550 S. Winchester Blvd. 110 - 110th Ave. NE
Third Floor Suite 390
San Jose, CA 95128-2545 Bellevue, WA 98004-5840
- ------------------------------------------------------------------------------------------------------------------------------------
[Illegible] [Illegible] [Illegible] [Illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
03/29/99 Origin 3. Net 30
- ------------------------------------------------------------------------------------------------------------------------------------
[Illegible] [Illegible] [Illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
Pete C. Prepaid ASAP
- ------------------------------------------------------------------------------------------------------------------------------------
QTY [Illegible] [Illegible] Description [Illegible] Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Enterprise Set Up 5495.00 5495.00
Total 5495.00
</TABLE>
/s/ Peter Crouch
-------------------------
Authorized Signature
<PAGE>
EXHIBIT 10.26
L E A S E
1. PARTIES. This lease, dated January 10, 2000 for reference purposes only,
is made by and between 110 ATRIUM PLACE ASSOCIATES, LLC, a California
limited liability company ("Landlord"), and MERCATA INCORPORATED, a
Delaware corporation ("Tenant").
2. BASIC LEASE TERMS.
a. Building: 110 Atrium Place
b. Floor: Fourth floor
c. Suite Number: 430
d. Rentable Area: 962 rentable square feet
e. Commencement Date: January 17, 2000
f. Expiration Date: May 31, 2000
g. Monthly Rent: $2.33 per rentable square foot per
month
h. Security Deposit $2,244.67
i. Use: General Office
j. Additional Provisions: Parking
k. Business Hours on
Business Days: 8:00 a.m. to 6:00 p.m. Monday through
Friday (except holidays)
3. PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, upon the terms and subject to the conditions of this Lease, that
certain space located in the suite and floor of the Building, and containing the
approximate rentable area set forth in Article 2 above (the "Premises") as
further described in Exhibit A attached hereto.
4. TERM; POSSESSION. The term of this Lease shall commence on the
Commencement Date and end on the Expiration Date set forth in Article 2 above.
If Landlord, for any reason whatsoever, cannot deliver possession of the
Premises to Tenant at the Commencement Date, this Lease shall not be void or
voidable, nor shall Landlord be liable to Tenant for any loss or damage
resulting therefrom, but in that event no rent shall be payable until the date
on which Landlord delivers possession.
5. RENT. Tenant agrees to pay to Landlord as rent for the Premises, without
prior notice or demand, offset or deduction, the sum(s) set forth in Paragraph
2(g) above, on the first day of each and every successive calendar month during
the Lease term, except that the first month's rent shall be paid upon the
execution hereof. Rent for any period during the Lease term which is for less
than one (1) month shall be prorated based on a thirty (30) day month. Rent
shall be paid in lawful money of the United States of America to Landlord at the
Office of the Building, or to such other person or at such other place as
Landlord may from time to time designate in writing. All amounts payable or
reimbursable by Tenant to Landlord under this Lease, including amounts payable
as late charges or interest, shall constitute rent and shall be payable and
recoverable as rent in the manner provided in this Lease.
6. SECURITY DEPOSIT. Tenant has deposited with Landlord the sum set forth in
Paragraph 2(h) above, which shall be held by Landlord as security for the
faithful performance by Tenant of all the terms, covenants and conditions of
this Lease to be kept and performed by Tenant. If Tenant defaults with respect
to any provision of this Lease, including but not limited to the provisions
relating to the payment of rent, Landlord may (but shall not be required to)
use, apply or retain all or any part of this security deposit for the payment of
any rent or for the payment of any amount which Landlord may incur by reason of
Tenant's default. If any portion of such deposit in so used or applied, Tenant
shall, within five (5) days after demand therefor, deposit cash with Landlord in
an amount sufficient to restore the security deposit to its original amount.
Landlord shall not be required to keep this security deposit separate from its
general
1.
<PAGE>
funds, and Tenant shall not be entitled to interest on such deposit. If Tenant
shall fully and faithfully perform every provision of this Lease to be performed
by it, the security deposit or any balance thereof shall be returned to Tenant
(or, at Landlord's option, to the last assignee of Tenant's interest hereunder)
at the expiration of the Lease term. Upon termination of Landlord's interest in
the Building, whether by sale of the Building or otherwise, Landlord shall have
no further obligation to Tenant with respect to the security deposit or any
other sums due hereunder and prepaid by Tenant upon transfer of the security
deposit to Landlord's successor in interest.
7. USE AND COMPLIANCE WITH LAWS.
a. The Premises shall be used for the purposes set forth in Article 2
above and for no other business or purpose.
b. Tenant shall not use the Premises or permit anything to be done in
or about the Premises which will in any way conflict with any law, statute,
ordinance or governmental rule or regulation now in force or which may hereafter
be enacted or promulgated (collectively, "Legal Requirements"). Tenant shall, at
its sole cost and expense, promptly comply with all Legal Requirements, and with
the requirements of any board of fire insurance underwriters or other similar
bodies now or hereafter constituted, relating to, or affecting the condition,
use or occupancy of the Premises, excluding structural changes not related to or
affected by Tenant's improvements or acts. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action against Tenant,
whether Landlord be a party thereto or not, that Tenant has violated any Legal
Requirement, shall be conclusive of that fact as between Landlord and Tenant.
c. Tenant shall not do or permit anything to be done in or about the
Premises nor bring or keep anything therein which will in any way increase the
existing rate of or affect any fire or other insurance upon the Building or any
of its contents, or cause cancellation of any insurance policy covering the
Building or any part thereof or any of its contents. Tenant shall not do or
permit anything to be done in or about the Premises which will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Building or injure or annoy them, or use or allow the Premises to be used for
any improper, immoral, unlawful or objectionable purpose, nor shall Tenant
cause, maintain or permit any nuisance in, on or about the Premises. Tenant
shall not commit or allow to be committed any waste in or upon the Premises.
d. No material or substance that is regulated as a hazardous or toxic
waste, substance, pollutant or contaminant under any Legal Requirement
(collectively, "Hazardous Materials") shall be used, handled, released or
disposed of by Tenant or its employees, agents or representatives (collectively,
"Representatives") or customers, visitors or invitees (collectively, "Visitors")
at or about the Premises or Building without Landlord's prior consent, which
consent may be granted, denied, or conditioned upon compliance with Landlord's
requirements, all in Landlord's absolute discretion. Notwithstanding the
foregoing, normal quantities and use of those Hazardous Materials customarily
used in the conduct of general office activities, such as copier fluids and
cleaning supplies, may be used and stored at the Premises without Landlord's
prior consent. Tenant's activities at or about the Premises and Building with
respect to Hazardous Materials shall comply at all times with all Legal
Requirements. At the expiration or termination of the Lease, Tenant shall
promptly remove from the Premises and Building all Hazardous Materials
introduced by Tenant or its Representatives or Visitors at the Premises or the
Building.
e. Tenant shall not make or allow to be made any alterations, additions
or improvements to the Premises or any part thereof. Tenant shall keep the
Premises and the property on which the Premises are situated free from any liens
arising out of any work performed, materials furnished or obligations incurred
by Tenant. If any such lien attaches to the Premises or the Building, and Tenant
does not cause the same to be released by payment, bonding or otherwise within
ten (10) days after the attachment thereof, Landlord shall have the right but
not the obligation to cause the same to be released by such means as it shall
deem proper, and any sums expended Landlord in connection therewith shall be
payable by Tenant on demand.
8. CONDITION OF PREMISES. By taking possession of the Premises, Tenant shall
be deemed to have accepted the Premises as being in good order, condition and
repair and accepts the Premises in their "as is" condition. During the Lease
term Tenant, at Tenant's sole cost and expense, shall keep the
2.
<PAGE>
Premises and every part thereof, and upon the expiration or sooner termination
of this Lease shall surrender the Premises to Landlord, in good condition and
repair, damage thereto from causes beyond the reasonable control of Tenant and
ordinary wear and tear excepted. Landlord shall have no obligation whatsoever to
alter, remodel, improve, repair, decorate or paint this Premises or any part
thereof. The parties hereto affirm that Landlord has made no representation to
Tenant respecting the condition of the Premises or the Building.
9. ASSIGNMENT AND SUBLETTING. Tenant shall not either voluntarily or by
operation of law, assign, transfer, mortgage, pledge, hypothecate or encumber
this Lease or any interest therein, and shall not sublet the Premises or any
part thereof, or any right or privilege appurtenant thereto, or allow any other
person (the Representatives and Visitors of Tenant excepted) to occupy or use
the Premises, or any portion thereof.
10. INDEMNIFICATION OF LANDLORD. Tenant shall indemnify and hold Landlord
harmless from and against any claims, liability, damages, costs or expenses,
including reasonable attorneys' fees and costs incurred in defending against the
same (collectively, "Claims"), arising from (a) the acts or omissions of Tenant
or its Representatives or Visitors in or about the Building, or (b) any
construction or other work undertaken by Tenant on the Premises, or (c) any
breach or default under this Lease by Tenant, or (d) any accident, injury or
damage, howsoever and by whomsoever caused, to any person or property, occurring
in or about the Premises during the Lease term; excepting only such Claims to
the extent they are caused by the gross negligence or willful misconduct of
Landlord or its authorized Representatives. The foregoing indemnity shall
survive the expiration or termination of this Lease.
11. DAMAGE TO TENANT'S PROPERTY. Tenant hereby assumes all risk of loss, injury
or other damage to any person or property (including, but not limited to, Tenant
or Tenant's Personal Property) in or about the Premises or the Building from any
cause (including, but not limited to: defects in the Building or in any
equipment in the Building, fire, explosion or other casualty; bursting, rupture,
leakage or overflow of any plumbing or other pipes or lines, sprinklers, tanks,
drains, drinking fountains or washstands in, above, or about the Premises or the
Building; or acts of other tenants in the Building), other than from Landlord's
gross negligence or willful misconduct, and Tenant hereby waives all claims in
respect thereof against Landlord. In no event shall Landlord or its
Representatives be liable for any loss or damage to property by theft or
otherwise, for any injury to or damage to property entrusted to employees of the
Building, for interference with the light or other incorporeal hereditaments,
for consequential or punitive damages or loss of business by Tenant, or for any
latent defect in the Premises or in the Building. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the Premises or in the
Building, or of defects therein or in the fixtures or equipment therein.
12. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and keep in
force during the Lease term a policy of commercial general liability insurance,
with a comprehensive single limit of not less than $2,000,000, insuring Landlord
and Tenant against any liability arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. The limit of such
insurance shall not, however, limit the liability of Tenant hereunder. If Tenant
fails to procure and maintain such insurance, Landlord may, but shall not be
obligated to, procure and maintain the same at the expense of Tenant. Prior to
occupancy of the Premises, Tenant shall deliver to Landlord copies of policies
of the insurance required herein or certificates evidencing the existence and
amount of such insurance with loss payable clauses satisfactory to Landlord. No
policy shall be cancelable or subject to reduction of coverage except after
thirty (30) days' prior notice to Landlord.
13. MUTUAL WAIVER. To the extent permitted by their respective policies of
insurance, Landlord and Tenant each hereby waive any right of recovery against
the other and the authorized Representatives of the other for any loss or damage
that is covered by any policy of insurance maintained by either party with
respect to the Premises or the Building or any operation therein. If any policy
of insurance relating to this Lease or to the Premises or the Building does not
permit the foregoing waiver or if the coverage under any such policy would be
invalidated as a result of such waiver, the party maintaining such policy shall,
if
3.
<PAGE>
possible, obtain from the insurer under such policy a waiver of all right of
recovery by way of subrogation against either party in connection with any
claim, loss or damage covered by such policy. If either party is not able to
obtain such waiver, then such party shall have the other party named as an
additional insured on all such policies of insurance.
14. SERVICES AND UTILITIES.
a. Landlord agrees to furnish to the Premises, during Business Hours on
Business Days as set forth in Paragraph 2(k) above, and subject to the rules and
regulations of the Building, "Building Standard" amounts of electricity, heat
and janitorial service. Upon request by Tenant in accordance with the
procedures established by Landlord from time to time for furnishing HVAC Service
at times other than Business Hours on Business Days, Landlord shall furnish such
service to Tenant and Tenant shall pay for such services on an hourly basis at
the then prevailing rate established for the Building by Landlord. As of the
date of this Lease, the prevailing rate for furnishing HVAC Service at times
other than Business Hours on Business Days is $25.00 per hour per floor which
may be changed from time to time in Landlord's sole discretion. Landlord shall
also maintain and keep lighted the common stairs, common entries and toilet
rooms in the Building. No interruption, failure or inability to provide any
service or utility, regardless of its duration, shall constitute an eviction of
Tenant, constructive or otherwise, or impose upon Landlord any liability
whatsoever, including, but not limited to, liability for consequential damages
or loss of business by Tenant, or entitle Tenant to an abatement of rent.
b. Tenant shall not use any apparatus or device in the Premises which
will in any way increase the amount of electricity usually furnished or supplied
for the use of the Premises as general office space, nor connect with electric
current any apparatus or device except through existing electrical outlets in
the Premises. If Tenant's usage of electricity, water or any other utility
exceeds the Building Standard use of such utility, then to the extent permitted
by Legal Requirements, Landlord may determine the amount of such excess use by
any reasonable means (including, but not limited to, the installation at
Landlord's request but at Tenant's expense of a separate meter or other
measuring device) and charge Tenant for the cost thereof.
15. CASUALTY. If the Premises shall be partially or totally destroyed by fire
or other casualty, this Lease shall terminate effective upon the date of such
casualty.
16. TENANT'S TAXES. Tenant shall pay, or cause to be paid, before delinquency,
any and all taxes levied or assessed and which become payable during the Lease
term upon all of Tenant's equipment, furniture, fixtures and personal property
located in the Premises (collectively, "Tenant Property"). If any or all of
Tenant's Property shall be assessed and taxed with the Building, Tenant shall
pay to Landlord its share of such taxes within ten (10) days after delivery to
Tenant by Landlord of a statement in writing setting forth the amount of such
taxes applicable to Tenant's property.
17. RULES AND REGULATIONS. Tenant shall comply with the rules and regulations
that Landlord shall from time to time promulgate with respect to the Building.
Landlord reserves the right from time to time to make all reasonable
modifications to such rules, which shall be binding upon Tenant upon delivery of
a copy to Tenant. Landlord shall not be liable to Tenant for the nonperformance
of any rules or regulations by any other tenants or occupants. A copy of
Building Rules is attached hereto as Exhibit C.
18. HOLDING OVER. If Tenant remains in possession of the Premises or any part
thereof after the expiration or termination of this Lease, such possession shall
be on the basis of a tenancy at the sufferance of Landlord, and Tenant shall
continue to comply with or perform all the terms and obligations of Tenant under
this Lease, except that the rent during Tenant's holding over shall be twice the
rent payable in the last month prior to such expiration or termination.
19. ENTRY BY LANDLORD. Landlord reserves and shall at any and all times have
the right to enter the Premises, inspect the same, and supply janitorial service
and any other service to be provided by Landlord to Tenant hereunder, to show
the Premises to prospective purchasers or tenants, and to alter, improve or
repair the Premises and any portion of the Building that Landlord may deem
necessary or
4.
<PAGE>
desirable, and may for that purpose erect scaffolding and other necessary
structures where reasonably required by the character of the work to be
performed; provided, however, that the entrance to the Premises shall not be
blocked thereby, and provided further that Landlord shall use reasonable efforts
to avoid any unreasonable interference with the business of Tenant. Landlord
shall at all times have a key with which to unlock all of the doors in, upon and
about the Premises (excluding Tenant's vaults, safes and files), for the
foregoing purposes. In addition, Landlord shall have the right, without
liability to Tenant, to use any and all means which Landlord may deem proper to
open such doors in an emergency, in order to obtain entry to the Premises. Any
entry to the Premises obtained by Landlord by any of such means or otherwise
shall not under any circumstances be construed or deemed to be a forcible of
unlawful entry into, or a detainer of, the Premises, or an eviction from the
Premises or any portion thereof, and Tenant hereby waives any claim for damages
or for any injury or inconvenience to or interference with Tenant's business,
any loss of occupancy or quiet enjoyment of the Premises, and any other loss
occasioned thereby.
20. DEFAULT. The occurrence of any one or more of the following events shall
constitute an "Event of Default" under this Lease by Tenant:
a. The failure by Tenant to make any payment of rent within five (5)
days of its due date.
b. The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Tenant,
where such failure continues for a period of ten (10) days after notice thereof
by Landlord to Tenant.
c. The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; or the filing by or against Tenant of
a petition to have Tenant adjudged bankrupt, or a petition or reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days); or
the appointment of a trustee or a receiver to take possession of substantially
all of Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where possession is not restored to Tenant within thirty (30) days; or
the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease,
where such seizure is not discharged in thirty (30) days.
Upon the occurrence of an Event of Default Landlord shall have and may
pursue any and all remedies now or hereafter available to Landlord under law,
including without limitation the right to recover from Tenant all damages
incurred by Landlord by reason of Tenant's default, including but not limited to
the cost of recovering possession of the Premises and reasonable attorneys'
fees.
21. AUTHORITY. If Tenant is a corporation or a partnership, each of the
persons executing this Lease on behalf of Tenant warrants and represents that
Tenant is a duly authorized and validly existing entity, that Tenant has full
right and authority to enter into this Lease and that the persons signing on
behalf of Tenant are authorized to do so and have the power to bind Tenant to
this Lease. Upon request by Landlord, Tenant shall provide Landlord with
evidence reasonably satisfactory to Landlord confirming the foregoing
representations.
22. GENERAL PROVISIONS.
a. Waiver. The waiver by Landlord of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition on any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease, other than the failure of Tenant
to pay the particular rent so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of the acceptance of such rent.
b. Notices. Any notice, demand, request, consent, approval or
communication to be given by either party to the other hereunder must be in
writing and shall be sent by United States mail, postage prepaid, and if to
Tenant shall be addressed to Tenant at the Premises, or to such other place as
Tenant may from time to time designate in a notice to Landlord, and if to
Landlord, shall be addressed to Landlord at the Office of the Building, or to
such other person or place as Landlord may from time to time designate in a
notice to Tenant.
5.
<PAGE>
c. Joint Obligation. If Tenant consists of more than one entity, the
obligations hereunder imposed upon Tenant shall be joint and several.
d. Headings. The headings and article titles contained in this Lease
are for purposes of convenience only and are not to be used to interpret or
construe this Lease.
e. Time. Time is of the essence of this Lease and each and all of its
provisions.
f. Successors and Assigns. The covenants and conditions herein
contained, subject to the provisions of Article 9 (Assignment and Subletting)
and Paragraph 22(m) (Landlord's Liability), shall inure to the benefit of and be
binding upon the heirs, successors, executors, administrators and assigns of the
parties hereto.
g. Recordation. Neither Landlord nor Tenant shall record this Lease.
h. Quiet Possession. Upon Tenant paying the rent reserved hereunder and
observing and performing all of the covenants, conditions and provisions as
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premises for the entire term hereof, subject to all the
provisions of this Lease.
i. Late Charges and Interest. Tenant hereby acknowledges that late
payment by Tenant to Landlord of rent will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Landlord by
terms of any mortgages or trust deed covering the Premises. Accordingly, if any
installment of rent is not received by Landlord within ten (10) days after
notice that such amount is past due, then Tenant shall pay to Landlord a late
charge equal to ten percent (10%) of such overdue amount. The parties hereby
agree that such late charge represents a fair and reasonable estimate of the
cost that Landlord will incur by such reason of the late payment by Tenant.
Acceptance of any late charge by Landlord shall in no event constitute a waiver
of Tenant's default with respect to such overdue amount, nor prevent Landlord
from exercising any of the other rights and remedies granted hereunder. In
addition to the late charges referred to above, which are intended to defray
Landlord's costs resulting from late payments, any late payment of rent shall,
at Landlord's option, bear interest from the due date of any such payment to the
date same is paid at a rate of eighteen percent (18%) per annum or the maximum
lawful rate that Landlord may charge to Tenant under applicable laws, whichever
is less (the "Interest Rate").
j. Entire Agreement. This Lease, including any exhibits or addenda
attached hereto or documents referred to herein, constitutes the entire
agreement between Landlord and Tenant with respect to the leasing of space by
Tenant in the Building, and supersedes all prior or contemporaneous agreements,
understandings, proposals and other representations by or between Landlord and
Tenant, whether written or oral. Neither Landlord nor Landlord's agents have
made any representations or warranties with respect to the Premises, the
Building or this Lease except as expressly set forth herein, and no rights,
easements or licenses shall be acquired by Tenant by implication or otherwise
unless expressly set forth herein. The submission of this Lease for examination
does not constitute an option for the Premises and this Lease shall become
effective as a binding agreement only upon execution and delivery thereof by
Landlord to Tenant. No provision of this Lease may be amended or added to except
by an agreement in writing signed by the parties hereto.
k. Inability to Perform. This Lease and the obligations of Tenant
hereunder shall not be affected or impaired because Landlord is unable to
fulfill any of its obligations hereunder or is delayed in doing so, if such
inability or delay is caused by reason of strike, labor troubles, act of God, or
any other cause beyond the reasonable control of Landlord.
l. Attorney's Fees. If Tenant or Landlord brings any action for the
enforcement or interpretation of this Lease, including any suit by Landlord for
the recovery of rent or possession of the Premises, the losing party shall pay
to the prevailing party a reasonable sum for attorneys' fees. The "prevailing
party" will be determined by the court before whom the action was brought based
upon an assessment of which party's major arguments or positions taken in the
suit or proceeding could fairly be said to have prevailed over the other party's
major arguments or positions on major disputed issues in the court's decision.
Any attorneys' fees and other costs and expenses incurred by either party in
enforcing a judgment in its favor under this Lease shall be recoverable
separately from and in addition to any other amount included in such judgment,
and such attorneys' fees obligation is intended to be severable from the other
provisions hereof and to survive and not be merged in any such judgment.
6.
<PAGE>
m. Landlord's Liability. The term "Landlord," as used in this Lease,
shall mean only the owner or owners of the Building at the time in question.
Notwithstanding any other term or provision of this Lease, the liability of
Landlord for its obligations under this Lease is limited solely to Landlord's
interest in the Building as the same may from time to time be encumbered, and no
personal liability shall at any time be asserted or enforceable against any
other assets of Landlord or against Landlord's partners or their stockholders,
directors, officers or partners on account of any of Landlord's obligations or
actions under this Lease. In addition, in the event of any conveyance of title
to the Building, then from and after the date of such conveyance, Landlord shall
be relieved of all liability with respect to Landlord's obligations to be
performed under this Lease after the date of such conveyance. Upon any
conveyance of title to the Building or the Building, the grantee or transferee,
by accepting such conveyance, shall be deemed to have assumed Landlord's
obligations to be performed under this Lease from and after the date of
transfer, subject to the limitations on liability set forth above in this
paragraph.
n. Subordination, Attornment. This Lease is expressly made subject and
subordinate to any present or future mortgage, deed of trust, ground lease,
underlying lease or like encumbrance affecting any part of the Building or any
interest of Landlord therein which is now existing or hereafter executed or
recorded ("Encumbrance"). If the interest of Landlord in the Building is
transferred to any person ("Purchaser") pursuant to or in lieu of proceedings
for enforcement of any Encumbrance, Tenant shall immediately and automatically
attorn to the Purchaser, and this Lease shall continue in full force and effect
as a direct lease between the Purchaser and Tenant on the terms and conditions
set forth in this Lease.
o. Separability. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof and such other provisions shall remain in full force and
effect.
p. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
q. Choice of Law. This Lease shall be governed by the laws of the State
of California.
23. BROKERS. Tenant warrants that it has had no dealings with any real estate
broker or agents in connection with the negotiation of this Lease and it knows
of no other real estate broker or agent who is entitled to a commission in
connection with this Lease. Tenant agrees to indemnify and hold Landlord
harmless from any claims incurred by Landlord asserted by any other broker or
finder for a fee or commission based upon any dealings with or statements made
by Tenant or its Representatives.
IN WITNESS WHEREOF, the parties hereto have entered into this Lease as of
the date first written above.
TENANT: LANDLORD:
MERCATA INCORPORATED, a Delaware 110 ATRIUM PLACE ASSOCIATES, LLC,
corporation a California limited liability company
By: /s/ John Engman By: Cornerstone Holdings, LLC
-----------------------------
Name: Jon Engman a Delaware limited liability
-----------------------
Title: VP, Finance & Admin. company Manager
----------------------
By:_____________________________ By:______________________________
Name:___________________________ Name:____________________________
Title:__________________________ Title:___________________________
Authorized Signatory
(For corporate entities, signature by TWO corporate officers is required: one
by (x) the chairman of the board, the president, or any vice president; and the
other by (y) the secretary, any assistant secretary, the chief financial
officer, or any assistant treasurer.)
7.
<PAGE>
Exhibit A: Premises
Exhibit B: Additional Provisions
Exhibit C: Building Rules
8.
<PAGE>
EXHIBIT A
---------
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF JANUARY 10, 2000
BETWEEN
110 ATRIUM PLACE ASSOCIATES, LLC, AS LANDLORD,
AND
MERCATA INCORPORATED, AS TENANT ("AGREEMENT")
THE PREMISES
------------
110 ATRIUM PLACE
FOURTH FLOOR
[Figure of Premises]
INITIALS:
Landlord _____
Tenant _____
Exhibit A, Page 1
<PAGE>
EXHIBIT B
---------
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF JANUARY 10, 2000
BETWEEN
110 ATRIUM PLACE ASSOCIATES, LLC, AS LANDLORD,
AND
MERCATA INCORPORATED, AS TENANT ("AGREEMENT")
ADDITIONAL PROVISIONS RIDER
---------------------------
PARKING.
a. Tenant's Parking Rights. Landlord shall provide Tenant, on an
-----------------------
unassigned and non-exclusive basis, for use by Tenant and Tenant's
Representatives and Visitors, at the users' sole risk, three (3) parking spaces
in the Parking Facility. The parking spaces to be made available to Tenant
hereunder may contain a reasonable mix of spaces for compact cars and up to ten
percent (10%) of the unassigned spaces may also be designated by Landlord as
Building visitors' parking.
b. Availability of Parking Spaces. Landlord shall take reasonable actions
------------------------------
to ensure the availability of the parking spaces leased by Tenant, but Landlord
does not guarantee the availability of those spaces at all times against the
actions of other tenants of the Building and users of the Parking Facility.
Access to the Parking Facility may, at Landlord's option, be regulated by card,
pass, bumper sticker, decal or other appropriate identification issued by
Landlord. Landlord retains the right to revoke the parking privileges of any
user of the Parking Facility who violates the rules and regulations governing
use of the Parking Facility (and Tenant shall be responsible for causing any
employee of Tenant or other person using parking spaces allocated to Tenant to
comply with all parking rules and regulations).
c. Monthly Parking Rental. Tenant shall pay to Landlord, as monthly rent
----------------------
for the parking spaces leased by Tenant hereunder, a "Monthly Parking Rental"
per space, which shall be the "Prevailing Parking Rental" for such parking
spaces in effect from time to time. As of the date of this Lease, the
Prevailing Parking Rental is $90.00 per parking space per month. The Prevailing
Parking Rental shall be determined by Landlord, based on the monthly rental
charged by Landlord from time to time for spaces in the Parking Facility, the
unassigned or reserved nature of such parking spaces, and the fair market rental
charged for comparable parking facilities in comparable buildings in the
vicinity of the Property. Tenant's Monthly Parking Rental shall be paid on the
first day of each month during the Term of this Lease; provided, however, that
in the event Tenant fails to pay Tenant's Monthly Parking Rental when due,
Landlord may assess a late charge of $50.00 on the delinquent amount, and
provided further that in the event Tenant fails to pay Tenant's Monthly Parking
Rental within thirty (30) days of Landlord's notice of such delinquency,
Landlord shall have the right by notice to Tenant permanently to terminate
Tenant's rights to use parking spaces hereunder, whether or not Landlord
declares a default under the Lease.
d. Assignment and Subletting. Notwithstanding any other provision of the
-------------------------
Lease to the contrary, Tenant shall not assign its rights to the parking spaces
or any interest therein, or sublease or otherwise allow the use of all or any
part of the parking spaces to or by any other person, except with Landlord's
prior written consent, which may be granted or withheld by Landlord in its sole
discretion. In the event of any separate assignment or sublease of parking space
rights that is approved by Landlord, Landlord shall be entitled to receive, as
additional Rent hereunder, one hundred percent (100%) of any profit received by
Tenant in connection with such assignment or sublease.
Exhibit B, Page 1
<PAGE>
e. Condemnation, Damage or Destruction. In the event the Parking Facility
-----------------------------------
is the subject of a Condemnation, or is damaged or destroyed, and this Lease is
not terminated, and if in such event the available number of parking spaces in
the Parking Facility is permanently reduced, then Tenant's rights to use parking
spaces hereunder may, at the election of Landlord, thereafter be reduced in
proportion to the reduction of the total number of parking spaces in the Parking
Facility, and the Monthly Parking Rental payable hereunder shall be reduced
proportionately. In such event, Landlord reserves the right to reduce the number
of parking spaces to which Tenant is entitled or to relocate some or all of the
parking spaces to which Tenant is entitled to other areas in the Parking
Facility.
INITIALS:
Landlord _____
Tenant _____
Exhibit B, Page 2
<PAGE>
EXHIBIT C
---------
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF JANUARY 10, 2000
BETWEEN
110 ATRIUM PLACE ASSOCIATES, LLC, AS LANDLORD,
AND
MERCATA INCORPORATED, AS TENANT ("AGREEMENT")
BUILDING RULES
--------------
The following Building Rules are additional provisions of the foregoing
Lease to which they are attached. The capitalized terms used herein have the
same meanings as these terms are given in the Lease.
1. Use of Common Areas. Tenant will not obstruct the sidewalks, halls,
-------------------
passages, exists, entrances, elevators or stairways of the Building ("Common
Areas"), and Tenant will not use the Common Areas for any purpose other than
ingress and egress to and from the Premises. The Common Areas, except for the
sidewalks, are not open to the general public and Landlord reserves the right to
control and prevent access to the Common Areas of any person whose presence, in
Landlord's opinion, would be prejudicial to the safety, reputation and interests
of the Building and its tenants.
2. No Access to Roof. Tenant has no right of access to the roof of the
-----------------
Building and will not install, repair or replace any antenna, aerial, aerial
wires, fan, air-conditioner or other device on the roof of the Building, without
the prior written consent of Landlord. Any such device installed without such
written consent is subject to removal at Tenant's expense without notice at any
time. In any event Tenant will be liable for any damages or repairs incurred or
required as a result of its installation, use, repair, maintenance or removal of
such devices on the roof and agrees to indemnify and hold harmless Landlord from
any liability, loss, damage, cost or expense, including reasonable attorneys'
fees, arising from any activities of Tenant or of Tenant's Representatives on
the roof of the Building.
3. Signage. No sign, placard, picture, name, advertisement or notice
-------
visible from the exterior of the Premises will be inscribed, painted, affixed or
otherwise displayed by Tenant on or in any part of the Building without the
prior written consent of Landlord. Landlord reserves the right to adopt and
furnish Tenant with general guidelines relating to signs in or on the Building.
All approved signage will be inscribed, painted or affixed at Tenant's expense
by a person approved by Landlord, which approval will not be unreasonably
withheld.
4. Prohibited Uses. The Premises will not be used for manufacturing, for
---------------
the storage of merchandise held for sale to the general public, for lodging or
for the sale of goods to the general public. Tenant will not permit any food
preparation on the Premises except that Tenant may use Underwriters' Laboratory
approved equipment for brewing coffee, tea, hot chocolate and similar beverages
so long as such use is in accordance with all applicable federal, state and city
laws, codes, ordinances, rules and regulations.
5. Janitorial Services. Tenant will not employ any person for the
-------------------
purpose of cleaning the Premises or permit any person to enter the Building for
such purpose other than Landlord's janitorial service, except with Landlord's
prior written consent. Tenant will not necessitate, and will be liable for the
cost of, any undue amount of janitorial labor by reason of Tenant's carelessness
in or indifference to the preservation of good order and cleanliness in the
Premises. Janitorial service will not be furnished to areas in the Premises on
nights when such areas are occupied after 9:30 p.m., unless such service is
extended by written agreement to a later hour in specifically designated areas
of the Premises.
Exhibit C, Page 1
<PAGE>
6. Keys and Locks. Landlord will furnish Tenant, free of charge, two
--------------
keys to each door or lock in the Premises. Landlord may make a reasonable
charge for any additional or replacement keys. Tenant will not duplicate any
keys, alter any locks or install any new or additional lock or bolt on any door
of its Premises or on any other part of the Building without the prior written
consent of Landlord and, in any event, Tenant will provide Landlord with a key
for any such lock. On the termination of the Lease, Tenant will deliver to
Landlord all keys to any locks or doors in the Building which have been obtained
by Tenant.
7. Freight. Upon not less than twenty-four hours prior notice to
-------
Landlord, which notice may be oral, an elevator will be made available for
Tenant's use for transportation of freight, subject to such scheduling as
Landlord in its discretion deems appropriate. Tenant shall not transport
freight in loads exceeding the weight limitations of such elevator. Landlord
reserves the right to prescribe the weight, size and position of all equipment,
materials, furniture or other property brought into the Building, and no
property will be received in the Building or carried up or down the freight
elevator or stairs except during such hours and along such routes and by such
persons as may be designated by Landlord. Landlord reserves the right to
require that heavy objects will stand on wood strips of such length and
thickness as is necessary to properly distribute the weight. Landlord will not
be responsible for loss of or damage to any such property from any cause, and
Tenant will be liable for all damage or injuries caused by moving or maintaining
such property.
8. Nuisances and Dangerous Substances. Tenant will not conduct itself or
----------------------------------
permit Tenant's Representatives or Visitors to conduct themselves, in the
Premises or anywhere on or in the Property in a manner which is offensive or
unduly annoying to any other Tenant or Landlord's property managers. Tenant
will not install or operate any phonograph, radio receiver, musical instrument,
or television or other similar device in any part of the Common Areas and shall
not operate any such device installed in the Premises in such manner as to
disturb or annoy other tenants of the Building. Tenant will not use or keep in
the Premises or the Property any kerosene, gasoline or other combustible fluid
or material other than limited quantities thereof reasonably necessary for the
maintenance of office equipment, or, without Landlord's prior written approval,
use any method of heating or air conditioning other than that supplied by
Landlord. Tenant will not use or keep any foul or noxious gas or substance in
the Premises or permit or suffer the Premises to be occupied or used in a manner
offensive or objectionable to Landlord or other occupants of the Building by
reason of noise, odors or vibrations, or interfere in any way with other tenants
or those having business therein. Tenant will not bring or keep any animals in
or about the Premises or the Property.
9. Building Name and Address. Without Landlord's prior written consent,
-------------------------
Tenant will not use the name of the Building in connection with or in promoting
or advertising Tenant's business except as Tenant's address.
10. Building Directory. A directory for the Building will be provided
------------------
for the display of the name and location of tenants. Landlord reserves the
right to approve any additional names Tenant desires to place in the directory
and, if so approved, Landlord may assess a reasonable charge for adding such
additional names.
11. Window Coverings. No curtains, draperies, blinds, shutters, shades,
----------------
awnings, screens or other coverings, window ventilators, hangings, decorations
or similar equipment shall be attached to, hung or placed in, or used in or with
any window of the Building without the prior written consent of Landlord, and
Landlord shall have the right to control all lighting within the Premises that
may be visible from the exterior of the Building.
12. Floor Coverings. Tenant will not lay or otherwise affix linoleum,
---------------
tile, carpet or any other floor covering to the floor of the Premises in any
manner except as approved in writing by Landlord. Tenant will be liable for the
cost of repair of any damage resulting from the violation of this rule or the
removal of any floor covering by Tenant or its contractors, employees or
invitees.
Exhibit C, Page 2
<PAGE>
13. Wiring and Cabling Installations. Landlord will direct Tenant's
--------------------------------
electricians and other vendors as to where and how data, telephone, and
electrical wires and cables are to be installed. No boring or cutting for wires
or cables will be allowed without the prior written consent of Landlord. The
location of burglar alarms, smoke detectors, telephones, call boxes and other
office equipment affixed to the Premises shall be subject to the written
approval of Landlord.
14. Office Closing Procedures. Tenant will see that the doors of the
-------------------------
Premises are closed and locked and that all water faucets, water apparatus and
utilities are shut off before Tenant or its employees leave the Premises, so as
to prevent waste or damage. Tenant will be liable for all damage or injuries
sustained by other tenants or occupants of the Building or Landlord resulting
from Tenant's carelessness in this regard or violation of this rule. Tenant
will keep the doors to the Building corridors closed at all times except for
ingress and egress.
15. Plumbing Facilities. The toilet rooms, toilets, urinals, wash bowls
-------------------
and other apparatus shall not be used for any purpose other than that for which
they were constructed and no foreign substance of any kind whatsoever shall be
disposed of therein. Tenant will be liable for any breakage, stoppage or damage
resulting from the violation of this rule by Tenant, its employees or invitees.
16. Use of Hand Trucks. Tenant will not use or permit to be used in the
------------------
Premises or in the Common Areas any hand trucks, carts or dollies except those
equipped with rubber tires and side guards or such other equipment as Landlord
may approve.
17. Refuse. Tenant shall store all Tenant's trash and garbage within the
------
Premises or in other facilities designated By Landlord for such purpose. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of removing and disposing of
trash and garbage in the city in which the Building is located without being in
violation of any law or ordinance governing such disposal. All trash and
garbage removal shall be made in accordance with directions issued from time to
time by Landlord, only through such Common Areas provided for such purposes and
at such times as Landlord may designate. Tenant shall comply with the
requirements of any recycling program adopted by Landlord for the Building.
18. Soliciting. Canvassing, peddling, soliciting and distribution of
----------
handbills or any other written materials in the Building are prohibited, and
Tenant will cooperate to prevent the same.
19. Parking. Tenant will use, and cause Tenant's Representatives and
-------
Visitors to use, any parking spaces to which Tenant is entitled under the Lease
in a manner consistent with Landlord's directional signs and markings in the
Parking Facility. Specifically, but without limitation, Tenant will not park,
or permit Tenant's Representatives or Visitors to park, in a manner that impedes
access to and from the Building or the Parking Facility or that violates space
reservations for handicapped drivers registered as such with the California
Department of Motor Vehicles. Landlord may use such reasonable means as may be
necessary to enforce the directional signs and markings in the Parking Facility,
including but not limited to towing services, and Landlord will not be liable
for any damage to vehicles towed as a result of non-compliance with such parking
regulations.
20. Fire, Security and Safety Regulations. Tenant will comply with all
-------------------------------------
safety, security, fire protection and evacuation measures and procedures
established by Landlord or any governmental agency.
21. Responsibility for Theft. Tenant assumes any and all responsibility
------------------------
for protecting the Premises from theft, robbery and pilferage, which includes
keeping doors locked and other means of entry to the Premises closed.
Exhibit C, Page 3
<PAGE>
22. Sales and Auctions. Tenant will not conduct or permit to be
------------------
conducted any sale by auction in, upon or from the Premises or elsewhere in the
Property, whether said auction by voluntary, involuntary, pursuant to any
assignment for the payment of creditors or pursuant to any bankruptcy or other
insolvency proceeding.
23. Waiver of Rules. Landlord may waive any one or more of these
---------------
Building Rules for the benefit of any particular tenant or tenants, but no such
waiver by Landlord will be construed as a waiver of such Building Rules in favor
of any other tenant or tenants nor prevent Landlord from thereafter enforcing
these Building Rules against any or all of the tenants of the Building.
24. Effect on Lease. These Building Rules are in addition to, and shall
---------------
not be construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease. Violation of these Building
Rules constitutes a failure to fully perform the provisions of the Lease, as
referred to in Article 20 - "Default".
25. Non-Discriminatory Enforcement. Subject to the provisions of the
------------------------------
Lease (and the provisions of other leases with respect to other tenants),
Landlord shall use reasonable efforts to enforce these Building Rules in a non-
discriminatory manner, but in no event shall Landlord have any liability for any
failure or refusal to do so (and Tenant's sole and exclusive remedy for any such
failure or refusal shall be injunctive relief preventing Landlord from enforcing
any of the Building Rules against Tenant in a manner that discriminates against
Tenant).
26. Additional and Amended Rules. Landlord reserves the right to
----------------------------
rescind or amend these Building Rules and/or adopt any other and reasonable
rules and regulations as in its judgment may from time to time be needed for the
safety, care and cleanliness of the Building and for the preservation of good
order therein.
INITIALS:
Landlord _____
Tenant _____
Exhibit C, Page 4
<PAGE>
EXHIBIT 10.27
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (this "Sublease") is made and entered into this 23rd
day of February, 2000, by and between Attachmate Corporation, a Washington
corporation ("Attachmate") and Mercata, Inc., a Delaware corporation,
("Mercata").
WHEREAS, by that certain Office Building Lease, dated April 29, 1998 and the
First Amendment to Four Newport Office Building Lease, dated July 28, 1999,
(collectively known as the "Master Lease"), attached hereto as Exhibit A and
----------
incorporated by reference herein, Attachmate leased from Bentall Newport
Centre L.L.C., ("Bentall") certain premises consisting of approximately One
Hundred Fifty Three Thousand Four Hundred Three (153,403) square feet (the
"Premises") in the Four Newport Building located in Bellevue, Washington (the
"Building"); and
WHEREAS, Attachmate has agreed to sublease a portion of the Premises,
consisting of the approximately Twenty Six Thousand Four Hundred Sixty
(26,460) square feet on the sixth (6th) floor of the Building as depicted on
Exhibit B attached hereto and made a part hereof (the "Subleased Premises") to
----------
Mercata on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the rents, covenants, agreements,
stipulations and provisions contained herein to be paid, kept and performed by
both Mercata and Attachmate, the parties do hereby agree as follows:
1. LEASE DATA AND EXHIBITS:
-----------------------
1.1 Land, Building and Subleased Premises. "Newport Corporate Center" as used
-------------------------------------
in this Sublease means all of the buildings, grounds, streets, parking
areas and other improvements comprising the Newport Corporate Center as
described in the Master Lease. "Land" as used in this Sublease shall mean
the real property legally described on "Exhibit A" of the Master Lease.
"Building" as used in this Sublease means Four Newport Building comprised
of approximately 153,403 rentable square feet and shown on Exhibits A-2
through A-7 of the Master Lease. "Subleased Premises" as used in this
Sublease means that space consisting of approximately 26,460 square feet of
rentable area on the sixth (6th) floor of the Building, as outlined on the
floor plan attached hereto as Exhibit B of this Sublease, including the
---------
applicable Tenant Improvements described in "Exhibit C" of the Master
Lease. As the precise number of rentable square feet in the Subleased
Premises cannot be determined as of the date of this Sublease, the rentable
square feet of the Subleased Premises shall be calculated by Attachmate
within thirty (30) days after the Commencement Date of this Sublease based
on Bentall's final determination of the square footage of the Premises as
set forth in Section 1.3 of the Master Lease. Attachmate shall thereafter
notify Mercata of any necessary adjustments due to such final measurement.
1.2 Term. The term of this Sublease shall be for twenty-four (24) months and
----
fourteen (14) days (the "Term"). Mercata hereby acknowledges that the
Master Lease commences upon Substantial Completion of the Building Shell,
parking, common areas and Tenant Improvements, as such term is defined
under Section 1.4 of the Master Lease. Attachmate hereby subleases the
Subleased Premises to Mercata and Mercata hereby subleases the Subleased
Premises from Attachmate commencing as of the date of Substantial
Completion of the Subleased Premises (the "Commencement Date"). The Master
Lease contemplates that the date of Substantial Completion of the Subleased
Premises will be March 8, 2000 (the "Estimated Commencement Date"), but
such date may be extended as provided in the Master Lease. In the event the
Commencement Date does not occur on or before June 8, 2000, Mercata shall
have the right to terminate this Sublease by giving written notice to
Attachmate of such termination at any time between June 9, 2000 and July 1,
2000 or
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Mercata's right to so terminate shall lapse and be of no further force and
effect. Attachmate shall provide written notice to Mercata of any
anticipated or actual delay in the Estimated Commencement Date within three
(3) business days of learning of such delay. Mercata hereby acknowledges
that under certain conditions the Master Lease may be terminated pursuant
to Section 2 of the Master Lease, and that if the Master Lease is so
terminated this Sublease shall be terminated after written notice of such
termination to Mercata, and Attachmate shall have no further obligation to
Mercata. If this Sublease is so terminated, all deposits, Rent and other
payments paid in advance by Mercata shall be immediately refunded to
Mercata.
1.3 Option to Extend. Attachmate hereby grants to Mercata the right, privilege
----------------
and option to extend the Term of this Sublease for one (1) period of one
(1) year ("First Extended Term") from the date of expiration of the initial
Term, upon the same terms and conditions as herein contained, except as
indicated below in Section 3. Mercata will be given the option to extend
for the additional one year in the event Attachmate does not intend to
occupy the Subleased Premises at the end of the initial Term. Attachmate
shall provide Mercata with six (6) months prior written notice of its
intention to occupy or not. If Attachmate does not intend to occupy,
Mercata shall exercise the option to extend by providing Attachmate with a
minimum of four (4) months written notice and evidence of the renewal of
the Letter of Credit for the duration of the First Extended Term as
required in Section 4 below.
2. USE:
---
2.1 The Subleased Premises shall be used for Mercata's office and related uses,
and for no other use whatsoever. Mercata shall comply as to the Subleased
Premises with all requirements under the Master Lease as to the Premises,
including, without limitation, Article 7. Provided Mercata complies with
all of the terms of this Sublease, including the payment of Rent, Mercata
shall have the right to leave the Subleased Premises unoccupied. Mercata
acknowledges that neither Bentall nor Attachmate nor any agent acting on
their behalf has made any representation or warranty with respect to the
suitability of the Subleased Premises for the conduct of Mercata's
business.
2.2 Normal building hours are from 7 a.m. to 6 p.m. weekdays and 7 a.m. to 1
p.m. on Saturdays, except for holidays. Access to the building shall be 24
hours per day, 365 days per year for Mercata employees with key cards.
Mercata shall be entitled to all utilities and services provided to
Attachmate under the Master Lease. Mercata will be billed by Attachmate
according to actual usage of after hours HVAC at the rate provided in
Section 6(b) of the Master Lease. Mercata shall be entitled to the same
and as frequent of janitorial and maintenance services to the Subleased
Premises as Attachmate is allowed under the Master Lease, including
janitorial service five (5) days per week.
3. RENT: Beginning on a date fourteen (14) days after the Commencement Date
----
(the "Rent Commencement Date"), Mercata covenants and agrees to pay to
Attachmate, without deduction or set off, base rental for the Term (the
"Base Rent") in monthly installments at the annual rate of $21.00 per
rentable square foot. It is estimated, based on the estimated number of
rentable square feet, that the monthly installment of Base Rent shall be
$46,305.00 per month for each month of the Term. Notwithstanding the
foregoing, Mercata shall be entitled to any abatement of Rent as set forth
in this Sublease or that Attachmate is entitled to with respect to the
Subleased Premises under the Master Lease. Attachmate shall confirm the
exact amount of Base Rent in the Notice, attached hereto as Exhibit C,
---------
within thirty (30) days after the Commencement Date based on its final
determination of the number of rentable square feet in the Subleased
Premises. Should Mercata exercise its option to extend the term of the
Sublease by the additional one year, the Base Rent will be an annual rate
of $22.00 per rentable square foot.
4. SECURITY DEPOSIT: Within fourteen (14) days after the execution and
----------------
delivery of this Sublease, Mercata shall deliver to Attachmate an
irrevocable and unconditional standby Letter of Credit (herein, together
with all replacements thereof, being called the "Letter of Credit") issued
by U.S. Bank of Washington, National Association, Bank of America, or
another bank or financial institution reasonably acceptable to Attachmate.
The Letter of Credit shall secure Mercata's payment obligations under the
Sublease and shall be in an
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amount equal to $200,000. The term of the Letter of Credit shall extend
from the Commencement Date of the Sublease to the earlier of (i) ninety
(90) days after the expiration of the Term (including any extensions
thereof) or earlier termination of this Sublease; or (ii) in the event
Mercata is not in default under this Sublease, the day after Mercata has
fully surrendered the Subleased Premises to Attachmate in the manner
required under Section 9 below. Further, the Letter of Credit shall contain
an evergreen renewal provision with not less than 90 days notice to
Attachmate on nonrenewal), provided, however, Mercata's notice exercising
it's option to extend the Term shall contain evidence of renewal of the
Letter of Credit for the First Extended Term.
The Letter of Credit shall be in a form reasonably acceptable to
Attachmate, shall be irrevocable, multiple draw, and subject only to the
condition that a proper draw certificate or claim be presented and to no
other condition. The Letter of Credit shall be transferable and assignable
by Attachmate, in whole or in part without cost to Attachmate, upon a
transfer of all of Attachmate's interest in the Premises. Mercata shall pay
all reasonable costs and shall take all reasonable steps necessary for any
such proposed transfer or assignment of the Letter of Credit. If Mercata
shall fail to pay such costs or take such steps in connection with a
proposed transfer or assignment of the Letter of Credit, then Attachmate
may, after written notice to Mercata as required under Section 18 below,
draw upon the Letter of Credit in whole or in part and may transfer the
proceeds of such draw. The Letter of Credit may be drawn in whole or in
part by Attachmate from time to time (and more than one time for partial
draws) upon the occurrence of any event of default by Mercata under the
Sublease, after notice and the expiration of any applicable cure period,
and without further notice to Mercata. Attachmate may draw upon the Letter
of Credit without proceeding against any person or exhausting any other
remedies that Attachmate may have and without resorting to any other
security held by Attachmate. Attachmate may apply the proceeds of the
Letter of Credit in any order or manner to any amounts owed by Mercata
under or pursuant to this Sublease. In the event of a draw by Attachmate
upon the Letter of Credit as provided for herein, Mercata shall be required
to replace the amount of the draw by a like amount to the Letter of Credit
so the balance of the Letter of Credit remains $200,000. Such application
shall not cure an event of default by Mercata under this Sublease until
such time as Mercata has reinstated the drawn amount of the Letter of
Credit in full. Furthermore, in no event shall the Letter of Credit, or
Attachmate's right to draw upon the Letter of Credit, be affected or
impaired by (i) the waiver, compromise, settlement, termination or other
release of the performance or observance by any person liable or to become
liable for the obligations under this Sublease; (ii) the modification or
amendment (whether material or otherwise) of any obligation, covenant or
agreement set forth in this Sublease; (iii) the voluntary or involuntary
liquidation, dissolution, sale of all or substantially all of the assets,
marshalling of assets and liabilities, receivership, conservatorship,
insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of, or any similar
proceeding affecting Mercata, or any allegation or contest of the validity
of this Sublease; or (iv) the taking or the omission of any of the actions
referred to in this Sublease.
5. TIME AND PLACE OF PAYMENT: As used herein, the term "Rent" shall include
-------------------------
Base Rent, Additional Rent, and any other payment obligations of Mercata
under this Sublease. Rent shall be due on the first day of each calendar
month after the Rent Commencement Date provided for herein. If the Rent
Commencement Date occurs on a day other than the first (1st) day of the
month, the Rent for such partial month shall be prorated based on a 365-day
year and shall be paid on the Rent Commencement Date of this Sublease. In
the event any payment of Rent is not paid within five (5) days following
the due date, Mercata shall pay to Attachmate upon demand a late charge
equal to 5% of the amount overdue. All payments of Rent shall be made
payable to the order of "Attachmate Corporation" and addressed to
Attachmate Corporation, P.O. Box 90026, Bellevue, WA., 98009-9026 ATTN:
Controller, Finance Department or to such other person or at such other
place as Attachmate may from time to time designate in writing.
6. RENTAL ADJUSTMENT - OPERATING COSTS: Effective with the first payment of
-----------------------------------
Base Rent, and each month thereafter for the balance of the Term, and any
extended Term, Mercata shall pay to Attachmate Additional Rent applicable
to the Subleased Premises as defined in the Master Lease at Section 4. It
is estimated that Mercata's pro rata share of building operating costs and
real estate taxes shall be 17.25%
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<PAGE>
and Mercata's share of operating costs attributable to the Newport
Corporate Centre Common Areas shall be 3.92%. Attachmate shall confirm the
exact amount of Tenant's Percentage in the Notice, attached hereto as
Exhibit C, within thirty (30) days after the Commencement Date. All such
---------
payments shall be made on or prior to the date Attachmate is required under
the Master Lease to make payments of Additional Rent. Attachmate shall
furnish to Mercata no later than ten (10) days after receipt; a copy of all
accountings of Operating Expenses (as defined in the Master Lease)
furnished pursuant to the Master Lease.
7. DESTRUCTION OR DAMAGE TO SUBLEASED PREMISES: In the event the Subleased
-------------------------------------------
Premises or any part thereof are, at any time prior to or during the Term
of this Sublease, damaged by fire or other casualty, this Sublease shall
remain in full force and effect unless and until the Master Lease is
canceled; provided that if more than fifty percent (50%) of the rentable
square feet of the Subleased Premises is damaged by fire or other casualty
on or before the Commencement Date, Mercata shall have the right to
terminate this Sublease upon fifteen (15) days' prior written notice to
Attachmate. If the Master Lease is canceled for such cause, Mercata's
obligations hereunder shall abate as of the effective date thereof.
Otherwise, such obligations shall abate only to the actual monetary extent
and for the duration that Attachmate's obligations are reduced in
accordance with the terms of the Master Lease.
8. RIGHT OF ENTRY: During the initial construction period Mercata shall be
--------------
provided reasonable access to the Subleased Premises for the purpose of
inspecting the Subleased Premises, in the manner and under the same terms
and condition such inspection is available to Attachmate under the Master
Lease. After the Commencement Date, Attachmate, and it's employees, and
contractors shall have the right to enter the Subleased Premises upon
twenty-four (24) hour's prior written notice to Mercata; provided that
Mercata shall have the right to require Attachmate and it's employees and
contractors to sign Mercata's standard non-disclosure agreement and be
accompanied by a representative from Mercata to inspect those two (2) rooms
within the Subleased Premises which contain highly confidential information
of Mercata as highlighted on Exhibit B. Notwithstanding the forgoing,
---------
Bentall shall have the right to enter the Subleased Premises under the
terms and conditions of the Master Lease and in the event of an emergency,
Attachmate shall have the right to gain access to the Subleased Premises
without written notice to Mercata. During the fourteen (14) day period
between the Commencement Date and the Rent Commencement Date Mercata shall
have the right to access the Subleased Premises for the purpose of
installing it's personal property, furniture and equipment, to the same
extent that Attachmate would be allowed to install Attachmate's Personal
Property, as defined in the Master Lease. Mercata and Attachmate shall meet
prior to such date to work out a reasonable and mutually acceptable
schedule for such installation, including, but not limited to the use of
the freight elevator.
9. ACCEPTANCE AND SURRENDER OF SUBLEASED PREMISES: Mercata acknowledges and
----------------------------------------------
agrees that the Subleased Premises will be constructed and improved as
outlined in "Exhibit C" of the Master Lease. Mercata agrees to accept the
Subleased Premises when it is Substantially Complete, as determined by
Attachmate and Bentall pursuant to the Master Lease. Any further
improvements to the Subleased Premises desired by Mercata shall be
submitted to Bentall and Attachmate in the manner required under Section
25A of the Master Lease, except that Mercata shall not be excluded from
seeking approval from Attachmate (but shall be excluded from seeking
approval from Bentall) for improvements which cost less than Ten Thousand
and No/100 Dollars ($10,000.00). Attachmate shall not unreasonably
withhold, condition or delay its approval of such further improvements.
Mercata acknowledges that if approval is given, a condition of such
approval shall be a requirement that Mercata restore the Subleased Premises
to the original Attachmate Tenant Improvements at the end of the Term,
reasonable wear and tear, casualty or condemnation accepted. Mercata shall
bear the full cost and expense of modifying or renovating the Subleased
Premises for its use. All wiring and cabling of the Subleased Premises for
Mercata's purposes shall be at its own expense. Mercata and Attachmate
shall meet prior to such date to work out a reasonable and mutually
acceptable schedule for such installation, including, but not limited to
the use of the freight elevator.
4
<PAGE>
Mercata shall, at the end of the Term, or upon sooner termination of this
Sublease pursuant to the terms hereof, promptly surrender the Subleased
Premises in good order and condition and in conformity with the applicable
provisions of this Sublease, and the Master Lease, excepting only
reasonable wear and tear, fire or other casualties or condemnation. Mercata
shall at the request of Attachmate remove any improvements made to the
Subleased Premises in accordance with this Section, so that only the
Attachmate Tenant Improvements are surrendered with the Subleased Premises.
10. ALTERATIONS AND MODIFICATIONS: Mercata agrees to obtain Attachmate's and
-----------------------------
Bentall's prior written approval of alterations, modifications, repairs or
renovations made to the Subleased Premises and such request shall be
submitted to Bentall and Attachmate in the manner required under Section
25A of the Master Lease, except that Mercata shall not be excluded from
seeking approval from Attachmate (but shall be excluded from seeking
approval from Bentall) for improvements which cost less than Ten Thousand
and No/100 Dollars ($10,000.00). Mercata acknowledges that Attachmate and
Bentall's approval of alterations, modifications, repairs or renovations
may be conditioned as set forth in the Master Lease.
Any alterations, modifications or renovations of or to the Subleased
Premises shall be limited to partition changes (non-bearing walls),
electrical and mechanical alterations, telephone relocations, and
decorating. The structural integrity of the Building will not be disturbed
in any way. Mercata shall provide Attachmate and Bentall with a release of
liens at the completion of any alterations or modifications to the
Subleased Premises executed by all contractors who performed such
alterations or modifications. In addition, Mercata agrees that all work
performed upon the Subleased Premises shall be done in a good and
workmanlike manner and shall be in accordance with all applicable law. All
permanent alterations, modifications and renovations, upon completion of
construction thereof, at the option of Attachmate, shall become part of the
Subleased Premises and the property of Attachmate without payment therefor
by Attachmate and shall, at the option of Attachmate, be surrendered to
Attachmate at the end of the Term, any extended term or upon sooner
termination of this Sublease pursuant to the terms of the Sublease or
Master Lease.
11. OBLIGATIONS UNDER MASTER LEASE CONTROLLING: Except as herein provided, and
------------------------------------------
except for Attachmate's obligation to pay the Basic Rent and Additional
Rent pursuant to Sections 3 and 4 of the Master Lease, Mercata agrees to
comply with all of the terms and conditions set forth in the Master Lease
applicable to Attachmate and related to the Subleased Premises and that are
to be performed by Mercata as subtenant under this Sublease; provided that
Mercata shall not have any liability for any default arising due to the
action or inaction of Attachmate, whether monetary or otherwise, under the
Master Lease. All of the terms and conditions of the Master Lease related
to the Subleased Premises shall apply in the same manner to Mercata as they
are expressed therein to apply to Attachmate under the Master Lease except
as modified or deleted pursuant to the terms of this Sublease. Attachmate
covenants and agrees to perform all of its obligations under the Master
Lease and will assist Mercata in coordinating Bentall's services and
obligations required to be provided and fulfilled by Bentall under the
Master Lease. Notwithstanding the foregoing, Attachmate shall have no
obligation to pursue available remedies provided for in the Master Lease in
the event Bentall defaults under the Master Lease or Bentall fails to
comply with or perform any of its services, duties, obligations or
covenants under the Master Lease. Mercata shall have all self-help rights
and other rights and remedies that Attachmate has under the Master Lease,
including rights and remedies in the event Bentall defaults under the
Master Lease or Bentall fails to comply with or perform any of its
services, duties, obligation or covenants under the Master Lease. Mercata's
obligations under this Sublease, including without limitation Mercata's
obligations to pay Rent, shall abate to the same extent that Attachmate's
obligations under the Master Lease would abate with respect to the
Subleased Premises.
12. MASTER LEASE IN EFFECT: Attachmate represents and warrants, to the best of
----------------------
its knowledge, that the Master Lease is in full force and effect, and that
neither Attachmate nor Bentall are in default thereunder. Attachmate shall
not do or permit anything to be done which would be a default under the
Master Lease after the expiration of any applicable cure periods or which
would cause the Master Lease to be terminated or forfeited, and Attachmate
shall indemnify, defend and hold Mercata harmless from and against any and
5
<PAGE>
all claims, demands, losses, damages, and costs and expenses arising out of
or relating to Attachmate's default under the Master Lease.
13. SUBLEASING OR ASSIGNMENT: In the event Mercata desires to sublease or
------------------------
assign all or any portion of the Subleased Premises or this Sublease, it
shall be bound to the terms and conditions of Section 8 of the Master
Lease, except all notices shall be delivered and all approvals obtained
from both Bentall and Attachmate. The obligation of Bentall and Attachmate
to consent to such subletting or assignment shall be as outlined in the
Master Lease; provided that in no event shall Attachmate's consent be
unreasonably withheld, conditioned or delayed. Any sublease or assignment
by Mercata shall be subject to the terms and conditions of the Master
Lease, including, without limitation Section 8.4 and 8.5 of the Master
Lease. Attachmate and Mercata acknowledge that the terms and conditions of
Section 8.8 of the Master Lease shall not apply, as the Sublease Limit will
not be reached due to this Sublease. The consent to a sublease or
assignment from Attachmate shall not be construed as relieving Mercata or
any assignee of the Sublease or sublessee of the Subleased Premises from
obtaining the express written consent of Bentall and Attachmate to any
further assignment or subletting or obligation hereunder whether or not
then accrued.
Any modifications or improvements necessary as a result of such sublease or
assignment must be approved as required in Section 10 above and Mercata
agrees to restore the Subleased Premises to the condition required in
Section 9 at the end of the term of such sub-sublease or assignment.
14. INSURANCE AND INDEMNITY; WAIVER:
-------------------------------
14.1 Mercata shall obtain and keep in full force and effect the insurance
required by Attachmate under Section 13 of the Master Lease and shall name
Bentall and Attachmate as additional insureds. Within fifteen (15)
business days of execution of this Sublease, Mercata shall furnish to
Bentall and Attachmate a certificate or certificates of insurance
confirming that the required insurance is in full force and effect with
all premiums paid current. Mercata further agrees to indemnify and hold
harmless Attachmate and Bentall from all liability arising out of the
filing of any mechanic's or materialman's lien against the Subleased
Premises by reason of any act or omission of Mercata.
14.2 Attachmate and Mercata each waive their right to sue and recover damages
against each other with respect to any liability arising under the Master
Lease or this Sublease and which is or is required to be covered by any
insurance policy maintained by any party, regardless of the cause of such
damage.
15. PERSONAL PROPERTY: Mercata agrees to assume full responsibility for its
-----------------
personal property located at the Subleased Premises, and to indemnify and
hold harmless Attachmate and Bentall against damage to Mercata's personal
property sustained by fire, theft or other casualty loss.
16. NOTICES: All notices required shall be given by registered or certified
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mail, postage prepaid, return receipt requested. Notice to Attachmate shall
be addressed to:
If by regular mail:
Attachmate Corporation
P.O. Box 90026
Bellevue, WA 98009-9026
Attn: Legal Department
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If by express delivery:
Attachmate Corporation
3617-131st Avenue SE
Bellevue, WA 98006
Attn: Legal Department
Notice to Mercata shall be addressed to:
If before the Commencement Date:
Mercata, Inc.
110 - 110th Avenue NE
Bellevue, WA 98004-5840
Attn: General Counsel
If after the Commencement Date:
Mercata, Inc.
3605 - 132nd Avenue SE, Suite 300
Bellevue, WA 98006
Attn: General Counsel
with a copy to (until July 1, 2000):
Mercata, Inc.
110 - 110th Avenue NE
Bellevue, WA 98004-5840
Attn: General Counsel
All notices shall be deemed received two (2) days after mailing or upon
receipt if sent by nationally recognized overnight courier. Attachmate
shall forward to Mercata copies of all notices affecting the Subleased
Premises received from Bentall, under the Master Lease, promptly upon
receipt or dispatch.
17. HOLD OVER: Notwithstanding any provision of law or any judicial decision to
---------
the contrary, and unless Mercata has exercised its option to extend the
Term, no notice shall be required to terminate the Term on the date herein
specified as the end of the Term, and the Term shall expire on the date
herein mentioned without notice being required from either party. In the
event that Mercata remains beyond the expiration date of the Term or as
extended, without the prior written consent of Attachmate, it is the
intention of the parties and it is hereby agreed that a tenancy at
sufferance shall arise at a monthly rent equal to One Hundred Fifty Percent
(150%) of the Rent due under this Sublease.
18. MERCATA'S DEFAULT: The occurrence of any one or more of the following
-----------------
events shall constitute an event of default under this Sublease by Mercata:
a. The failure by Mercata to make any payment of Rent or any other payment
required to be made by it hereunder on the date due where such failure
shall continue for a period of five (5) days after receipt of written
notice of such failure from Attachmate.
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b. The failure by Mercata to observe or perform any of the covenants,
conditions or provisions of this Sublease other than as described in the
immediately preceding paragraph and/or the failure by Mercata to observe or
perform any of the covenants, conditions or provisions of the Master Lease
to which Mercata has agreed to be bound pursuant to the terms of this
Sublease, where such failure shall continue for a period of fifteen (15)
days after written notice thereof from Attachmate to Mercata and such
additional time, if any, as is reasonably necessary to cure such default if
such default is of such a nature that it cannot reasonably be cured within
fifteen days, provided that Mercata diligently prosecutes such cure in good
faith and with due diligence and provided that such cure is completed
within sixty (60) days from the date of such notice from Attachmate.
c. The making by Mercata of any general arrangement or assignment for the
benefit of creditors; Mercata becomes a "debtor" as defined in 11 U.S.C.
101 or any successor statute thereto (unless, in the case of a petition
filed against Mercata, the same be dismissed within sixty (60) days); the
appointment of a trustee or receiver to take possession of all or
substantially all of Mercata's assets or of Mercata's interest in this
Sublease, where possession is not restored to Mercata within thirty (30)
days; or the attachment, execution or other judicial seizure of all or
substantially all of Mercata's assets or of Mercata's interest in this
Sublease, where such seizure is not discharged within thirty (30) days.
19. REMEDIES: In the event of any such default by Mercata, Attachmate may at
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any time thereafter, without limiting Attachmate in the exercise of any
right or remedy which Attachmate may have by reason of such default or
breach:
a. Upon the occurrence of an event of default, Attachmate at any time
thereafter may give written notice to Mercata specifying such event of
default and stating that either this Sublease shall expire or Mercata's
right to possession shall expire on the date specified in such notice but
not less than thirty (30) days after the date that Mercata receives said
notice and upon the date specified in such notice.
b. Upon the termination of this Sublease or Mercata's possession of the
Subleased Premises pursuant to paragraph a. of this Section, Mercata shall
peacefully surrender the Subleased Premises to Attachmate, and Attachmate,
upon or at any time after any such expiration, may without further notice
reenter the Subleased Premises and repossess it by summary proceedings,
ejectment, or otherwise, and may dispossess Mercata and remove Mercata and
all other persons and Mercata's property from the Subleased Premises and
may have, hold, and enjoy the Subleased Premises including the right to
receive all rental income therefrom.
c. At any time after any such termination, Attachmate may relet the
Subleased Premises or any part thereof, in the name of Attachmate or on
behalf of Mercata, for such term (which may be greater or less than the
period which would otherwise have constituted the balance of the term of
this Sublease) and on such conditions (which may include concessions or
free rent) as Attachmate, in its reasonable discretion, may determine, and
may collect and receive the rent therefore. Attachmate shall mitigate its
damage by making reasonable efforts to relet the Premises on reasonable
terms. Attachmate shall be entitled to all reasonable expenses incurred in
connection with such mitigation, including without limitation, all
repossession costs, brokerage commissions, legal expenses, reasonable
attorneys fees, and expenses of preparation for such reletting (but
excluding any tenant allowances or tenant improvement costs).
d. No such termination of this Sublease or Mercata's possession of the
Subleased Premises shall relieve Mercata of its liability and obligations
under this Sublease, and such liability and obligations shall survive any
such termination. In the event of any termination of this Sublease, if the
Subleased Premises has not been relet, Mercata shall pay to Attachmate the
present value of the Rent and any other amounts required to be paid by
Mercata until the end of what would have been the Term of this Sublease,
less the present value of the anticipated fair and reasonable rental value
of the Subleased Premises over the same period.
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e. In the event of a termination of this Sublease after the Subleased
Premises has been relet or the termination of Mercata's possession of the
Subleased Premises, Mercata shall pay to Attachmate as damages for
Mercata's default:
(1) The amount of the Rent and any other amounts which would be payable
under this Sublease by Mercata if this Sublease were still in effect,
less
(2) The net proceeds of any reletting affected pursuant to paragraph c. of
this Section.
Mercata shall pay such current damages, herein called deficiency, to
Attachmate monthly on the days on which the Rent would have been payable
under this Sublease if this Sublease were still in effect, and Attachmate
shall be entitled to recover from Mercata each monthly deficient, as or at
any time after such deficiency shall arise. If the Subleased Premises or
any part thereof is relet by Attachmate for the unexpired Term, including
any extension thereof, or any part thereof, before presentation of proof of
such damages to any court, commission, or tribunal, the amount of rent
reserved upon such reletting shall be deemed prima facie to be the fair and
reasonable rental value for the part or the whole of the Subleased Premises
so relet during the term of the reletting. Nothing herein contained shall
limit or prejudice the right of Attachmate to prove for and obtain as
damages by reason of such termination an amount equal to the maximum
allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
f. Pursue any other remedy now or hereafter available to Attachmate under
the laws of the State of Washington or in equity. All remedies available to
Attachmate hereunder shall be cumulative and concurrent. No waiver or delay
in enforcement by Attachmate of any breach of Mercata's obligations
hereunder shall constitute a waiver of any such breach or any subsequent
breach.
20. INTEREST: In the event that any sums due and payable to Attachmate pursuant
--------
to the terms of this Sublease are not paid when due, such sums shall bear
interest at the rate specified in Section 3.3 of the Master Lease, but in
no event less than the prime rate as published by Bank of America, N.A.
plus two percent (2%), as published from time to time, from the due date
until actually paid, unless that rate is usurious as applied to Mercata in
which event the rate shall be reduced to the highest non-usurious rate.
Neither the accrual nor the payment of interest shall cure any default by
Mercata under this Sublease.
21. BROKERS: Mercata is represented by The Broderick Group, Inc. and Attachmate
-------
is represented by Colliers International in connection with the negotiation
of this Sublease. Attachmate is responsible for a commission to Colliers
International with whom it has a separate agreement.
22. COMPLIANCE WITH LAWS: This Sublease will be construed and enforced in
--------------------
accordance with the laws of the State of Washington.
23. AUTHORITY: If Mercata executes this Sublease as a corporation, then Mercata
---------
and the person executing this Sublease on behalf of Mercata represents and
warrants that the individuals executing this Sublease on Mercata's behalf
are duly authorized to execute and deliver this Sublease on its behalf in
accordance with a duly adopted resolution of the Board of Directors of
Mercata, a copy of which is to be delivered to Attachmate on execution
hereof, and in accordance with the Bylaws of Mercata and that this Sublease
is binding upon Mercata in accordance with its terms. If Attachmate
executes this Sublease as a corporation, then Attachmate and the person
executing this Sublease on behalf of Mercata represents and warrants that
the individuals executing this Sublease on Attachmate's behalf are duly
authorized to execute and deliver this Sublease on its behalf in accordance
with a duly adopted resolution of the Board of Directors of Attachmate.
9
<PAGE>
24. FURTHER DOCUMENTS: Each party agrees to execute and deliver to the other
-----------------
all instruments which may reasonably be required to carry out all terms and
provisions of this Sublease.
25. RECOVERY OF COSTS AND FEES: If either party shall bring any civil action to
--------------------------
enforce any of its rights under this Sublease or for any relief against the
other party with regard to the matters contained in this Sublease or if
either party incurs any legal or professional fees whatsoever (including
but not limited to those of appraiser's accountant's or any payments to
collection agents) to enforce this Sublease whether or not such enforcement
efforts proceed to the filing of a lawsuit, then all reasonable costs and
expenses, including without limitation reasonable attorney's and
professional fees of the prevailing party shall be paid by the losing
party.
26. BINDING EFFECT: This Sublease shall be binding upon the successors and
--------------
permitted assigns of Mercata and Attachmate.
27. LEGAL RELATIONSHIP OF THE PARTIES: This Sublease shall not be interpreted
---------------------------------
or construed as establishing a partnership or joint venture between
Attachmate and Mercata, and neither party shall be liable for the debts or
obligations of the other, except as expressly agreed to herein.
28. INTEGRATED DOCUMENT: This instrument embodies all of the agreements between
-------------------
the parties with respect to the Subleased Premises, and no oral agreements,
prior correspondence or other prior writings shall be held to vary the
provisions hereof. Any subsequent changes or modifications shall become
effective only by a written instrument duly executed by Mercata and
Attachmate.
29. CONSENT REQUIRED: This Sublease is contingent upon, and shall have no force
----------------
or effect until receipt of consent by Bentall.
30. RIGHT OF FIRST OFFER: Mercata shall have an exclusive, ongoing Right of
--------------------
First Offer on all additional space Attachmate wishes to sublease on floor
five of the Building. In the event any such space becomes available,
Attachmate shall so notify Mercata in writing. Mercata shall notify
Attachmate in writing within thirty (30) days thereafter regarding whether
Mercata desires to sublease such space. If Mercata notifies Attachmate of
its desire to sublease such space, then such space shall be added to the
Subleased Premises as of the date that is thirty (30) days after
Attachmate's receipt of Mercata's notice that it is willing to sublease
such space. Any sublease of such space shall be on the same terms and
conditions contained in this Sublease, except that Base Rent for such space
shall be at the then prevailing market rent for comparable Bellevue area
office space but in no instance less than the rate Mercata is paying to
lease the Subleased Premises per this Sublease. The term for the additional
subleased space shall be coterminous with the Sublease Term. In the event
Mercata fails to respond to Attachmate's notice within the thirty (30) day
period, Mercata's right to exercise the Right of First Offer shall lapse
and be of no further force or effect.
31. PARKING: Mercata shall have the right to use four (4) parking stalls per
-------
thousand rentable square feet of the Subleased Premises (as the same may be
expanded as provided in Section 30 or otherwise) during the sublease Term
or any extensions free of charge in the Four Newport garage.
32. ROOF ACCESS: Mercata shall have access to roof rights for communications
-----------
equipment at no additional charge throughout the Term or any extensions
thereof. All installations and/or access rights shall be at Mercata's
expense and shall be governed by the terms of the Master Lease.
33. MERCATA SIGNAGE: Subject to Attachmate's approval, Mercata shall be
---------------
permitted to display a sign or plaque on the reception desk at the entry to
the Building. Interior signage installed by Mercata in the Subleased
Premises shall be at its own expense and such signage will be removed at
the end of the Term and any extension thereof at Mercata's expense and
subject to repair of damage caused by such removal.
10
<PAGE>
34. QUIET ENJOYMENT: Attachmate covenants and agrees that so long as Mercata
---------------
performs all of the covenants on Mercata's part to be observed and
performed under this Sublease (including without limitation remedying any
potential default within the times permitted for cure in this Sublease),
Mercata shall and peaceably quietly have, hold and enjoy the Subleased
Premises.
IN WITNESS WHEREOF, the parties hereto have executed this Sublease
Agreement as of the day and year first above written.
MERCATA, INC. ATTACHMATE CORPORATION
By: /s/ Tom Van Horn By: /s/ William E. Boisvert
----------------------- ------------------------
Its: President & CEO Its: President
---------------------- -----------------------
11
<PAGE>
Mercata Notary
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this day of February 23, 2000, before me personally appeared Tom Van Horn,
to me known to be the President and CEO of Mercata, Inc., the corporation that
executed the within and foregoing instrument, and acknowledged said instrument
to be the free and voluntary act and deed of said corporation, for the uses
and purposes therein mentioned, and on oath stated that he/she is authorized
to execute said instrument and that the seal affixed, if any, is the corporate
seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
the day and year first above written.
/s/ Craig A. Fielden
-------------------------------------------------
Notary Public in and for the State of Washington,
residing at Fall City
[Notary Seal] My commission expires: 5-26-02
Craig A. Fielden
-------------------------------------------
[Type or Print Notary Name]
Attachmate Notary
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this day of February 25, 2000, before me personally appeared
William E. Boisvert, to me known to be the President of
Attachmate Corporation, the corporation that executed the within and foregoing
instrument, and acknowledged said instrument to be the free and voluntary act
and deed of said corporation, for the uses and purposes therein mentioned, and
on oath stated that he/she is authorized to execute said instrument and that
the seal affixed, if any, is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
the day and year first above written.
/s/ Sally A. Main
-------------------------------------------------
Notary Public in and for the State of Washington,
residing at Seattle
[Notary Seal] My commission expires: 12/14/01
Sally A. Main
-------------------------------------------
[Type or Print Notary Name]
12
<PAGE>
List of Exhibits:
Exhibit A - Master Lease
Exhibit B - Subleased Premises
Exhibit C - Notice
13
<PAGE>
EXHIBIT A
---------
MASTER LEASE
------------
(See attached)
<PAGE>
ATTACHMATE CORPORATION
FOUR NEWPORT
OFFICE BUILDING LEASE
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. PREMISES......................................................... 1
2. TERM............................................................. 8
3. BASIC RENT....................................................... 13
4. RENTAL ADJUSTMENT................................................ 14
5. SECURITY DEPOSIT................................................. 20
6. UTILITIES AND SERVICES........................................... 20
7. CARE AND USE OF THE PREMISES..................................... 23
7A. HAZARDOUS MATERIALS.............................................. 25
8. ASSIGNMENT AND SUBLETTING........................................ 26
9. INTENTIONALLY DELETED............................................ 28
10. DAMAGE OR DESTRUCTION............................................ 28
11. INDEMNIFICATION.................................................. 30
12. DAMAGE TO TENANT'S PROPERTY...................................... 31
13. INSURANCE........................................................ 31
14. WAIVER OF SUBROGATION............................................ 32
15. EMINENT DOMAIN................................................... 33
16. BANKRUPTCY....................................................... 34
17. DEFAULT RE-ENTRY: REMEDIES....................................... 34
18. INTENTIONALLY DELETED............................................ 37
</TABLE>
<PAGE>
<TABLE>
<S> <C>
19 SUBORDINATION QUIET ENJOYMENT.................................. 37
20. ESTOPPEL CERTIFICATES.......................................... 38
21. ATTORNEYS' FEES................................................ 39
22. INTENTIONALLY DELETED.......................................... 39
23. NOTICES........................................................ 39
24. HOLDING OVER................................................... 40
25. CONSTRUCTION OF BUILDING AND IMPROVEMENTS...................... 40
25A. ALTERATIONS AND ADDITIONS BY TENANT............................ 42
26. RENT TAX....................................................... 43
27. PRIOR AGREEMENT, AMENDMENTS.................................... 43
28. PERSONAL PROPERTY TAXES........................................ 43
29. SUCCESSORS..................................................... 43
30. RIGHT TO PERFORM............................................... 44
31. FORCE MAJEURE.................................................. 44
32. LIMITATION ON LIABILITY........................................ 44
33. INTENTIONALLY DELETED.......................................... 45
34. MISCELLANEOUS.................................................. 45
35. RIDERS......................................................... 49
36. LEASE AND AMENDMENTS........................................... 49
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
EXHIBIT "A" - FOUR NEWPORT LEGAL DESCRIPTION................................. 1
EXHIBIT "A-1" - FOUR NEWPORT OVERALL SITE PLAN............................... 2
EXHIBIT "A-2" - FOUR NEWPORT FIRST (1st) FLOOR PREMISES...................... 3
EXHIBIT "A-3" - FOUR NEWPORT SECOND (2nd) FLOOR PREMISES..................... 4
EXHIBIT "A-4" - FOUR NEWPORT THIRD (3rd) FLOOR PREMISES...................... 5
EXHIBIT "A-5" - FOUR NEWPORT FOURTH (4th) FLOOR PREMISES..................... 6
EXHIBIT "A-6" - FOUR NEWPORT FIFTH (5th) FLOOR PREMISES...................... 7
EXHIBIT "A-7" - FOUR NEWPORT SIXTH (6th) FLOOR PREMISES...................... 8
EXHIBIT "A-8" - ONE NEWPORT LEGAL DESCRIPTION................................ 9
EXHIBIT "A-9" - ONE NEWPORT FIRST (1st) FLOOR PREMISES....................... 10
EXHIBIT "A-10" - ONE NEWPORT SECOND (2nd) FLOOR PREMISES..................... 11
EXHIBIT "A-11" - ONE NEWPORT THIRD (3rd) FLOOR PREMISES...................... 12
EXHIBIT "A-12" - ONE NEWPORT FOURTH (4th) FLOOR PREMISES..................... 13
EXHIBIT "A-13" - NEWPORT TOWER SECOND (2nd) FLOOR PREMISES................... 14
EXHIBIT "B" - BUILDING AREA.................................................. 15
EXHIBIT "C" - CONSTRUCTION AGREEMENT FOR LEASE...................... 1 (of "C")
EXHIBIT "C-1" - WORK SCHEDULE..................................... 20 (of "C-1")
EXHIBIT "C-2" - IDENTIFICATION OF BUILDING AND PARKING GARAGE SHELL
CONSTRUCTION DOCUMENTS...................................................... 18
EXHIBIT "C-3" - DESCRIPTION OF BUILDING AND PARKING GARAGE SHELL............ 21
EXHIBIT "C-4" - IDENTIFICATION OF LINK SCHEMATIC PLANS....................... 26
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
EXHIBIT "C-5" - BUILDING STANDARD TENANT IMPROVEMENT'S OUTLINE
SPECIFICATIONS......................................................... 27
EXHIBIT "D" - LEASE SUMMARY AND CONFIRMATION OF DATES................... 28
EXHIBIT "E" - BUILDING RULES AND REGULATIONS............................ 29
EXHIBIT "F" - BENTALL CONSTRUCTION RULES AND REGULATIONS................ 32
EXHIBIT "G" - ROOFTOP AGREEMENT......................................... 34
EXHIBIT "G-1" - ANTENNAE AND EQUIPMENT PLAN............................. 38
EXHIBIT "G-2" - SCHEDULE OF ANTENNAE AND EQUIPMENT...................... 39
EXHIBIT "G-3" - BENTALL CONSTRUCTION RULES AND REGULATIONS.............. 40
EXHIBIT "H" - MEMORANDUM OF LEASE....................................... 41
EXHIBIT "H-1" - FOUR NEWPORT LEGAL DESCRIPTION.......................... 43
EXHIBIT "H-2" - ONE NEWPORT LEGAL DESCRIPTION........................... 44
EXHIBIT "I" - GENERAL SPECIFICATIONS FOR JANITORIAL SERVICES FOR THE
BUILDING............................................................... 45
EXHIBIT "J" - ONE NEWPORT BUILDING PROPERTY MANAGEMENT PLAN............. 53
EXHIBIT "K" - TENANT RULES AND REGULATIONS................................1
</TABLE>
4
<PAGE>
ATTACHMATE CORPORATION
FOUR NEWPORT
OFFICE BUILDING LEASE
THIS LEASE, dated as of April 29, 1998, is made and entered into by and
between Bentall Newport Centre L.L.C., a Washington limited liability company
("Landlord"), and Attachmate Corporation, a Washington corporation ("Tenant").
WITNESSETH, THAT:
1. PREMISES
1.1 Land, Building & Link. Landlord shall erect, pursuant to the Building
---------------------
Shell Construction Documents and Description of Building and Parking Garage
Shell attached as Exhibit "C-2" and "C-3" hereto, on the real property described
in Exhibit "A" located in King County, Washington (the "Real Property"), a six
(6) story office building as further specified in this Lease and Exhibits
attached hereto, collectively known as the Four Newport Building (the
"Building"), together with an enclosed walkway between the Building and the
adjoining Newport Terrace Building (the "Link") as further specified in this
Lease and Exhibits attached hereto. Landlord's obligation to construct the
Building, Tenant Improvements (as defined in Exhibit "C"), and Link is set forth
in Section 25 herein. Landlord shall obtain all permits required by local,
state or federal law relating to the construction of the Building Shell (as
defined in Exhibit "C") and will otherwise comply with any and all laws related
to the construction thereof. Tenant's sole and exclusive remedy for Landlord's
failure to obtain all permits relating to the construction of the Building shell
and core in accordance with the preceding sentence shall be to terminate this
Lease in accordance with the provisions of Section 2.1(d)(iii) below. Landlord
shall also use its good faith reasonable best efforts to obtain all permits
required by local, state or federal law relating to the construction of the Link
and will otherwise comply with any and all laws related to the construction
thereof, provided, however, Landlord shall have no liability to Tenant for a
delay in the completion of the Link if Landlord is unable, despite Landlord's
good faith efforts, to obtain all permits and governmental approvals necessary
for the construction of the Link.
1.2 Premises. Landlord, subject to the terms and conditions hereof, hereby
--------
leases to Tenant and Tenant hereby leases from Landlord the entire first (1st),
second (2nd), third (3rd) and fourth (4th) floors of the Building, which
includes approximately 100,328 square feet of Rentable Area, and 87,682 square
feet of Useable Area, together with access thereto (including without limitation
the Link) and parking as provided in Section 34.6 of this Lease (collectively
the "Premises"). The floor plates for the first (1st), second (2nd), third (3rd)
and fourth (4th) floors of the Building are shown on Exhibits "A-2" through
"A-5." Tenant may use the Premises for general office purposes, computer
operations, research and development laboratories, athletic facilities for
Tenant's employees, food services for Tenant's employees, warehouse, product
assembly, distribution center, storage, shipping and receiving and for no other
use without Landlord's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed.
1
<PAGE>
1.3 Agreed Floor Areas. The agreed Building Rentable Area of the Building is
------------------
approximately 153,181 square feet. The Premises contains approximately 100,328
square feet of Rentable Area and 87,682 square feet of Useable Area, subject to
final measurement and space planning in accordance with and based on the
definitions of those phrases in the Standard Method for Measuring Floor Area in
Office Buildings (An American National Standard ANSI/BOMA Z65.1-1996 (Revised
and readopted June 7, 1996) published by Building Owners and Managers
Association International ("BOMA Standard"), as set forth on Exhibit "B" (which
may be amended based on final measurements). All final square footages shall be
determined by Landlord's architect (the "Architect") and verified by Tenant's
architect. Verification shall be per BOMA Standard for a multi-tenant
building unless Tenant leases the entire Building, in which case verification
shall be based on a single-tenant building. Any dispute regarding the
determination of the final square footages shall be resolved in accordance with
Section 17.7 below. Initial square footage calculations have been completed
prior to Lease execution, and shall be redone prior to the Commencement Date (as
defined in Section 2.1 below). Notwithstanding the foregoing or the BOMA
Standard, the parties agree that the square footage of the Link shall not be
used in calculations to determine the Useable Area or Rentable Area of the
Premises, and no Rent (as defined in Section 3.2 below) shall be payable during
the Term (as defined in Section 2 below) for the Link except as expressly set
forth in subsection 3.1A below.
1.4 Acceptance of Property and Premises. Neither Landlord nor its agents
-----------------------------------
have made any representations with respect to the Building, the Real Property,
or the Premises, except as expressly set forth herein and no rights, easements,
or licenses are acquired by the Tenant by implication or otherwise except as
expressly set forth in this Lease, together with its Exhibits. Landlord shall
deliver the Premises on the date of Substantial Completion of the Building and
Tenant Improvements, as defined more fully below.
(a) "Substantial Completion" or "Substantially Complete" means that the
Building Shell, parking, common areas, and Tenant Improvements (as defined in
Exhibit "C") in the Premises shall have been completed in accordance with the
Building Shell Construction Documents and the Tenant Improvement Construction
Documents (as those terms are defined in Exhibit "C"), but specifically
excluding the Link (which shall be completed in accordance with Section 25.6
below), which Substantial Completion shall be conclusively deemed to have
occurred upon issuance by the City of Bellevue of a temporary certificate of
occupancy for the Building and Premises (such temporary certificate of occupancy
to be obtained by Landlord) and issuance by the Architect of a Certificate of
Substantial Completion for the Tenant Improvements, which Certificate of
Substantial Completion shall be in the form of AIA Document G704. The existence
of punchlist items or additional work required for issuance of a final
certificate of occupancy by the City of Bellevue shall not be matters which will
delay Substantial Completion from having occurred; provided that Landlord shall
use diligent efforts to obtain Final Completion (as defined below) within sixty
(60) days thereafter or as soon as reasonably practical if any such punchlist
item or work required for issuance of a final certificate of occupancy cannot be
completed within such sixty (60) day period. If Landlord fails to obtain Final
Completion within sixty (60) days after Substantial Completion or as soon as
reasonably practical if any punchlist item or work required for issuance of a
final certificate of occupancy cannot be completed within sixty (60) days,
Tenant shall have the right, after five (5) days written notice to Landlord, to
complete the work necessary for Final Completion and Landlord shall reimburse
Tenant for the reasonable cost of completing such work within ten (10) days of
2
<PAGE>
Landlord's receipt of invoices for such work. Notwithstanding the above to the
contrary, if, after the execution of this Lease, Tenant's design decisions,
revisions, or additional work of Tenant or its agents or architect delays
Substantial Completion, then to the extent such delay is determined to be caused
by or attributable to Tenant or its agents or architect, the date of Substantial
Completion shall be deemed to have occurred on the date Substantial Completion
would otherwise be established absent such delay.
(b) "Final Completion" with reference to the Building Shell, parking and
common areas, and Tenant Improvements in the Premises means such items are
Substantially Complete, all punchlist items have been complete, and a final
certificate of occupancy for the Building Shell, parking, common areas and
Tenant Improvements in the Premises has been issued.
(c) Landlord warrants to Tenant that the materials and equipment used and
installed in the Building Shell, Tenant Improvements and the Link, are new, of a
first class quality, are in conformance with the documents attached hereto as
Exhibit "C" and that all work shall be in compliance with all applicable codes.
Landlord shall proceed diligently with all aspects of the construction and any
repairs due to initial construction defects and latent defects, upon Landlord's
knowledge thereof. Landlord agrees it will enforce its contractual agreements
with Landlord's architect and general contractor. For a period of one (1) year
from the date of Substantial Completion of each of the Building Shell, Tenant
Improvements, and Link (if constructed), Landlord shall remedy, repair or
replace, in the manner specified by Tenant all defects, deficiencies in
workmanship and materials in the Building Shell, Tenant Improvements, and Link.
1.5 Common Areas.
------------
(a) Building Common Areas. Tenant shall have the nonexclusive right to
---------------------
use in common with other tenants in the Building the following areas ("Building
Common Areas") appurtenant to the Premises: The Building's common entrances,
lobbies, trash areas, restrooms, elevators, stairways and access ways, loading
docks, shipping and receiving areas, ramps, drives and platforms and any
passageways and service ways thereto, and the common pipes, conduits, wires and
appurtenant equipment serving the Premises (provided however, that
notwithstanding the foregoing, the Link is not a common area and is reserved for
the exclusive use of the Tenant). Landlord agrees to install at no cost to
Tenant two conduits (with pull-strings) leading from the Newport Terrace
Building to the Building and agrees to use its reasonable best efforts to
dedicate one conduit within the Newport Corporate Center (as hereafter defined)
for Tenant's exclusive use provided that such dedication can be accomplished at
no additional cost and provided that Tenant shall remove all cabling within such
conduits at the expiration or termination of this Lease if requested by Landlord
by cutting and pulling the cabling out of the conduit(s). If Landlord is unable
to dedicate a conduit for Tenant's exclusive use, Landlord shall use its
reasonable best efforts to minimize any interruptions within the conduits from
use by other tenants.
(b) Newport Corporate Center Common Areas. Tenant shall also have the
-------------------------------------
nonexclusive right to use in common with other tenants of the Newport Corporate
Center (as defined below) the following areas ("Newport Corporate Center Common
Areas"): Common facilities made available for or for the benefit of all tenants
within the Newport Corporate Center
3
<PAGE>
including, without limitation, landscaping, roadways, pedestrian walkways, and
parking areas, but specifically excluding the use of any future fitness center.
The term "Newport Corporate Center" shall mean the properties and buildings
located thereon commonly known as One Newport, Two Newport, Newport Tower,
Newport Heights, Newport Terrace and Four Newport (the names of which Landlord
may change from time to time subject to Section 34.14), together with such other
additional properties and/or buildings which Landlord may add in the future.
(c) Definition of Common Areas. The term "Common Areas" as used in this
--------------------------
Lease shall include the Building Common Areas and the Newport Corporate Center
Common Areas.
(d) Landlord reserves the right from time to time, upon reasonable prior
notice to Tenant and without either expense to Tenant or unreasonable or
prolonged interference with Tenant's use:
(i) To install, use, maintain, repair and replace pipes, ducts,
conduits, wires and appurtenant meters and equipment for service to other parts
of the Building above the ceiling surfaces, below the floor surfaces, within the
walls and in the central core areas of the Premises, and to relocate any pipes,
ducts, conduits, wires and appurtenant meters and equipment included in the
Premises for the benefit of the Premises or other parts of the Building;
(ii) To make changes to the Common Areas, including, without limitation,
changes in the location, size, shape and number of driveways, entrances, parking
spaces, (as long as the parking ratio of four (4) parking spaces per 1000 square
feet of Useable Area, as stated in Section 34.6 is maintained) parking areas (as
long as not substantially different from the plans approved by Tenant for such
parking areas), loading and unloading areas, ingress, egress, direction of
traffic, landscaped areas and walkways;
(iii) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available and the
maintenance promptly started and diligently pursued to completion;
(iv) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Building, or any portion thereof;
(v) To establish, reasonably modify or change rules governing the move-
in and move-out procedures of Tenant's furniture, equipment, and fixtures, so
long as not adversely discriminatory against Tenant compared to other tenants of
the Building and effective only after Tenant has received a copy of such rules;
(vi) To designate other land located within Newport Corporate Center to
be part of the Newport Corporate Center Common Areas for the use of all tenants
of Newport Corporate Center associated with a building yet to be built now known
as Five Newport;
(vii) To add additional improvements to the Common Areas which, with
respect to the Building Common Areas shall be for the general benefit of all
tenants of the
4
<PAGE>
Building and, with respect to the Newport Corporate Center Common Areas shall be
for the general benefit of the Newport Corporate Center.
Nothing contained in this Section 1.5(d) shall (1) limit Landlord's right
to charge or Tenant's obligation to pay "Operating Costs" as that term is
defined in Section 4.3 below, or (2) expand on Landlord's right to charge or
Tenant's obligation to pay capital costs as set forth in Section 4.3 below. In
addition, notwithstanding the provisions of this Section to the contrary, Tenant
shall have the right to approve alterations to the Common Areas which materially
affect the Building (other than alterations required by governmental
authorities) during such time(s) as Tenant occupies the entire Building.
(e) If Landlord makes any changes, alterations or additions to the
Premises, the Common Areas, or to the Newport Corporate Center common areas
(including, without limitation, the construction of new buildings), such
changes, alterations or additions shall not interfere with the public
accessibility to the Premises, including without limitation Tenant's parking,
and shall not interfere with Tenant's utility services, including without
limitation all electricity, gas, water, sewer, and telecommunications services
to the Premises. If such interference should occur for any reason, Landlord
shall make immediate efforts to restore such accessibility or services in
coordination and cooperation with Tenant. Further, if such interference should
occur due to the acts or omissions of Landlord or its agents, then following
notice to Landlord and two (2) business days' opportunity to cure the
interference, Rent due under this Lease shall abate to the extent of the
interference from the date of the interference until such interference is cured
and Tenant shall be entitled to recover its damages arising from such
interference (excluding consequential damages such as lost profits).
(f) Since Tenant is also an existing tenant of the existing building
("Newport Terrace") to the north of the Building as well as other buildings in
the Newport Corporate Center, the parties anticipate the need for Landlord to
take reasonable steps to minimize any interference with the operation of
Tenant's business at Newport Corporate Center and Tenant's quiet enjoyment
during the period in which the balance of Newport Corporate Center is
constructed (including the construction of the Building as well as any future
buildings). Therefore, Landlord shall give Tenant advance notice on a regular
basis of construction activities at Newport Corporate Center, and particularly
of any activity at Newport Corporate Center that may result in interference with
Tenant's operations at the buildings occupied by Tenant. Examples of these
activities might include excavation around existing utilities, grading and
construction of roads, and access ways, and work on drainage systems. To the
extent reasonably possible, Landlord shall accommodate Tenant's wishes
concerning any planned interruptions of access or utilities at the buildings
occupied by Tenant. Any such planned interruptions shall be done in consultation
and coordination with Tenant. Any accidental interference by Landlord with
Tenant's use of space at Newport Corporate Center, whether interference with
access, utilities or otherwise, shall be promptly remedied by Landlord. If
interference with Tenant's use of the Premises should occur due to the acts or
omissions of Landlord or its agents, then following notice to Landlord and two
(2) business days' opportunity to cure the interference, Rent due under this
Lease shall abate to the extent of the interference from the date of the
interference until such interference is cured and Tenant shall be entitled to
recover its damages arising from such interference (excluding consequential
damages such as lost profits). The same provision as is set forth in the
5
<PAGE>
preceding sentence shall be included in each of the Amendments (as defined in
Section 36 below) to cover the space leased by Tenant in the other buildings in
Newport Corporate Center.
(g) In the event of any interference with Tenant's use of the Premises
which is not due to the acts or omissions of Landlord or its agents nor due to
the acts or omissions of Tenant or its agents and such interference is not
remedied within one hundred twenty (120) days from the date of interruption,
Rent due under this Lease shall abate to the extent of the interference from the
date of the interference until such interference is cured.
1.6 Exclusive Expansion Right. Landlord hereby grants Tenant an exclusive
-------------------------
expansion right to lease the entire fifth (5th) floor, or the entire sixth (6th)
floor, or the entirety of both the fifth (5th) and sixth (6th) floors of the
Building (the "Four Newport Expansion Space") on the terms set forth in this
Section 1.6. The Four Newport Expansion Space encompasses approximately 52,853
square feet of rentable area and 46,056 square feet of useable area, as
delineated on Exhibits "A-6" -"A-7", subject to final measurement and space
planning according to the BOMA Standard. This exclusive expansion right is
subject to the following terms and conditions:
(a) Exercise. Tenant exercises this exclusive expansion right by giving
--------
Landlord written notice of exercise (the "Exercise Notice") on or before 6:00
p.m. Seattle, Washington time on the date which is the later to occur of
November 12, 1998, or twelve (12) months prior to the date of Substantial
Completion (based on the estimated date of Substantial Completion as set forth
in the Construction Agreement (as defined below in Section 2.1(b)) and as such
estimated date may change from time to time based on the most recent schedule
prepared by the General Contractor). The Exercise Notice shall state the amount
of the Four Newport Expansion Space it wishes to add to the Premises under this
Lease, which must be the entire fifth (5th) floor, or the entire sixth (6th)
floor, or the entirety of both floors. Notice is not effective if Tenant is in
default under this Lease at the time of the exercise. If, within ninety (90)
days following Tenant's delivery of the Exercise Notice, the Scheduled
Substantial Completion Date (as defined in the Construction Agreement) in effect
on the date of the delivery of Tenant's Exercise Notice is changed to a date
more than ninety (90) days later than such Scheduled Substantial Completion
Date, then Tenant shall have three (3) business days from Tenant's receipt of
notice of such change to rescind the Exercise Notice by giving written notice of
rescission to Landlord. Landlord agrees to notify Tenant of any changes in the
Scheduled Substantial Completion Date when Landlord becomes aware of such
changes.
(b) Addition to Premises. If Tenant exercises this exclusive expansion
--------------------
right in accordance with Subsection 1.6(a) above, then the portion of the Four
Newport Expansion Space described in the Exercise Notice shall be added to the
definition of Premises so that it is constructed in accordance with this Lease
and leased to and rent is payable by Tenant beginning on Substantial Completion
of the Tenant Improvements for the applicable portion of the Four Newport
Expansion Space, including Rent (defined in Section 3 below) and otherwise
leased on the same terms and conditions as contained in this Lease. An amendment
to this Lease shall be prepared by Landlord and signed by the parties adding
that portion of the Four Newport Expansion Space stated in the Exercise Notice
to the Premises under this Lease, including Exhibits similar to those attached
as Exhibit "A-6" and "A-7" describing such space.
6
<PAGE>
(c) Termination. This exclusive expansion right automatically terminates
-----------
at 6:01 p.m. on the date which is the later to occur of November 12, 1998, or
twelve (12) months prior to the date of Substantial Completion (based on the
estimated date of Substantial Completion as set forth in the Construction
Agreement and as such estimated date may change from time to time based on the
most recent schedule prepared by the General Contractor), and Landlord shall
thereafter be free to lease the Four Newport Expansion Space to any third party
that is not a Direct Competitor (as defined in Section 1.8 below).
(d) Limitation. This exclusive expansion right is not assignable
----------
separate and apart from this Lease, and may only be exercised by Tenant or its
assignee as permitted under Section 8 of this Lease.
1.7 Right of First Opportunity. Landlord hereby grants Tenant a "Right of
--------------------------
First Opportunity" to lease any space which becomes available in the One Newport
Building (the "Opportunity Space"), which space is legally described in Exhibit
"A-8" attached hereto, and delineated on Exhibits "A-9" through "A-12" attached
hereto. This Right of First Opportunity is subject to the following terms and
conditions:
(a) Availability of Opportunity Space. Opportunity Space shall be deemed
---------------------------------
available for purposes of triggering Landlord's Notice (as defined below) when
one hundred fifty (150) or fewer days remain in the term of any lease of any
such Opportunity Space (subject, however, to any existing leases, rights of
extension or other option rights of leases existing on the date hereof). If,
however, the tenant who has possession of and/or rights to the affected
Opportunity Space does not vacate the Opportunity Space at the end of the lease
term and if Tenant elects to lease that Opportunity Space, then Landlord shall
promptly undertake eviction proceedings to make the space available and pursue
them to completion at its cost, but shall have no liability to Tenant for delay
in delivering possession of such space. Within three (3) days of Tenant's
request, Landlord shall provide Tenant with a list of all anticipated dates and
square footages of Opportunity Space which may become available.
(b) Landlord's Notice. Landlord shall give Tenant written notice
-----------------
("Landlord's Notice") at such time as any portion of the Opportunity Space
becomes available. Tenant shall have ten (10) working days from receipt of
Landlord's Notice to elect to take the Opportunity Space described in Landlord's
Notice. Tenant must make this election by written notice to Landlord within this
ten (10) working day period. Tenant's election to lease the Opportunity Space
offered is not effective if Tenant is in default under this Lease at the time of
Tenant's election or on the first day of the lease of such space. If Tenant
fails to exercise its Right of First Opportunity following receipt of a
Landlord's Notice within the ten (10) working day period, then Landlord is free
to lease that portion of the Opportunity Space described in Landlord's Notice to
any third party on any terms within six (6) months following the expiration of
such ten (10) working day period. If Landlord does not lease that portion of the
Opportunity Space described in Landlord's Notice within such six (6) month
period, Tenant's Right of First Opportunity with respect the space described in
Landlord's Notice shall continue with respect to that space. If Tenant exercises
its Right of First Opportunity with respect to any Opportunity Space, Tenant
shall not have any future right of first opportunity on that particular
Opportunity Space.
7
<PAGE>
(c) Terms of Opportunity Space Lease. If Tenant elects to lease
--------------------------------
Opportunity Space described in any Landlord's Notice, Tenant's lease of the
applicable Opportunity Space shall commence on the date Tenant takes occupancy
of such space (so long as Tenant does not delay its occupancy for reasons within
its control for more than sixty (60) days following the date such space becomes
vacant, in which case the lease of such space shall commence on the sixtieth
(60th) day following such date). The lease of such Opportunity Space shall
be for a minimum lease term of three (3) years and shall otherwise be based on
fair market terms and conditions at the time the First Right of Opportunity is
exercised, including Basic Rent (described in Section 3 below), storage rent,
parking charges, and on such other terms and concessions as the parties may in
good faith negotiate, using this Lease as a starting point; provided, however,
if Landlord and Tenant are unable to agree on such fair market terms within
thirty (30) days following Landlord's receipt of Tenant's notice of Tenant's
election to lease the applicable Opportunity Space, then the "fair market terms"
shall be determined in accordance with the appraisal procedure described in
Section 2.2(a) below provided, however, the determination of "fair market terms"
shall not be limited to a determination of Basic Rent but shall include a
determination of all essential business terms including, without limitation,
Basic Rent, lease term, renewal options, allowances, storage space rent, parking
charges, and any other Landlord concessions. If the fair market terms are
determined through the procedure described in Section 2.2(a), Landlord and
Tenant agree that the provisions of this Lease other than the business terms
shall be used for the lease of the applicable Opportunity Space. Landlord shall
not be required to pay any brokerage commissions with respect to leases of the
Opportunity Space as provided in this Section.
(d) Termination. This Right of First Opportunity automatically terminates
-----------
on the date which is twelve (12) months prior to the expiration of the Term of
this Lease (including any Extended Terms as described in Section 2.2 below).
(e) Limitation. This exclusive expansion right is not assignable
----------
separate and apart from this Lease, and may only be exercised by Tenant or its
assignee as permitted under Section 8 of this Lease.
1.8 Leases With Direct Competitors and Software Companies. For the purposes
-----------------------------------------------------
of this Lease, the term "Direct Competitor" shall mean Wall Data and Walker,
Ritcher, Quinn, and their successors. For so long as Tenant leases and occupies
the Premises pursuant to the provisions of this Lease, Landlord agrees not to
enter into any lease(s) for space in Newport Corporate Center with a Direct
Competitor. This prohibition shall not apply to assignments or subleases of
existing leases. In addition, commencing with the date Tenant exercises its
Expansion Right pursuant to Section 1.6 above with respect to the fifth (5th)
floor of the Building, and continuing for so long as Tenant leases and occupies
floors one (1) through five (5) of the Building pursuant to the terms of this
Lease, Landlord shall not, without Tenant's prior written consent, enter into a
lease with a software company for space in the Building.
2. TERM
2.1 Initial Term. The term of this Lease shall be for a period of six and
------------
one-half (6.5) years, as extended as provided in Subsection 2.1(a) below if the
Commencement Date falls on a date other than the first of the month ("Initial
Term"). The Initial Term as well as the Tenant's obligation to pay Rent shall
commence on the date (but not prior to September 30, 1999, and
8
<PAGE>
subject to the provisions of Subsection 2.1(e) below) of Substantial Completion
of Floors 1 through 4 of the Building (the "Commencement Date"); except that if,
after the execution of this Lease, Tenant's design decisions, revisions, or
additional work of Tenant or it's agents or architect delays Substantial
Completion, then to the extent such delay is determined to be caused by or
attributable to Tenant or its agents or architect, the Commencement Date which
would otherwise be established shall be accelerated to a new date by the number
of days of said delay. See Exhibit "C" attached hereto for further provisions
regarding Substantial Completion delay procedures.
(a) The terms and provisions of this Lease are effective as of the date of
this Lease. If the Commencement Date does not occur on the first day of the
month, then the Term shall be extended by the number of days remaining in that
fractional first month such that the Termination Date is the last day of a
month. In that event, however, the fractional month shall be added to the end of
the Initial Term for the purposes of determining Basic Rent under Section 3.1
below and Tenant shall pay Rent for the fractional first month on a per diem
basis (calculated on the basis of a thirty-day month) until the first day of the
month following the Commencement Date. Thereafter the Basic Rent, as well as the
Tenant's share of Operating Costs (defined herein) shall be paid in advance in
equal monthly installments on the first day of each and every month. Upon the
Commencement Date, the parties shall execute a written acknowledgment of this
Lease setting forth the precise Commencement Date and expiration date (the
"Expiration Date") of this Lease. Said acknowledgment shall be in the form
attached hereto as Exhibit "D". Failure to execute such acknowledgment, however,
shall not affect Landlord's or Tenant's liability hereunder.
(b) Early Possession. If Landlord offers and Tenant chooses to occupy
----------------
the Premises and performs its regular business operations therein prior to the
Commencement Date set forth in Section 2.1, then the Commencement Date shall be
such date of such occupancy. Tenant's occupancy prior to the originally
scheduled Commencement Date shall be subject to all the provisions of this Lease
and shall not advance the Expiration Date. Tenant shall have the right of access
to the Premises prior to the Commencement Date as provided in Section 3.3.2 of
the Construction Agreement for Lease attached hereto as Exhibit "C" (the
"Construction Agreement").
(c) Landlord Delay. If for any reason, other than a Tenant delay or a
--------------
delay for any of the reasons stated in Section 31, Landlord cannot deliver
possession of the Premises to Tenant on or before October 15, 1999 (the
"Scheduled Substantial Completion Date"), then subject to the provisions of the
Construction Agreement relating to such delay, the following shall occur: (i)
the Commencement Date shall be the date of Substantial Completion, (ii) the
liquidated damages set forth in the Construction Agreement shall apply, (iii)
the Expiration Date shall be adjusted so that the length of the Term remains as
provided in Section 2.1 and (iv) Landlord and Tenant shall execute an amendment
to this Lease setting forth the adjusted Commencement Date and Expiration Date.
(d) Liquidated Damages and Termination Rights. Anything in this Lease
-----------------------------------------
to the contrary notwithstanding, the parties agree that the actual damages that
Tenant would suffer as a consequence of delays in Substantial Completion beyond
the Scheduled Substantial Completion Date are too difficult to quantify, and
that in the event of such a delay, not due to a
9
<PAGE>
Tenant delay and not due to a delay for any of the reasons described in Section
31 below ("Force Majeure"), the following liquidated damages and remedial
actions are agreed by the parties:
(i) Liquidated Damages. The liquidated damages provisions of Section
------------------
7.4 of the Construction Agreement shall apply.
(ii) No Rent. Until Substantial Completion occurs, no Rent is due
-------
under this Lease.
(iii) Tenant's Right to Terminate. If Substantial Completion does not
---------------------------
occur on or by April 1, 2000, then Tenant may terminate this Lease and the
Amended and Restated Newport Terrace Lease (as defined in Section 36 below) by
notice to Landlord, which notice must be given on or before April 10, 2000, and
shall be effective April 30, 2000. If Tenant does not elect to terminate this
Lease and the Amended and Restated Newport Terrace Lease by giving notice
thereof by April 10, 2000, this Lease and the Amended and Restated Newport
Terrace Lease shall continue in full force and effect. If Tenant elects to
terminate, the provisions of subsection 2.1(d)(v) below shall be effective.
(iv) Landlord's Right to Terminate. If Substantial Completion does not
-----------------------------
occur on or by July 1, 2000, due to delays beyond Landlord's control, then
Landlord may terminate this Lease and the Amended and Restated Newport Terrace
Lease by notice to Tenant, which notice must be given on or before July 10,
2000, and shall be effective July 30, 2000. If Landlord does not elect to
terminate this Lease and the Amended and Restated Newport Terrace Lease by
giving notice thereof by July 10, 2000, this Lease and the Amended and Restated
Newport Terrace Lease shall continue in full force and effect. If Landlord
elects to terminate, the provisions of subsection 2.1(d)(v) below shall be
effective.
(v) Effect of Termination. If either Tenant terminates this Lease under
---------------------
subsection 2.1(d)(iii) above or Landlord terminates this Lease under subsection
2.1(d)(iv) above, then:
(1) All of the terms and conditions of the Newport Terrace Lease,
Newport Tower Lease, One Newport Lease and Two Newport Lease (as those terms are
defined in Section 36 below) shall remain in full force and effect as they
existed prior to this Lease and the Amendments (as defined in Section 36),
including the Amended and Restated Newport Terrace Lease, shall be null and
void;
(2) Tenant shall have the option to renew the Newport Tower Lease, One
Newport Lease and Two Newport Lease for a minimum of five (5) years at the end
of the existing terms in accordance with the terms and provisions of the
Amendments; and
(3) Tenant shall reimburse Landlord for the full Newport Terrace
Allowance (as defined in the Amended and Restated Newport Terrace Lease) or, in
the alternative, shall exercise its option to renew the Newport Terrace Lease
for five (5) years in accordance with the terms and provisions of the Newport
Terrace Lease provided, however, if Tenant renews the Newport Terrace Lease,
Landlord shall not be obligated to provide any allowance other than the Newport
Terrace Allowance.
10
<PAGE>
(e) Interim Space. Landlord agrees to lease to Tenant approximately
-------------
17,000 rentable square feet of space in Newport Tower in the location identified
on Exhibit "A-13" attached hereto (the "Interim Space") at the rate of $16.50
per square foot, triple net, commencing on or about April 1, 1999, and
continuing until the first to occur of Substantial Completion or the termination
of this Lease. Except with respect to the business terms, the lease agreement
for the Interim Space shall be based on the format and legal provisions of this
Lease. Landlord and Tenant shall use their reasonable best efforts to prepare a
mutually acceptable short term lease agreement within sixty (60) days after the
date of this Lease.
(f) Delay in Occupancy. Notwithstanding the above provisions of this
------------------
Section 2.1 to the contrary, if Substantial Completion occurs between November
1, 1999 and December 31, 1999, Tenant may, by written notice to Landlord within
five (5) days of Substantial Completion, elect not to take occupancy of the
Premises until February 10, 2000, in which case the Commencement Date shall be
January 10, 2000; provided, however, if Substantial Completion occurs between
November 1, 1999 and December 31, 1999, Tenant may, by notice to Landlord at any
time between the date of Substantial Completion and January 10, 2000, elect to
occupy any portion of the Premises, in which case Tenant shall pay Rent on all
space which Tenant elects to occupy (as well as Rent on other space occupied by
Tenant in other buildings) and Basic Rent shall be paid at the per square foot
rate specified for Years 1 - 2 of the Lease Term in Section 3.1 below .
2.2 Option to Extend. Landlord hereby grants to Tenant the right, privilege,
-----------------
and option to extend the Term of this Lease for three (3) periods of five (5)
years ("First, Second and Third Extended Terms" respectively), from the date of
expiration of the Initial Term, upon the same terms and conditions as herein
contained, except Basic Rent. Basic Rent shall be determined in the method set
forth below for each Extended Term. Tenant shall give written notice to
Landlord at least three hundred sixty (360) days prior to the expiration of the
then expiring Term of Tenant's intention to exercise said option. In the event
that Tenant fails to give notice by the specified deadline of its intention to
exercise said option, then Tenant's right to extend this Lease for the remaining
available Extended Terms shall terminate and be of no further force and effect.
(a) If Tenant validly exercises its option to extend the Term of this
Lease as herein provided, Basic Rent shall be adjusted as of the first day of
the applicable Extended Terms as follows:
(i) Commencing within ten (10) days after Landlord's receipt of
Tenant's notice of its intention to exercise its option, Landlord and Tenant
shall attempt to agree upon Basic Rent for the Premises for the applicable
Extended Term, such rent to equal one hundred percent (100%) of the estimated
fair market rental value of the Premises for the applicable Extended Term. If
the parties are unable to agree upon the Basic Rent within thirty (30) days
after Landlord's receipt of the notice, then within thirty (30) days thereafter
each party, at its own cost and by giving notice to the other party, shall
appoint a real estate appraiser with at least five (5) years full-time
commercial real estate appraisal experience in the area in which the Premises
are located to appraise and set the Basic Rent for the applicable Extended Term.
If a party does not appoint an appraiser within ten (10) days after the other
party has given notice of
11
<PAGE>
the name of its appraiser, the single appraiser appointed shall be the sole
appraiser and shall set Basic Rent for the applicable Extended Term. If each
party shall have so appointed an appraiser, the two appraisers shall meet
promptly and attempt to set the Basic Rent for the applicable Extended Term. If
the two appraisers are unable to agree within thirty (30) days after the second
appraiser has been appointed, they shall attempt to select a third appraiser
meeting the qualifications herein stated within ten (10) days after the last day
the two appraisers are given to set Basic Rent. If the two appraisers are unable
to agree on the third appraiser within such ten (10) day period, either of the
parties to this Lease, by giving five (5) days notice to the other party, may
apply to the then presiding judge of the Superior Court of King County for the
selection of a third appraiser meeting the qualifications stated in this
paragraph. Each of the parties shall bear one-half (1/2) of the cost of
appointing the third appraiser and of paying the third appraiser's fee. The
third appraiser, however selected, shall be a person who has not previously
acted in any capacity for either party.
(ii) Within thirty (30) days after the selection of the third
appraiser, a majority of the appraisers shall set Basic Rent for the applicable
Extended Term. If a majority of the appraisers are unable to agree upon the
Basic Rent within the stipulated period of time, the three appraisals shall be
added together and their total divided by three (3). The resulting quotient
shall be the Basic Rent for the Premises during the applicable Extended Term.
If, however, the low appraisal and/or the high appraisal is/are more than five
percent (5%) lower and/or higher than the middle appraisal, the low appraisal
and/or the high appraisal shall be disregarded. If only one (1) appraisal is
disregarded, the remaining two (2) appraisals shall be added together and their
total divided by two (2), and the resulting quotient shall be Basic Rent for the
Premises during the applicable Extended Term.
(iii) For purposes of determining the Basic Rent for an Extended
Term, including the determination of Basic Rent by the appraisers, the "fair
market rental value" shall be based on the actual rental rates which ready and
willing renewal tenants are paying as of the date of the notice of Tenant's
election to extend the Term, as annual rent for a primary renewal premises (as
distinguished from the rent payable for a sublet premises or with respect to an
assignment of an interest in an existing lease or for the initial term for newly
constructed or existing premises) to a ready and willing landlord of such
primary renewal premises for space comparable to the Premises in a building
comparable to the Building. Rental rates quoted or used under sublease
agreements shall be considered rates of special circumstances and shall be
excluded from the definition of "fair market rental value" under this Section.
(iv) Notwithstanding the above to the contrary, such arbitration
procedure shall be completed prior to the commencement date of the Extended Term
and shall be final, binding and non appealable.
(b) If Tenant timely and properly exercises an option to extend, then
Landlord agrees to provide Tenant with an allowance (the "Renewal Allowance")
with respect each option exercised for the actual cost to re-paint and re-carpet
the Premises (the "Renewal Improvements") in Building standard materials as
defined in the Building Standard Tenant Improvement Specifications attached
hereto as Exhibit "C-5". The Renewal Allowance shall be paid by Landlord to
Tenant within ten (10) days of completion of the Renewal Improvements and
receipt by Landlord of copies of paid invoices for the Renewal Improvements.
12
<PAGE>
(c) The option to extend the Term in this Section is not assignable
separate and apart from this Lease, and may only be exercised by Tenant or its
assignee as permitted under Section 8 of this Lease.
(d) If Tenant timely and properly exercises its option to extend, then
Landlord and Tenant shall within fifteen (15) days after the determination of
Basic Rent for the Extended Term in question, execute an amendment to this Lease
extending the Term on the terms and conditions set forth in this Section 2.2.
(e) Tenant shall not have the right to exercise the option to extend,
notwithstanding anything to the contrary set forth above:
(i) During the time commencing from the date Landlord gives to
Tenant a written notice that Tenant is in material nonmonetary default under any
provisions of this Lease, and continuing until the default alleged in said
notice is cured; or
(ii) During the period of time commencing on the day that written
notice is given that a monetary obligation to Landlord is due from Tenant and
unpaid continuing until the obligation is paid.
(f) The period of time within which the option may be exercised shall
not be extended or enlarged by reason of Tenant's inability to exercise the
option because of the provisions and/or restrictions in Section 2.2(e).
(g) All rights of Tenant under the provisions of this option shall
terminate and be of no further force or effect even after Tenant's due and
timely exercise of the option, if after such exercise, but prior to the first
day of the Extended Term in question, (1) Tenant fails to pay to Landlord a
monetary obligation of Tenant for a period of five (5) business days after
written notice thereof from Landlord; or (2) Tenant fails to commence to cure a
default within thirty (30) days after the date Landlord, during the term of this
Lease, gives notice to Tenant of such default; provided, however, the time
periods set forth in this subsection shall be tolled during the time period
necessary to resolve any dispute if Tenant is, in good faith, contesting an
alleged default.
3. BASIC RENT
3.1 Annual/Monthly Rent, Tenant shall pay to Landlord the annual and
-------------------
monthly Rent defined below, (the "Basic Rent") for the Premises, which is
subject to adjustment in accordance with Section 1.3 and Section 1.6 above.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Period Rate/SF of Rentable Monthly Rent Annual Rent
Area
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Years 1 - 2 $19.00 $158,853 $1,906,232
- -----------------------------------------------------------------------------------------------------
Years 3 - 4 $20.00 $167,213 $2,006,560
- -----------------------------------------------------------------------------------------------------
Year 5 $22.00 $183,935 $2,207,216
- -----------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Years 6 - 6.5 $23.00 $192,295 $2,307,544
- -----------------------------------------------------------------------------------------------------
</TABLE>
Each monthly installment shall be paid, in advance, on the first day of each and
every calendar month during the Term unless the Commencement Date is on a day
other than the first day of a calendar month, in which event the Basic Rent for
such month shall be prorated as provided above.
3.1A. Link Rent. When Substantially Completed, Tenant shall pay
---------
Landlord $6.35 per square foot (per BOMA) of the Link as Rent for the Link in
the same manner and time as the payment of Basic Rent through the initial Term
and such Rent shall be increased for any Extended Terms in an amount equal to
the percentage change in Basic Rent for the Extended Terms for the same period.
3.2 Definition of Rent. All amounts due from Tenant to Landlord under
------------------
this Lease other than Basic Rent shall be due as "Additional Rent." The terms
"Rent" and "Rental" as used in this Lease shall mean all amounts to be paid
hereunder by Tenant whether those sums are designated Basic Rent or Additional
Rent or otherwise and as adjusted by the terms of this Lease. Failure by Tenant
to pay any sum of Rent due under this Lease shall entitle Landlord to pursue any
or all remedies specified in this Lease as well as remedies specified in RCW
Chapter 59.12 or otherwise allowed by law, subject to Landlord giving Tenant
prior notice of such default and the expiration of any applicable cure period
without cure having been accomplished.
3.3 Payment of Base Rent - No Deduction or Offset, The Tenant shall pay
---------------------------------------------
said Rent to Landlord (checks should be made out to Bentall Newport Centre
L.L.C.), at the office of Landlord at 3650 131st Avenue S.E., Suite 620,
Bellevue, WA 98006-1334, or to such other party or to such other address as
Landlord may designate from time to time by written notice to Tenant, without
demand and without deduction, setoff or counterclaim, except as otherwise
provided herein. If Landlord shall at any time or times accept said Rent after
it shall become due and payable, such acceptance shall not excuse delay upon
subsequent occasions, or constitute, or be construed as a waiver of any or all
of Landlord's rights hereunder. In the event Rent is not paid when it becomes
due, Tenant shall pay interest at the rate of two percent (2%) per annum above
the prime rate charged from time to time by Seafirst Bank on all late payments
past due.
4. RENTAL ADJUSTMENT - OPERATING COSTS
4.1 Acknowledged Net Terms. Tenant acknowledges that this Lease is, in all
----------------------
respects, considered to be a net Lease and it is the intent of the parties that
Tenant shall pay for its Tenant's Percentage (defined below) of the Operating
Costs (defined below) relating to the Building, Real Property, and Common Areas.
All Operating Costs shall be treated as Additional Rent hereunder.
4.2 Tenant Percentage.
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(a) Building. Tenant shall, for each calendar year of the Lease term,
--------
or any Extended Term, pay to Landlord as Additional Rent Sixty-five and 50/100
Percent (65.50%)
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("Tenant's Percentage") (subject to adjustment upon re-measurement of the
Premises and/or Building prior to the Commencement Date and if Tenant exercises
Tenant's exclusive expansion right to lease additional space on the fifth (5th)
and/or sixth (6th) floors of the Building) of the Operating Costs of the
Building, Building Common Areas and Real Property; provided, Real Property taxes
and assessments will be prorated in the event of a partial lease year. If an
Operating Cost is not attributable to one hundred percent (100%) of the
Building, Building Common Areas or Real Property, then Tenant shall pay its
reasonable proportionate share thereof. Tenant shall pay 100% of any Operating
Costs directly attributable to Tenant's Premises, not resulting from the
negligence or intentional misconduct of Landlord, its agents and invitees.
(b) Newport Corporate Center. If an Operating Cost is attributable to
------------------------
the Newport Corporate Center Common Areas, "Tenant's Percentage" of such cost
shall be based on the total rentable square footage of Newport Corporate Center
and, as of the date of this Lease, is Fourteen and 83/100 percent (14.83%)
(subject to the same adjustment as Tenant's Percentage set forth above).
4.3 Operating Costs Definition.
--------------------------
(a) Except as otherwise excluded in subsection 4.3(b) below, the term
"Operating Costs" shall include all Operating Costs incurred in maintaining and
operating the Building, Real Property and Common Areas. The Operating Costs
shall include (without limiting the generality of the foregoing) the following:
(1) all real estate taxes and assessments on the Real Property and
Building which are attributable to the Lease term;
(2) heat, air conditioning, utilities, insurance, janitorial and
cleaning services;
(3) a management fee (to cover the cost of salaries, wages, payroll
taxes and other personnel cost of engineers, superintendents,
and other employees in connection with the maintenance and
operation of the Premises, Building and Real Property) in an
amount equal to three and one-half percent (3.5%) of gross rent
in the Building (defined as Basic Rent and Operating Costs less
real estate taxes, assessments, insurance and excess electrical
consumption, and excluding payment of the Link and Excess Cost
Amortization (as defined in the Construction Agreement), Rent
paid for the Link and Storage and, if Tenant elects to provide
certain services as allowed under Section 6.1(b) or 6.1(e),
less the cost of the services provided by Tenant);
(4) all charges under third party maintenance and service contracts
for heating and air conditioning equipment and controls,
exterior window cleaning and Building and parking facilities
maintenance;
(5) security;
(6) insurance provided by Landlord as set forth in Section 13;
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(7) personal property taxes (if any) in connection with personal
property used in the operation of the Building and Real
Property (but not for any particular tenant);
(8) maintenance, operation, repair and replacement expenses and
supplies for the Building, Real Property, and Building Common
Areas which are deducted for any calendar year and not
capitalized under generally accepted accounting principles
(GAAP) and practices, consistently applied;
(9) maintenance, operation, repair and replacement expenses and
supplies for the Newport Corporate Center Common Areas which
are deducted for any calendar year under generally accepted
accounting principles (GAAP) and practices, consistently
applied, which may include, without limitation, landscaping,
sweeping, flower rotations, storm drains, and pressure washing,
but will specifically exclude costs associated with a common
fitness center, common day care, or common deli;
(10) capital purchases charged to all tenants of the Building by
amortizing the cost thereof over the allowable useful life and
to the extent they are made for and directly contribute to the
lowering of the Operating Costs; and
(11) landscape fees.
Real estate taxes shall be deemed to be the taxes payable in the respective
calendar years, even though the levy or assessment thereof may be for a
different fiscal year, and shall include all real and personal property taxes
and assessments imposed by any governmental authority or agency on the Building
and Real Property; any assessments levied in lieu of taxes; any non-progressive
tax on or measured by gross rentals received from the rental of space in the
Building; and other costs levied or assessed by, or at the direction of, any
federal, state, or local government authority in connection with the use or
occupancy of the Premises or the parking facilities serving the Premises; any
sales or excise tax on this transaction or any document to which Tenant is a
party creating or transferring an interest in the Premises and any expenses,
including costs of attorneys or experts, reasonably incurred by Landlord solely
for the purpose of seeking reduction by the taxing authority of the above-
referenced taxes, but shall not include any income, franchise, capital stock,
estate or inheritance taxes. Landlord agrees to make reasonable efforts so all
assessments against the Real Property and Building are at favorable interest
rates and are calculated based on payment of all assessments over the longest
permitted time.
(b) Notwithstanding anything to the contrary herein, Operating Costs
shall not include the following:
(1) leasing commissions;
(2) payments of principal or interest on any mortgages, deeds of
trust, ground leases or other encumbrances upon the Real
Property or Building;
(3) repairs to the foundation, structural, roof and window
system repairs and replacements (unless such items are
ordinary
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maintenance and repair items, in which event they are
included as Operating Costs under subsection 4.3(a));
(4) all costs incurred in connection with the original
construction of the Building and Tenant Improvements;
(5) capital improvements, replacements and expenditures, which
under generally accepted accounting principles (GAAP) and
practices, consistently applied, would be classified as
capital expenditures (except as allowed in subsection 4.3(a)
above);
(6) depreciation of machinery, tools and equipment (except as
allowed in Subsection 4.3(a) above);
(7) any bad debt, Rent loss, or reserves for bad debts or Rent
loss;
(8) any expense for which Landlord is compensated through
proceeds of insurance;
(9) unreasonable consulting fees, market study fees, advertising
and promotional expenditures;
(10) legal, accounting or auditing fees (except as allowed in
Subsection 4.3(a);
(11) governmental fines, penalties or interest imposed upon
Landlord except governmental interest imposed on
assessments;
(12) damages incurred by Landlord for any default, breach, claim,
judgment or settlement arising out of this Lease;
(13) finance charges for any future capital expenditures;
(14) fees, costs or expenses incurred in refinancing the Building
or Real Property;
(15) taxes on the sale or transfer of any ownership of or
interest in the Building or Real Property;
(16) repairs and replacements arising from construction and
design defects;
(17) depreciation of the Building, Premises or Tenant
Improvements;
(18) lease or rent payments or leasing or rental costs or
expenses for leased equipment unless such costs or equipment
are used for normal maintenance or repair procedures and are
equitably assessed by Landlord if used for other buildings,
(19) cost of repair of the Building caused by fire or other
casualty or due to the exercise of the right of eminent
domain;
(20) any costs related to public transportation, transit, or
vanpool, unless imposed by governmental authority or at the
request of Tenant;
(21) taxes attributable to Landlord's income, excess profit
taxes, franchise taxes, costs or other taxes on Landlord's
business, costs of selling, syndicating, financing,
mortgaging and costs of any disputes between Landlord and
its employees agents, contractors or building management;
(22) executive salaries;
(23) expenses incurred for the leasing, renovating or improving
space in the Building for tenants and costs (including
permit, license and
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inspection fees) incurred in building, renovating,
improving, decorating, painting, or redecorating vacant
space for tenants;
(24) costs (including increased insurance premiums) incurred
because Landlord or another tenant violated the terms of
this Lease or any other lease;
(25) compensation paid to clerks, attendants, or other persons in
commercial concessions operated by Landlord;
(26) items and services for which Tenant reimburses Landlord or
pays third parties or that Landlord provides selectively to
one or more tenants of the Building other than Tenant
without reimbursement;
(27) costs incurred to remedy structural defects in original
construction materials or installations, or to remedy
defects or violations in the Building by reason of any laws;
(28) any costs, fines, or penalties incurred because Landlord
violated any Law, government rule or authority; and
(29) original construction costs of the roads, interchanges,
traffic signals, access ways, drainage systems, detention
ponds, street signs, street lights, curbs and gutters, and
all other infrastructure improvements and betterments of the
area surrounding the Building, and any one-time water or
sewer connection fees for the Building,
(30) costs incurred to test, survey, cleanup, contain,
abate, remove, or otherwise remedy hazardous wastes or
asbestos-containing materials from the Building, unless the
wastes or asbestos-containing materials were in or on the
Building because of Tenant's negligence or intentional acts;
(31) overhead and profit paid to subsidiaries or affiliates of
Landlord for management or other services on or to the
Building for supplies or other materials, to the extent that
the costs of the services, supplies, or materials exceed the
competitive costs of the services, supplies, or materials
were they not provided by the subsidiary or affiliate;
(32) advertising and promotional expenditures;
(33) expenses for the replacement of any item to the extent
covered under warranty;
(34) if Landlord charges for parking at the Building, the costs
of Landlord's parking facilities personnel or, if Landlord
contracts with a third-party operator, the costs of such
parking facilities operator, except to the extent that such
costs exceed the revenue generated from the parking
facilities;
(35) assessments or charges of any kind for capital improvements
to the Building or surrounding area called for by any
governmental authority;
(36) marketing expenses and the costs of promotions for the
Building or any tenant therein; and
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(37) costs of construction or maintenance of any common area
improvements to benefit retail tenants in the Building.
Landlord shall not recover any item of cost more than once.
4.4 Operating Costs and Adjustment. Before the commencement of each calendar
------------------------------
year of the Lease term, or as soon thereafter as practicable, Landlord will
notify Tenant in writing of Landlord's good faith estimate of the Operating
Costs and Tenant's Percentage times said Operating Costs for the next succeeding
year (until the following January 1). Effective January 1 and each month
thereafter, Tenant shall pay to Landlord as Additional Rent one-twelfth (1/12th)
of Tenant's Percentage of said estimated Operating Costs. On the next
succeeding January 1, or as soon thereafter as possible, but not later than the
next succeeding March 31, or upon sooner termination of the Lease, Landlord will
compute Tenant's total rental adjustment for such previous year or portion
thereof if applicable, based on the actual Operating Costs and, shall provide
Tenant with a written statement showing the actual Operating Costs and Tenant's
Percentage of said Operating Costs. Such statement shall provide an itemized
breakdown of the actual Operating Costs. If the total amount of Additional Rent
paid by Tenant for such previous year or portion thereof is less than Tenant's
Percentage of actual Operating Costs, then Tenant shall pay Landlord any
deficiency. If the total amount paid by Tenant for such previous year or
portion thereof exceeds the Tenant's Percentage of actual Operating Costs, then
Landlord shall credit such excess to the payment of Rent and Additional Rent
which may thereafter become due. Any adjustment payment required to be made
pursuant to this section shall be made within thirty (30) days after Landlord
has notified Tenant thereof. Landlord shall make available for Tenant's review
and upon request by Tenant, the accounting information on which any Operating
Cost adjustment is based. If this Lease commences at a time other than at the
commencement of a calendar year, or expires at a time other than the expiration
of the calendar year, Landlord shall estimate Tenant's contributions for that
portion of the calendar year contained in the Lease term and Tenant shall pay
such charge in equal monthly installments on the first day of those months of
that calendar year which are in the Lease term. If at any time Landlord obtains
or receives additional information regarding the actual amounts of the
contributions, Landlord may, at its election, adjust the amount of the monthly
installments due during the balance of the calendar year of the Lease term to
reflect such additional information.
Even though the term has expired and Tenant has vacated the Premises, when the
final determination is made of Tenant's Percentage of Operating Costs for the
year in which this Lease terminates Tenant shall within thirty (30) days pay any
increase due over the estimated expenses paid and, conversely, if Tenant has
otherwise complied with all other terms and conditions of this Lease, Landlord
shall refund any excess to Tenant within thirty (30) days following the date of
termination.
Any increase in Tenant's Percentage of Operating Costs pursuant to this
Section shall be deemed Additional Rent payable by Tenant hereunder, and in the
event of nonpayment thereof, Landlord shall have similar rights with respect to
such nonpayment as it has with respect to any other nonpayment of Basic Rent
hereunder.
4.5 Right to Audit. Landlord agrees to keep books and records showing the
--------------
Operating Costs in accordance with a system of accounts and accounting practices
consistently
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maintained on a year-to-year basis. Tenant shall have the right to audit, at
Tenant's expense, Landlord's books and records pertaining to Operating Costs and
Real Property taxes. In the event that any such audit conducted in accordance
with generally accepted accounting principles, consistently applied, reveals a
discrepancy of five percent (5%) or more in Landlord's favor between Landlord's
statement of the actual operating and tax costs for the calendar year and the
amount of such operating and tax costs determined by such audit, then Landlord
shall reimburse to Tenant the excess amount, if any, paid by Tenant and shall
pay for the cost of such audit. Tenant's right to audit shall be limited to one
(1) time per calendar year. The time period covered by the audit shall be
limited to the previous twenty-four (24) months from the date of such audit.
4.6 Credits/Reimbursements. Operating Costs shall be reduced by
----------------------
reimbursements, credits, discounts, reductions, or other allowances received or
receivable by Landlord for items of cost included in Operating Costs. If
Landlord receives a refund of any portion of real estate taxes that were
included in the real estate taxes paid by Tenant, then Landlord shall reimburse
Tenant its pro rata share of the refunded taxes, less any expenses that Landlord
reasonably incurred to obtain the refund.
5. SECURITY DEPOSIT
It is hereby agreed that no security deposit will be required.
6. UTILITIES AND SERVICES
6.1 Landlord's Duties. Provided that Tenant is not in default or beyond
-----------------
any applicable cure period, under any of the material terms, covenants,
conditions, provisions or agreements of this Lease, Landlord will provide the
following services:
(a) Maintain normal and usual Building business hours (the "Normal
Business Hours"), Monday through Friday, from 7:00 a.m. to 6:00 p.m. and on
Saturday from 8:00 a.m. to 1:00 p.m.; Sundays and holidays excepted.
(b) Furnish utilities to provide for lighting, convenience power, and
heat and air conditioning twenty-four (24) hours a day for the comfortable
occupancy of the Premises; provided, however, utilities used by Tenant during
other than the Normal Business Hours shall be billed to Tenant at the actual
hourly rate charged to Landlord. Tenant agrees to cooperate fully at all times
with Landlord, and to abide by all regulations and requirements which Landlord
may prescribe for the proper function and protection of said air conditioning
system. Tenant agrees not to connect any apparatus, device, conduit or pipe to
the Building chilled and hot water air conditioning supply lines. Tenant further
agrees that without prior Landlord notice and approval, neither Tenant nor its
servants, employees, agents, visitors, licensees or contractors shall at any
time enter mechanical installations or facilities of the Building or adjust,
tamper with, touch or otherwise in any manner affect said installations or
facilities. The cost of maintenance and service calls to adjust and regulate the
air conditioning system shall be charged to Tenant if the need for maintenance
work results from either Tenant's adjustment of room thermostats or Tenant's
failure to comply with its obligations under this Section. In the event Tenant
occupies the entire Building, Tenant shall have the right, upon notice to
Landlord,
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to pay for Tenant's electricity directly to the utility provider so long as such
payments are made as and when due. Landlord agrees not to install or utilize its
own power plant for the Building without Tenant's prior written consent, which
consent may be withheld in Tenant's discretion. In addition, Landlord agrees not
to contract with an independent utility provider without Tenant's full
involvement and Tenant's prior written consent, which consent shall not be
unreasonably withheld, conditioned, or delayed, provided that it shall be
reasonable for Tenant to withhold consent if the proposed utility provider is
not a reputable quality utility provider, does not provide the services at
competitive market rates, and does not have local maintenance and emergency
response personnel.
(c) Provide Tenant twenty four (24) hours per day, seven (7) days per
week, fifty-two (52) weeks per year access to the Building and Premises without
the requirement of prior notice to Landlord. Landlord shall provide Tenant with
sufficient keys or access devices for Tenants employees and guests who will be
utilizing the Premises. The cost of such keys or access devices shall be drawn
from the Tenant Improvement Allowance. Landlord shall also provide security
services for the Building comparable as to coverage, control and responsiveness
(but not necessarily as to means for accomplishing same) to first class multi-
tenant (unless the Building is a single tenant building) office buildings in the
area in which the Building is located including, without limitation, electronic
security monitoring of all entrances and exits to the Building on a twenty-four
(24) hour per day basis; provided, however, Landlord shall have no
responsibility to prevent and Landlord shall not be liable to Tenant for any
liability or loss to Tenant, its agents, employees and visitors arising out of
losses due to theft, burglary, or damage or injury to persons or property caused
by persons gaining access to the Building and Premises unless caused by
Landlord's negligence. Tenant shall have the right to install an electronic
security system within the Premises, serving only the Premises, at its sole cost
and expense, provided, however, Landlord shall have the right to approve the
design, plans and specifications for such security systems and the installations
thereof.
(d) Provide non-attended passenger elevator facilities during all
working days (and on Saturday, Sunday and holidays provide at least one elevator
subject to call). Tenant acknowledges that the elevator cars will not be
equipped with card-key access devices.
(e) Provide janitorial and maintenance services to the Premises in
accordance with the Janitorial Services described in Exhibit "I" attached hereto
provided the Premises are kept in reasonable order by Tenant. Any and all
additional janitorial service desired by the Tenant shall be contracted for by
the Tenant directly with Landlord's janitorial agent and the cost and payment
thereof shall be and remain the sole responsibility of the Tenant. In addition,
Tenant may elect to contract directly with Landlord's janitorial agent for
normal janitorial and cleaning services for the Premises and may also elect to
replace the lights in the Premises at Tenant's cost.
(f) Make all repairs to the Premises, excluding repairs to or any
special treatment of walls, floors or ceilings made by or at the request of
Tenant and excluding repairs to any fixtures or other improvements installed or
made by or at the request of Tenant. In the event any repairs are required
because of any act or omission of Tenant, its agents, employees, customers, or
invitees, Landlord may make such repairs and add the cost thereof to the next
installment of Rent. Landlord shall proceed in a reasonable manner and with due
diligence in
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performing all Landlord obligations hereunder which involve the delivery of
services and utilities to Tenant.
(g) Provide water for drinking, lavatory and toilet purposes drawn
through fixtures installed by Landlord.
(h) Repair and maintain the structural, foundational, window systems,
elevator, HVAC, electrical, plumbing and roof portions of the Building, along
with areas of ingress and egress at Landlord's sole cost except to the extent
such costs are "Operating Costs" as defined in Section 4.3(a) and except to the
extent that such costs are the obligation of Tenant under this Lease.
(i) Except with respect to matters related to Tenant's particular use
of the Premises, which shall be Tenant's responsibility, comply with the
provisions of the Americans with Disabilities Act (ADA) Title III, "Commercial
Facilities." Landlord reserves the right to object to and appeal any
determination that it must take any specific action to comply with the ADA;
provided Landlord will hold Tenant harmless from any adverse effects or cost of
such objection or appeal.
(j) Perform property management services in accordance with the
standards and terms set forth on Exhibit "J" attached hereto.
(k) Tenant shall have the right to have telecommunications services
provided to Tenant by a service provider other than US West (Landlord's initial
service provider) provided that Tenant pays all costs and expenses associated
with the connection of the new service provider to the Building and to the
Premises.
6.2 Interruption. It is understood that Landlord does not warrant that any
-------------
of the services referred to above will be free from interruption by virtue of
strike or labor trouble or any other cause beyond Landlord's control. Such
interruption of service shall not be deemed an eviction or disturbance of
Tenant's use or possession of the Premises, or any part thereof, nor shall it
render Landlord liable to Tenant for damages, by abatement or reduction of Rent
or otherwise, except as provided in Subsection 6.3 herein, nor shall it relieve
Tenant from performance of Tenant's obligations under this Lease, nor shall
Tenant be relieved from the performance of any covenant or agreement in this
Lease because of such failure or interruption. Landlord reserves the right to
stop service of the elevator, plumbing, ventilation, air-conditioning, and
electrical systems, when necessary, by reason of accident or emergency, or, upon
reasonable advance notice to Tenant, for repairs, alterations or improvements,
which are in the reasonable judgment of Landlord necessary, until said repairs,
alterations or improvements shall have been completed. Landlord shall use good
faith best efforts to minimize the disruption to Tenant's business in making
such repairs.
6.3 Rent Abatement. If there occurs an interruption or failure of services
--------------
or utilities as referred to in Section 6.2 which is caused by Landlord's
negligence or other wrongful conduct or the negligence or wrongful conduct of
Landlord's agents, employees or contractors and Landlord fails to commence
within two (2) business days and thereafter diligently proceed to complete
repairs required to be made by Landlord under this Lease, and if the condition
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referred to continues for a period of three (3) business days (or for more than
five (5) days in any ten (10) day period), then from the first day of the
existence of such condition (or the occurrence requiring repairs or
corrections), the Rent payable by Tenant hereunder (including Additional Rent)
shall be abated for the portion of the Premises for which normal and usual
utilization by Tenant is made impractical, such abatement to be effective for
the full period such condition exists and until the repairs or corrections are
made or the services or utilities are restored.
6.4 Self-Help and Remedies. If after written notice of the failure to
----------------------
perform is given to Landlord by Tenant; provided, however, that if any such
failure by Landlord to perform such service shall render the Premises
untenantable or unfit for Tenant's intended use then Tenant shall have the right
to take such reasonable actions as may be necessary to remedy the situation and
shall give Landlord contemporaneous notice of the actions it is taking.
6.5 Cost of Services. The cost of all services provided by Landlord under
----------------
this Section 6 shall be considered Operating Costs under Section 4; except for
Landlord's costs which are specifically set forth under Subsection 4.3(b) and
except for costs which are the responsibility of Tenant under this Lease.
Payment for all services rendered under this Section 6 shall be in accordance
with Section 4 of this Lease.
6.6 Tenant's Rules and Regulations. Landlord agrees to comply with the
------------------------------
"Tenant's Rules and Regulations" attached hereto as Exhibit K.
---------
7. CARE AND USE OF THE PREMISES
7.1 Tenant's Duties. Tenant agrees that it shall during the Term:
---------------
(a) Not use or occupy the Premises in violation of law or of the
certificate of occupancy issued for the Building, and shall, upon written notice
from Landlord, discontinue any use of the Premises which is declared by any
governmental authority having jurisdiction to be a violation of law or of said
certificate of occupancy. Tenant shall comply with any direction of any
governmental authority having jurisdiction which shall, by reason of the nature
of Tenant's use or occupancy of the Premises, impose any duty upon Tenant or
Landlord with respect to the Premises or with respect to the use or occupation
thereof.
(b) Give Landlord access to the Premises at all reasonable times, upon
reasonable advance notice to Tenant (which notice shall be directed to Tenant's
"Facilities Department" in addition to any other person to whom notices are
required to be given under this Lease), without charge or diminution of Rent, to
enable Landlord to examine the same and to make such repairs, additions and
alterations as are required under the terms of this Lease, including the right
to show the Premises for the purpose of a potential sale or lease. If Tenant
fails to respond to Landlord's request for access within one (1) business day,
Tenant shall be deemed to have agreed to the time and manner of Landlord's
requested access. If Landlord proposes to show the Premises, Tenant will be
allowed to limit or prevent access to those portions of the Premises Tenant
deems, in its sole business judgment, sensitive or confidential. Furthermore, if
Landlord proposes to show the Premises to a prospective Tenant, Landlord may be
precluded from doing so, except during the last six (6) months of the Lease
term.
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(c) Keep the Premises in good order and condition, reasonable wear and
tear and casualty damage excepted, and replace all broken glass with glass of
the same quality as that broken, save only glass broken by fire and extended
coverage type risks.
(d) Recognize that improvements attached to the Premises become the
property of the Building and may not be removed without approval of Landlord
which approval may be subject to the Tenant's paying for the cost of repairs
resulting from the removal of such improvements.
(e) Upon the termination of this Lease in any manner whatsoever,
remove Tenant's property and those of any other person claiming under Tenant,
and quit and deliver up the Premises to Landlord peaceably and quietly in as
good order and condition as the same are in on the Commencement Date, reasonable
use and wear thereof, casualty damage and permitted alterations and additions
not specifically required to be removed upon termination of the Lease as they
were added excepted. The foregoing property required to be removed that is not
removed by Tenant at the termination of this Lease, however terminated, shall be
considered abandoned and Landlord may dispose of the same in the manner it deems
expedient with reasonable cost to be billed to the Tenant.
(f) Not place signs on the outside of the Premises or in places
visible from the outside by the public, without the prior written consent of
Landlord and subject to all applicable governmental rules and restrictions, as
well as the "Building Rules and Regulations as set forth in Exhibit "E".
(g) Not use or allow the Premises to be used for any unlawful purpose,
nor cause, maintain or permit any nuisance in, on or about the Premises. Tenant
shall not commit or suffer to be committed any waste in or upon the Premises.
(h) Not do or permit to be done anything which will invalidate or
increase the cost of any fire, extended coverage or any other insurance policy
covering the Building and/or property located therein unless Tenant agrees,
after Landlord gives thirty (30) days prior written notice to Tenant of the cost
thereof, to reimburse Landlord for any increase in the cost of such insurance
and subject to lender's approval. Tenant shall promptly, upon demand, reimburse
Landlord for any additional premium charges for such policy by reason of
Tenant's failure to comply with the provisions of this Section.
(i) Observe the "Building Rules and Regulations" described in Exhibit
"E", and which may be modified by Landlord from time to time provided Tenant is
given at least ten (10) business days prior written notice of such now or
amended rules and provided further that such new or amended rules do not
materially interfere with the terms and conditions of this Lease or unreasonably
interfere with Tenant's quiet enjoyment and its intended use of the Real
Property, the Building or the Premises or materially increase Tenant's cost of
operations or occupying the Premises and, provided further, that the Building
Rules and Regulations shall not discriminate against Tenant and are enforced by
Landlord in a non-discriminatory manner.
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(j) Notify Landlord in writing promptly upon Tenant's discovery of any
latent defects in the Building and/or the Premises. So long as Tenant has
promptly notified Landlord in writing of any latent defect(s) (of which Tenant
has knowledge) in the building shell construction and the Tenant Improvements
owned by Landlord, then Tenant shall not be responsible for the costs and
expense of repairing latent defect(s) in the building shell construction and the
tenant improvements owned by Landlord. Provided, if Tenant fails to notify
Landlord of a latent defect of which Tenant has knowledge, then the failure to
notify Landlord must be a proximate cause of Landlord's damage before Tenant
would be responsible for the costs and expenses to repair such latent defect(s).
7.2 Use of Rooftop. The parties anticipate that Tenant will require
--------------
rooftop installation of one or more of the following: (a) satellite dish; (b)
microwave dish; and (c) communications equipment. The installation of such
equipment shall be in accordance with Landlord's Rooftop Agreement attached
hereto as Exhibit "G".
7.3 Maintenance of Link. Except with respect to construction defects,
-------------------
which shall be the obligation of Landlord, Tenant shall be solely responsible,
at Tenant's expense, for the cost of maintaining and repairing the Link. In the
event Tenant elects to have Landlord maintain and repair the Link, such
maintenance and repair shall be done at Tenant's cost and Tenant shall pay
Landlord a fee equal to 3.5% of such reasonable maintenance and repair costs.
7A. HAZARDOUS MATERIALS
7A.1 Tenant Representations. Tenant represents and warrants that it shall
----------------------
not generate, treat, store or discharge on or at the Premises, the Building or
the Real Property any hazardous wastes or hazardous substances as defined in
applicable federal, state and/or local statutes or regulations; provided, Tenant
shall not be in violation of the foregoing by its use and storage of standard
office products, otherwise defined as hazardous, which products are used by
Tenant with due care and in accordance with the instructions of the product
manufacturer in the reasonable and prudent conduct of Tenant's business on the
Premises, and/or by Tenant's generation of a byproduct connected with its
permissible uses, which byproduct is otherwise defined as hazardous, so long as
Tenant uses due care in connection therewith.
7A.2 Landlord Representations. Landlord represents and warrants the
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following:
(a) To the best of Landlord's knowledge, there exists no
environmental liability from hazardous substances or toxic materials as defined
by the Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA"), 42 U.S.C. (S) 9601, et seq., and amendments thereto, or
------
hazardous waste as defined by the Resource Conservation Recovery Act ("RCRA"),
42 U.S.C. (S) 6901, 21 et seq., and amendments thereto, or
------
hazardous waste or substance as defined in any federal, state or local law,
statute or regulation within, on, in, or under any portion of the Premises, the
Building, or the Real Property. Landlord further warrants and represents that,
to the best of Landlord's knowledge, no hazardous substances have been dumped,
stored or manufactured on or are now being stored or manufactured on the
Premises, the Building, or the Real Property. Landlord will not in the future
generate, treat, store or discharge such hazardous wastes or substances on or at
the
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Premises, Building, or Real Property except in accordance with applicable
federal state and/or local statutes or regulations;
(b) The Premises and Building will be free from asbestos; and
(c) Landlord will not knowingly allow another tenant or Landlord's
contractors to generate, treat, store or discharge hazardous wastes or hazardous
substances on or at the Premises, Building, or Real Property except in
accordance with applicable federal, state and/or local statutes or regulations.
8. ASSIGNMENT AND SUBLETTING
8.1 Except as allowed by the provisions of this Section 8, Tenant shall
not, either voluntarily or by operation of law, assign, hypothecate or transfer
this Lease, or sublet the Premises or any part thereof, without the prior
written consent of Landlord in each instance, which shall not be unreasonably
withheld, conditioned or delayed.
8.2 In the event Tenant desires to assign, hypothecate or otherwise
transfer this Lease or sublet the Premises, then at least thirty (30) days prior
to the date when Tenant desires the assignment or sublease to be effective (the
"Assignment Date"), Tenant shall give Landlord a notice (the "Assignment
Notice"), which shall set forth the name, address and business of the proposed
assignee or sublessee, information (including references) concerning the
character, ownership, and financial condition of the proposed assignee or
sublessee, the Assignment Date, any ownership or commercial relationship between
Tenant and the proposed assignee or sublessee, and the consideration and all
other material terms and conditions of the proposed assignment or sublease, all
in such detail as Landlord shall reasonably require.
8.3 The subletting of substantially all of the Premises for all or any
part of the remaining term of this Lease shall be deemed an assignment rather
than a sublease for purposes of this clause. Notwithstanding the foregoing,
Landlord shall consent to the assignment or transfer, if the Assignment Notice
states that Tenant desires to assign the Lease to any entity into which Tenant
is merged, that controls, is controlled by or is under common control with
Tenant, or with which Tenant is consolidated or which acquired all or
substantially all of the assets of Tenant, provided that the assignee first
executes, acknowledges and delivers to Landlord an agreement whereby the
assignee agrees to be bound by all of the covenants and agreements in this Lease
which Tenant has agreed to keep, observe or perform, that the assignee agrees
that the provisions of this Section shall be binding upon it as if it were the
original Tenant hereunder and that the assignee shall have a net worth
(determined in accordance with generally accepted accounting principals
consistently applied) immediately after such assignment which is at least equal
to the net worth (as so determined) of Tenant immediately prior to the
assignment.
8.4 If Tenant shall sublet all or any portion of the Premises, any
consideration paid by the sublessee for the portion of the Premises being sublet
that exceeds one hundred percent (100%) of the Basic Rent and Rental Adjustments
provided by this Lease for such portion of the Premises being sublet shall be
due, owing and payable from Tenant to Landlord when owing by the sublessee under
the sublease; provided, however, that Tenant may retain out of
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such excess rent an amount sufficient to reimburse Tenant for Tenant's actual
and reasonable out-of-pocket costs associated with the sublease (such as
commissions and allowances) not to exceed $5.00 per rentable square foot of
subleased space.
8.5 Any sale, assignment, hypothecation or transfer of this Lease or
subletting of the Premises that is not in compliance with the provisions of this
Section 8 shall be void. The consent by Landlord to any assignment or
subletting shall not be construed as relieving Tenant or any assignee of this
Lease or sublessee of the Premises from obtaining the express written consent of
Landlord to any further assignment or subletting, or as releasing Tenant or any
assignee or sublessee of Tenant from any liability or obligation hereunder
whether or not then accrued. In the event Landlord shall consent to any
assignment or sublease, Tenant shall pay Landlord as Additional Rent a
reasonable attorneys and administrative fee for costs incurred in connection
with evaluating the Assignment Notice up to a limit of $500. This Section 8
shall be fully applicable to all further sales, hypothecations, transfers,
assignments and subleases of any portion of the Premises by any successors or
assignee of Tenant, or any sublessee of the Premises.
8.6 The term "assign," as used herein, shall include (i) an assignment of
a part of interest in this Lease, as well as any assignment from one cotenant to
another; and (ii) an assignment to any prior owner of the Tenant's interest
herein or part thereof.
8.7 An assignment requiring consent within the meaning of this Section,
shall be deemed to include one or more sales or transfers, by operation of law
or otherwise, or creation of new stock, by which an aggregate of more than fifty
percent (50%) of Tenant's stock shall be vested in a party or parties who are
nonstockholders as of the date hereof. This Section 8.7 shall not apply and
consent shall not be required if Tenant's stock is listed on a recognized
security exchange. This paragraph shall not apply and consent shall not be
required if the stock is transferred:(i) for bona fide estate planning purposes
or due to the death of any member(s) of the family of Frank Pritt; (ii) to
Welsh, Carson, Anderson & Stowe, or any entity in which Frank Pritt or his
family members own at least fifty percent (50%) of the beneficial interest
therein, provided, the net worth (determined by generally accepted accounting
principles, consistently applied) of any such entity together with the net worth
of Tenant (as so determined) at the time of such transfer shall be equal to or
greater than the net worth of Tenant immediately prior to the transfer;
provided, the assignee will agree to be bound by all of the covenants and
agreements of this Lease which Tenant has agreed to keep, observe or perform and
the assignee will execute such documents as Landlord or its lender shall
reasonably require or request to evidence such agreement.
8.8 Notwithstanding any provision of this Section 8 to the contrary, after
Landlord receives a request from Tenant to consent to either an assignment or
sublease, Landlord shall have the option, to be exercised by written notice
within thirty (30) days after the receipt of such request, to terminate this
Lease (in the case of an assignment or sublease of all of the Premises) or
recapture a portion of the Premises (in the case of a sublease of part of the
Premises) within such thirty (30) day period by notice to the Tenant. If
Landlord elects to terminate this Lease or recapture a portion of the Premises,
Tenant shall have the right, to be exercised by written notice to the Landlord
within ten (10) days after receipt of such notice of termination or recapture
from Landlord, to withdraw its request for consent to the proposed
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assignment or sublease, in which case the Tenant shall not proceed with the
proposed assignment or sublease, Landlord notice of termination or recapture
shall be null and void and this Lease shall continue in full force and effect in
accordance with its terms. Notwithstanding the above provisions of this Section
8.8 to the contrary, Landlord shall not have the right to recapture a portion of
the Premises with respect to the first 45,000 rentable square feet of space
subleased by Tenant and, if Tenant exercises its Expansion Right under Section
1.6 above with respect to both the fifth (5th) and sixth (6th) floors of the
Building, then Landlord shall not have the right to recapture with respect to
the amount of rentable square feet of space which equals the total rentable
square footage of the largest two floors in the Building subleased by Tenant
(which 45,000 square feet or two floor square footage, as applicable, is
hereafter referred to as the "Sublease Limit"). Once the Sublease Limit is
reached, Landlord shall have the right to recapture space in excess of the
Sublease Limit in accordance with the timing and other terms set forth above in
this Section. In addition, if Landlord does not elect to recapture space in
excess of the Sublease Limit prior to a sublease being entered into by Tenant,
Landlord shall have the right to recapture such space at the expiration of the
sublease term if Tenant does not re-occupy the space within ninety (90) days
after the expiration of the sublease term. With respect to Tenant's options to
extend under Section 2.2, Landlord agrees to respond to Tenant's request to
include any of such options in a proposed sublease at the time of Tenant's
request for consent. Further, in the event Tenant requests Landlord's consent to
a sublease to a single subtenant which covers a portion of the Premises in
excess of the Sublease Limit in addition to the Sublease Limit, and Tenant
desires to include Tenant's options to extend in the sublease terms, Landlord
agrees not to unreasonably withhold its consent to such request provided that
the proposed subtenant is of a quality comparable to other office tenants in the
Newport Corporate Center.
9. INTENTIONALLY DELETED
10. DAMAGE OR DESTRUCTION
10.1 In the event the Building and/or the Premises is damaged by fire or
other perils covered by Landlord's insurance, Landlord shall:
(a) In the event of a partial destruction of the Building and/or the
Premises, to an extent not exceeding fifty percent (50%) of the full insurable
value thereof, and if the damage thereto is such that the Building and/or the
Premises may be repaired, reconstructed or restored within a period of one
hundred twenty (120) days from the date of the happening of such casualty and if
Landlord will receive insurance proceeds sufficient to cover the cost of such
repairs, then Landlord shall commence and proceed diligently with the work of
repair, reconstruction and restoration and this Lease shall continue in full
force and effect.
(b) If such repair, reconstruction, and restoration shall require a
period longer than one hundred twenty (120) days or exceeds fifty percent (50%)
of the full insurable value thereof, or if said insurance proceeds will not be
sufficient to cover the cost of such repairs, then Landlord either may elect to
so repair, reconstruct or restore and the Lease shall continue in full force and
effect or Landlord may elect not to repair, reconstruct, or restore and the
Lease shall then terminate. Under any of the conditions of this Section 10.1(b),
Landlord shall give written notice to Tenant of its intention within ninety (90)
days after the occurrence
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of such damage or destruction. In the event Landlord elects not to restore the
Building and/or the Premises, this Lease shall be deemed to have terminated as
of the date of such partial destruction.
(c) If the Newport Terrace Building continues to be leased by Tenant
following any destruction of the Building and there remains at least eleven (11)
months on the term of this Lease and Tenant has exercised an option to extend,
and Tenant requests within thirty (30) days of the date of destruction, Landlord
shall rebuild the Building and Tenant Improvements regardless of the degree of
damage or time required to rebuild, provided Tenant agrees to pay any costs not
reimbursed by insurance and such payment is made to Landlord prior to the
commencement of construction.
(d) Notwithstanding the foregoing provisions of this Section 10.1,
if the parties are unable to agree on the extent of damage or whether or not the
damage can be repaired within any applicable time limits within ten (10) days
after Landlord's notice to Tenant of its election, then the dispute resolution
procedures of Section 17.6 shall be used to resolve the issue.
10.2. Upon any termination of this Lease under any of the provisions of
this Section 10, the parties shall be released without further obligation to the
other from the date possession of the Premises is surrendered to Landlord except
for items which have therefore accrued and are then unpaid or any items which
have been prepaid by Tenant and a refund shall be then due.
10.3 In the event of repair, reconstruction, and restoration by Landlord
as herein provided, the Rent payable under this Lease shall be abated
proportionately with the degree to which Tenant's use of the Premises is
impaired during the period of such repair, reconstruction or restoration unless
the damage or destruction was caused by the negligence or willful misconduct of
Tenant in which event the Rent payable hereunder will continue unabated. Tenant
shall not be entitled to any compensation or damages for loss in the use of the
whole or any part of the Premises and/or any inconvenience or annoyance
occasioned by such damage, repair, reconstruction or restoration, unless cause
in whole or in part by Landlord's negligence or willful misconduct.
10.4 Tenant shall not be released from any of its obligations under this
Lease except to the extent and upon the conditions expressly stated in this
Section 10. Notwithstanding anything to the contrary contained in this Section
10, if Landlord is delayed or prevented from repairing or restoring the damaged
Premises within twelve (12) months after the occurrence of such damage or
destruction by reason of acts of God, war, governmental restrictions, inability
to procure the necessary labor or materials, or other cause beyond the control
of Landlord, Landlord shall be relieved of its obligation to make such repair or
restoration and Tenant shall be released from its obligations under this Lease
as of the end of said one (1) year period and this Lease shall be deemed
terminated.
10.5 If Landlord is obligated to or elects to repair or restore as herein
provided, Landlord shall be obligated to make repair or restoration only of
those portions of the Building and/or the Premises and/or Tenant Improvements
which were originally provided at Landlord's
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expense, and the repair and restoration of items not provided at Landlord's
expense shall be the obligation of Tenant.
10.6 Notwithstanding anything to the contrary contained in this Section
10, if any damage or destruction is due to any cause other than a cause covered
by the insurance required to be carried by Landlord under this Lease and such
damage or destruction will cost in excess of ten percent (10%) of the then
current full replacement cost of the Building, Landlord may elect to terminate
this Lease by giving notice thereof to Tenant provided, however, if Landlord
elects to terminate this Lease, Tenant shall have the right to cause Landlord to
repair such damage if, within twenty (20) days of receipt of Landlord's notice
of termination, Tenant agrees to pay for the repair cost in excess of such ten
percent (10%) and provides Landlord with reasonably adequate assurances of
Tenant's ability to pay for such excess cost.
10.7 Notwithstanding anything to the contrary contained in this Section
10, Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Premise when the damage resulting from any casualty covered under
this Section 10 occurs during the last twelve (12) months of the then current
term of this Lease. However, if Landlord chooses not to restore, Tenant may
elect to terminate this Lease.
11. INDEMNIFICATION
11.1 Indemnity by Tenant. Tenant shall indemnify, defend and hold
-------------------
Landlord harmless from all claims arising from Tenant's use of the Real
Property, Building and Premises or the conduct of its business or from any
activity, work, or thing done, permitted or suffered by Tenant in or about the
Real Property, Building or Premises. Tenant shall further indemnify, defend and
hold Landlord harmless from all claims arising from any breach or default in the
performance of any obligation to be performed by Tenant under the terms of this
Lease, or arising from any act, neglect, fault or omission of Tenant or of its
agents, contractors or employees, and from and against all costs, reasonable
attorneys' fees, expenses, and liabilities incurred in or about such claim or
any action or proceeding brought thereon. In case any action or proceeding shall
be brought against Landlord by reason of any such claim, Tenant, upon notice
from Landlord, shall defend the same at Tenant's expense; provided that the
foregoing provision shall not be construed to make Tenant responsible for loss,
damage, liability or expense resulting from injuries to third parties caused by
the negligence of Landlord, or its officers, contractors, agents or employees.
11.2 Indemnity by Landlord. Landlord shall indemnify, defend and hold
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Tenant harmless from all claims arising from any activity, work, or thing done
or permitted by Landlord in or about Real Property, Building and Premises.
Landlord shall further indemnify, defend and hold Tenant harmless from all
claims arising from any breach or default in the performance of any obligation
to be performed by Landlord under the terms of this Lease, or arising from any
act, neglect, fault or omission of Landlord or of its agents, contractors or
employees, and from and against all costs, reasonable attorneys' fees, expenses,
and liabilities incurred in or about such claim or any action or proceeding
brought thereon. In case any action or proceeding shall be brought against
Tenant by reason of any such claim, Landlord, upon notice from Tenant, shall
defend the same at Landlord's expense; provided that the foregoing provision
shall not be construed to make Landlord responsible for loss, damage, liability
or
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expense resulting from injuries to third parties caused by the negligence of
Tenant, or its officers, contractors, agents or employees.
11.3 Limitation. Notwithstanding anything contained above in this
----------
Section, in the event of concurrent negligence of Tenant, its agents, employees
or contractors, on the one hand, and that of Landlord, its agents, employees, or
contractors on the other hand, which concurrent negligence results in injury or
damage to persons or property, Tenant's obligation to indemnify Landlord and
Landlord's obligation to indemnify Tenant as set forth in this Section shall be
limited to the extent of the defaulting party's negligence, and that of its
agents, employees, or contractors, including the defaulting party's proportional
share of costs, attorneys fees and expenses incurred in connection with any
claim, action or proceeding brought with respect to such injury or damage.
12. DAMAGE TO TENANT'S PROPERTY
Notwithstanding anything in this Lease to the contrary, Landlord or its agents
shall not be liable for any damage to Tenant's property which is caused by the
following: (a) loss or damage to any property by theft or otherwise (unless
caused by Landlord's or its employees', agents' or contractors' negligence), or
(b) any injury or damage to property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak from any part of
the Building or from the pipes, appliances or plumbing work therein or from the
roof, street or sub-surface or from any other place or resulting from dampness
(unless caused by Landlord's negligence or willful misconduct). Landlord or its
agents shall not be liable for interference with light or other incorporeal
hereditaments. Tenant shall give prompt notice to Landlord in case of fire or
accidents in the Premises or in the Building or of defects herein or in the
fixtures or equipment.
13. INSURANCE
13.1 Tenant's Insurance. Tenant shall, during the Term and any other
------------------
period of occupancy, at its sole cost and expense, keep in full force and effect
the following insurance:
(a) Commercial general liability insurance insuring Tenant against
any liability arising out of Lease, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be in the
amount of not less that Five Million Dollars ($5,000,000.00) combined single
limit per occurrence and aggregate for injury to, or death of one or more
persons and for damage to tangible property (including loss of use). The policy
shall insure the operations of independent contractors, and include contractual
liability (covering the indemnity contained in Section 11 above) and shall (1)
name Landlord as an additional insured (limited to liabilities arising out of or
in connection with Tenant's operations or Premises), and (2) contain a provision
that "the insurance provided Landlord hereunder shall be primary and non-
contributing with any other insurance available to Landlord."
13.2 Landlord's Insurance. Landlord shall, during the Term and any other
--------------------
period of occupancy, keep in full force and effect the following insurance:
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(a) Commercial general liability insurance insuring Landlord against
any liability arising out of Landlord's use, occupancy or maintenance of the
Building and all areas appurtenant thereto. Such insurance shall be in the
amount of not less that Five Million Dollars ($5,000,000.00) combined single
limit per occurrence and aggregate for injury to, or death of one or more
persons and for damage to tangible property (including loss of use). The policy
shall insure the operations of independent contractors, and include contractual
liability (covering the indemnity contained in Section 11 above) and shall (1)
name Tenant as an additional insured (limited to liabilities arising out of or
in connection with Tenant's operations or the Premises), and (2) contain a
provision that "the insurance provided Landlord hereunder shall be primary and
non-contributing with any other insurance available to Landlord."
(b) Property insurance on a "special perils" form together with
coverage for earthquake and sewer backup (excluding any property which Tenant is
obligated to insure), for the full replacement value of the Building, all
personal property owned by Landlord at the Building, and all improvements and
betterments to the Building, with a deductible not to exceed $20,000.00. Such
policy shall also include coverage for loss of rental income, covering direct or
indirect loss of Landlord's earnings attributable to abatement of Rent under
this Lease or termination of this Lease as provided herein in an amount as will
properly reimburse Landlord.
(c) Landlord may at its own expense obtain and carry any other form
or forms of insurance as it or Landlord's mortgagees may determine advisable.
13.3 Policies. All policies shall be written in a form satisfactory to
--------
Landlord and shall be taken out with insurance companies holding a General
Policyholders Rating of "A" and a Financial Rating of "V" or better, as set
forth in the most current issue of Bests Insurance Guide. Prior to taking
occupancy of the Premises, Tenant shall deliver to Landlord certificates
evidencing the existence of the amounts and forms of coverage required in
Section 13.1 above. No such policy shall be cancelable or reducible in coverage
except after forty-five (45) days prior written notice to Landlord or after ten
(10) days prior written notice for nonpayment of premiums. Tenant shall within
ten (10) days prior to the expiration of such policies, furnish Landlord with
renewals or "binders" thereof. If Landlord obtains any insurance that is the
responsibility of Tenant under this Section 13, Landlord shall deliver to Tenant
a written statement setting forth the cost of any such insurance and showing in
reasonable detail the manner in which it has been computed. All insurance
passed through to tenants as an Operating Cost shall be at market based premiums
and deductibles, as evidenced by bids if requested by Tenant.
13.4 Evidence of Insurance. All insurance policies shall be written in a
---------------------
form and with an insurance company as required in Section 13.3. Within fifteen
(15) days after Tenant takes possession of the Premises, upon Tenant's request
Landlord shall deliver to Tenant certificates evidencing the existence of the
amounts and forms of coverage required by this Lease. Landlord shall within ten
(10) days prior to the expiration of such policies, upon Tenant's request
furnish Tenant with renewals or "binders" thereof.
14. WAIVER OF SUBROGATION
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Tenant and Landlord agree to mutually release each other from liability, and to
waive all right of recovery against the other, for any loss of or damage to the
property of each, including earnings derived there from caused by or resulting
from fire, the perils of the commonly referred to special form coverage and
leakage from automatic sprinkler systems, if any, or from perils insured against
under any insurance policies maintained by the parties hereto, regardless of the
cause of such loss or damage even though it results from some act or negligence
of a party hereto, its agents or representatives; provided, however, that this
provision shall be inapplicable if it should have the effect, but only to the
extent that it would have the effect, of invalidating any insurance coverage of
the parties thereto.
15. EMINENT DOMAIN
15.1 If all of the Premises, access to the Premises, or such portion of
the Premises or the Newport Corporate Center or access thereto as would, in
Landlord's or Tenant's reasonable judgment, materially interfere with the
continuation of Tenant's business operations in substantially the same manner
and space, shall be permanently taken or condemned for any public purpose, then
this Lease, at the option of Tenant or Landlord upon the giving of written
notice to the other party, shall forthwith cease and terminate upon the date
when title vests in the condemning or taking entity. If this Lease is terminated
as provided above, then this Lease shall cease and expire as if the date of
transfer of possession of the Premises, the Newport Corporate Center, or any
portion thereof, was the Expiration Date of this Lease.
15.2 In the event that this Lease is not terminated by either Landlord or
Tenant under the prior Section, Tenant shall pay Rent up to the date of transfer
of possession of such portion of the Premises so taken or condemned and this
Lease shall thereupon cease and terminate with respect to such portion of the
Premises so taken or condemned as if the date of transfer of possession of the
Premises was the Expiration Date of the term of this Lease relating to such
portion of the Premises. Thereafter the Rent shall be adjusted on a pro rata,
net rentable square foot basis.
15.3 In the event of any such condemnation or taking and this Lease is not
so terminated, Landlord shall promptly repair the Premises or the Newport
Corporate Center, as the case may be, to the condition that existed at the
Commencement Date, so that the remaining portion of the Premises or Newport
Corporate Center, as the case may be, shall constitute a complete architectural
unit, fit for Tenant's occupancy and business; provided, however, that
Landlord's obligation to repair hereunder shall be limited to the extent of the
net proceeds made available to Landlord for such repair from any such
condemnation or taking. Landlord shall promptly make available to Tenant any and
all net proceeds made available to Landlord from such condemnation or taking to
the extent such proceeds are attributable to Tenant Improvements owned by and/or
paid for by Tenant and are not used in repairing or restoring such Tenant
Improvements to the condition that existed at the Commencement Date.
15.4 In the event of any temporary taking or condemnation for any public
purpose of the Premises or any portion thereof, then this Lease shall continue
in full force and effect except that Rent shall be adjusted on a pro rata net
rentable square foot basis for the period of time that the Premises are so taken
as of the date of transfer of possession of the Premises, and Landlord shall be
under no obligation to make any repairs or alterations.
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15.5 In the event of any condemnation or taking of the Premises, Tenant
hereby assigns to Landlord the value of all or any portion of the unexpired term
of the Lease and all Tenant Improvements and Tenant may not assert a claim for a
condemnation award therefor; provided, however, Tenant may pursue a separate
attempt to recover an award or compensation against or from the condemning
authority for (i) the value of any fixtures, furniture, furnishings, and other
personal property which were condemned but which under the terms of this Lease
Tenant is permitted to remove at the end of the Term, (ii) the unamortized cost
of Tenant Improvements, which are not so removable by Tenant at the end of the
term of this Lease but which were installed solely at Tenant's expense, (iii)
relocation and moving expenses, and (iv) compensation for loss to Tenant's
business.
15.6 Subject to Section 15.5, Landlord shall have the exclusive authority
to grant possession and use to the condemning authority and to negotiate and
settle all issues of just compensation or, in the alternative, to conduct
litigation concerning such issues; provided, however, that Landlord shall keep
Tenant informed of the proceedings and negotiations concerning the Premises.
16. BANKRUPTCY
If Tenant shall file a petition in bankruptcy under any provision of the
Bankruptcy Code as then in effect, or if Tenant shall be adjudicated a bankrupt
in involuntary bankruptcy proceedings and such adjudication shall not have been
vacated within ninety (90) days from the date thereof, or if a receiver or
trustee shall be appointed of Tenant's property and the order appointing such
receiver or trustee shall not be set aside or vacated within ninety (90) days
after the end thereof, or if Tenant shall assign Tenant's estate or effects for
the benefit of creditors, or if this Lease shall, by operation of law or
otherwise, pass to any person or persons other than Tenant, then in any such
event Landlord may terminate this Lease, if Landlord so elects, with notice of
such election and with or without entry or action by Landlord. In such case,
notwithstanding any other provisions of this Lease, Landlord, in addition to any
and all rights and remedies allowed by law or equity, shall, upon such
termination, be entitled to recover damages in the amount provided in Section
17.2 hereof. Neither Tenant nor any person claiming through or under Tenant or
by virtue of any statute or order of any court shall be entitled to possession
of the Premises but shall surrender the Premises to Landlord. Nothing contained
herein shall limit or prejudice the right of Landlord to recover damages by
reason of any such termination equal to the maximum allowed by any statute or
rule of law in effect at the time when, and governing the proceedings in which,
such damages are to be provided; whether or not such amount is greater, equal
to, or less than the amount of damages recoverable under the provisions of this
Section.
17. DEFAULT AND RE-ENTRY: REMEDIES
17.1 Default. The occurrence of any one or more of the following events
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shall constitute a default hereunder by the party acting or failing to act:
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(a) The failure to make any payment required by this Lease as and
when due, where such failure shall continue after three (3) days' written notice
that the same was not paid when due.
(b) The failure to observe or perform any of the express or implied
covenants or provisions of this Lease to be observed or performed by Tenant,
other than as specified in Section 17.1(a) above, where such failure shall
continue for a period of fifteen (15) days after written notice thereof from the
other party. If the nature of the default is such that more than fifteen (15)
days are reasonably required for its cure, then no default shall occur if the
party shall commence such cure within said fifteen (15) day period and
thereafter diligently prosecute such cure to completion. Notwithstanding the
above to the contrary, Tenant may contest mechanic liens and other claims
against the Building and/or Premises made by third parties without being in
default so long as it takes reasonably adequate steps to protect the Landlord's
interest.
(c) Subject to Section 365(b)(2) and (e)(1), Bankruptcy Reform Act of
1978, as amended by the Bankruptcy Amendments and Federal Judgeship Act of 1984,
(a) The making of any general assignment for the benefit of creditors; (b) the
filing by or against a party a petition to have that party adjudged a bankrupt
or a petition for reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of a petition filed against a party, the same is
dismissed within thirty (30) days); (c) the appointment of a trustee or receiver
to take possession of substantially all of a party's assets located at the
Premises or of that party's interest in this Lease, where possession is not
restored within one hundred twenty (120) days; or (d) the attachment, execution
or other judicial seizure of substantially all of a party's assets located at
the Premises or of that party's interest in this Lease where such seizure is not
discharged within one hundred twenty (120) days.
17.2 Remedies on Default. In the event of any such default by Tenant,
-------------------
then Landlord may elect either (a) to cancel and terminate this Lease, (b) to
terminate Tenant's right to possession only without terminating the Lease, or
(c) pursue any other remedy available at law or equity.
In the event of election under 17.2(b) above to terminate Tenant's right to
possession only, Landlord may, at Landlord's option, enter into the Premises,
change the locks and take and hold possession of the Premises in accordance with
applicable law, without such entry into possession terminating this Lease or
releasing Tenant in whole or in part from Tenant's obligation to pay the Rent
hereunder for the full stated term. Upon such re-entry, Landlord may remove all
persons and property from the Premises, and such property may be removed and
stored in a public warehouse or elsewhere at the cost of and for the account of
Tenant. No re-entry or taking possession of the Premises by Landlord pursuant
to this Section shall be construed as an election to terminate this Lease unless
a written notice of such intention is given to Tenant or unless the termination
thereof is decreed by a court of competent jurisdiction. Upon and after entry
into possession without termination of the Lease, Landlord shall use good faith
best efforts to relet the Premises, or any part thereof, for the account of
Tenant, to any person, firm or corporation, other than Tenant, for such rent,
for such time and upon such terms as Landlord, using reasonable discretion,
shall determine, subject to Landlord's legal duty to mitigate its damages and
re-let the Premises, but Landlord shall not be
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required to accept any tenant offered by Tenant or to observe any instruction
given by Tenant about such reletting. In any such case, Landlord may make
repairs and redecorate the Premises to the extent reasonably necessary to secure
a replacement tenant, and Tenant shall, upon demand, pay the costs thereof,
together with all of Landlord's reasonable expenses of reletting. If the
consideration collected by Landlord upon any such reletting for Tenant's
account, and after deducting all expenses incident thereto, including reasonable
brokerage fees and legal expenses, is not sufficient to pay monthly the full
amount of the Rent provided in this Lease, Tenant shall pay to Landlord the
amount of each monthly deficiency upon demand. In the event that Landlord shall
have terminated Tenant's right to possession only, Landlord shall have the right
to further pursue any remedy at law or in equity that may be available to
Landlord.
17.3 Rent After Termination. In the event Tenant ceases to conduct its
-----------------------
business operations on the Premises or, if Landlord shall at any time be
entitled to Rent under this Lease pursuant to any of the covenants, conditions
or agreements of this Lease either (1) after termination of Tenant's right to
possession without termination of this Lease, or (2) after the termination of
this Lease, then Landlord shall recover and Tenant agrees to pay the Basic Rent
and any Additional Rent, together with late fees and interest, as provided in
this Lease. In the event that Landlord shall elect to terminate this Lease then
upon such termination Tenant shall (if it has not already done so) quit and
surrender the Premises to Landlord and Landlord may recover from Tenant:
(a) Any unpaid Rent which had been earned at the time of such
termination; plus
(b) The unpaid Rent which would have been earned after termination
until the time of award exceeds the amount of such Rent loss that Tenant proves
could have been reasonably avoided; plus
(c) The present value at the time of award of the amount by which the
unpaid Rent for the balance of the term after the time of award exceeds the
amount of such Rent loss that Tenant proves could be reasonably avoided; plus
(d) Any other amount necessary to compensate Landlord for all the
damage proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom.
17.4 Cumulative Remedies; No Waiver. Except as otherwise provided in this
-------------------------------
Lease, all rights, options and remedies of either party contained in this Lease
shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other, and Landlord or Tenant shall have the right to pursue
any one or all of such remedies or any other remedy or relief which may be
provided by law, whether or not stated in this Lease. No waiver of any default
of Tenant or Landlord hereunder shall be implied from any acceptance by Landlord
or Tenant of any Rent or other payments due hereunder or any omission by
Landlord or Tenant to take any action on account of such default if such default
persists or is repeated, and no express waiver shall affect defaults other than
as specified in said waiver. The consent or approval of Landlord or Tenant to
or of any act by the other requiring the other's consent or approval shall
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not be deemed to waive or render unnecessary Landlord's or Tenant's consent or
approval to or of any subsequent similar acts by Tenant or Landlord.
17.5 Tenant Remedies. As more specifically provided elsewhere in this
---------------
Lease, upon Landlord's default, Tenant may pursue the remedies given in this
Lease.
17.6 Mitigation. Notwithstanding anything to the contrary herein, both
----------
Landlord and Tenant shall have the obligation to take reasonable steps to
mitigate their damages caused by any default under this Lease.
17.7 Dispute Resolution Procedures. Except with respect to actions by
-----------------------------
Landlord to recover possession of the Premises through an unlawful detainer or
similar procedure, and except with respect to emergency matters for which a
restraining order or other similar equitable relief is necessary, the parties
agree to attempt to resolve any disputes under this Lease and related agreements
as follows: both parties covenant to provide a person authorized and empowered
to resolve any dispute that may arise to meet face to face with the person from
the other party upon ten (10) days prior notice at a mutually convenient place.
Such persons shall negotiate in good faith to attempt to resolve the dispute for
as long as either party so desires and in good faith believes progress can be
made. Failing a resolution of the dispute by this method, the parties shall
submit to non-binding mediation of the dispute with a mediator of their choice
with experience in mediating commercial disputes. Both parties shall pay an
equal share of the fees of the mediator prior to the commencement of the
mediation. Otherwise the parties shall each pay their own costs and expenses of
such mediation. Failing resolution of the dispute by this method, the parties
shall resort to arbitration or litigation as provided herein. Any dispute under
this Lease shall not be subject to arbitration unless and to the extent required
by law or as otherwise agreed to by the parties or specifically stated herein.
When any dispute is to be arbitrated, the parties shall choose one arbitrator.
If the parties do not agree on an arbitrator within fifteen (15) days after
being requested to do so in writing, then either party may petition the Superior
Court of Washington to appoint an arbitrator. Each of the parties shall pay one-
half of the arbitrators' fees. The arbitration shall be conducted in accordance
with Rules 2.3 through 8.1 of the Superior Court Mandatory Arbitration Rules
(MAR), 1997 official edition of the Washington Rules of Court, as they may be
amended from time to time. All disputes not required to be arbitrated after the
procedures of this Section have been undertaken shall be resolved by litigation
in an appropriate court of law.
18. INTENTIONALLY DELETED
19. SUBORDINATION, QUIET ENJOYMENT
19.1 Subordination. This Lease is subject to and is hereby subordinated
to all present and future mortgages, deeds of trust and other encumbrances
affecting the Premises, Building and Real Property subject to Tenant's right to
peaceful and quiet enjoyment and exclusive possession during the Lease term and
any extensions thereof, so long as Tenant is not in default hereunder. The
foregoing sentence is conditioned upon Landlord obtaining and delivering to
Tenant a nondisturbance agreement in which any person currently or hereafter
holding a mortgage, deed of trust or other encumbrance to which this Lease is to
be subordinate agrees to recognize this Lease upon foreclosure, trustee's sale
or deed in lieu thereof so long as the
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Tenant is not in default under this Lease beyond the expiration of any
applicable cure period. Tenant will, upon demand by Landlord, execute such
instruments as may be reasonably required at any time, and from time to time, to
subordinate the rights and interests of the Tenant under this Lease to the lien
of any mortgage or trust deed at any time placed on the land or which the
Premises are a part; provided however, that such subordination shall not affect
Tenant's right to possession, use and occupancy of the Premises as long as
Tenant shall not be in default under any of the terms and conditions of this
Lease.
19.2 Attornment and Estoppel. Tenant further agrees:
------------------------
(a) That any such subordination agreement will contain a provision
satisfactory to Landlord's financing lender whereby Tenant will agree, in the
event of foreclosure of any such mortgage or trust deed to attorn to and
recognize as its Landlord under the terms of this Lease said lender or any
purchaser of the leased property at a foreclosure sale or their heirs,
successors, or assigns; and
(b) That it will execute and deliver to such lender a true Estoppel
Certificate in a form reasonably satisfactory to such lender.
20. ESTOPPEL CERTIFICATES
Tenant shall, from time to time, upon written request of Landlord, execute,
acknowledge and deliver to Landlord or its designee a written statement stating:
the date this Lease was executed; the Commencement Date and Expiration Date; the
amount of minimum monthly Rent and the date to which such Rent has been paid;
and certifying to the extent true: that this Lease is in full force and effect
and has not been assigned, modified, supplemented or amended in any way (or
specifying the date of the agreement so affecting this Lease); that this Lease
together with all Exhibits represents the entire agreement between the parties
as to this leasing; that all conditions under this Lease to be performed by
Landlord have been satisfied; that all required contributions by Landlord to
Tenant on account of Tenant's improvements have been received; that on this date
there are no existing defenses or offsets which the Tenant has against the
enforcement of this Lease by Landlord, and that not more than one month's Rent
has been paid in advance. It is intended that any such statement delivered
pursuant to this Section may be relied upon by a prospective purchaser of
Landlord's interest or a mortgagee of Landlord's interest or assignee of any
mortgage upon Landlord's interest in the Building. If Tenant shall fail to
respond within ten (10) days of receipt by Tenant of Landlord's written request,
Landlord shall give Tenant a second identical notice advising Tenant it has to
respond within five (5) business days after receipt by Tenant of said second
request by Landlord as herein provided, otherwise Tenant shall be deemed to have
given such certificate as above provided without modification and shall be
deemed to have admitted the accuracy of any information supplied by Landlord to
a prospective purchaser of mortgagee, that this Lease is in full force and
effect, that there are no uncured defaults in Landlord's performance, that the
security deposit is as stated in this Lease, and that not more than one month's
Rent has been paid in advance. If, in Tenant's good faith opinion, there are
discrepancies between the terms stated on the Estoppel Certificates and the
agreement then in effect, including any known current defaults under this Lease
by either Landlord or Tenant, including written modifications to the Lease and
stating the date and nature of such modifications and including the date to
which the Basic Rent
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and other sums payable under this Lease have been paid, that Tenant be allowed
to describe all such exceptions.
21. ATTORNEY'S FEES
21.1 Payment to Prevailing Party. If either party shall bring an action or
---------------------------
proceeding (including without limitation, any cross-complaint, counterclaim or
third party claim) against any other party by reason of the breach or alleged
violation of any covenant, term or obligation hereof, or for the enforcement of
any provision hereof, or to interpret, or otherwise arising out of this Lease,
except for the appraisal procedures of Section 2.2, the prevailing party in such
action or proceeding shall be entitled to its costs and expenses of suit,
including but not limited to reasonable attorneys' fees, which shall be payable
whether or not such action is prosecuted to judgment. "Prevailing party" within
the meaning of this Section shall include, without limitation, a party who
dismisses an action for recovery hereunder in exchange for full payment of the
sums allegedly due, performance of covenants allegedly breached or consideration
substantially equal to all of the relief sought in the action.
21.2 Attorneys' Fees in Third Party Litigation. If either party is
-----------------------------------------
required to initiate or defend any action or proceeding with a third party
(including, without limitation, any cross-complaint, counterclaim or their party
claim) because of the other party's breach of this Lease, or otherwise arising
out of this Lease, and such party is the prevailing party in such action or
proceeding, then the party so initiating or defending shall be entitled to its
costs and expenses of suit, including but not limited to reasonable attorneys'
fees from the other party.
21.3 Scope of Fees. Attorneys' fees under this Section shall include
-------------
attorneys' fees on any appeal, and, in addition, a party entitled to attorneys'
fees shall be entitled to all other reasonable costs and expenses occurred in
connection with such action.
22. INTENTIONALLY DELETED
23. NOTICES
All bills, statements, notices or communications which either party may desire
or be required to give to the other party pursuant to this Lease shall be in
writing and either delivered to the other party personally or sent by courier or
registered or certified mail addressed to Tenant or Landlord as the case may be,
at the address below, all such notices being effective upon receipt as shown on
the return receipt from the postal service or courier, if mailed by registered
or certified mail or courier addressed to Tenant or to Landlord at the addresses
designated as follows:
To Tenant: Attachmate Corporation
Attn: Legal Department
3617 131st Avenue S.E.
Bellevue, WA 98006
Facsimile No. (425) 649-6390
with copy to: Geoffrey G. Revelle
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Stoel Rives LLP
600 University Street
3600 One Union Square
Seattle, WA 98101
Facsimile No. (206) 386-7500
To Landlord: Bentall Newport Centre L.L.C.
3650 131st Ave. S.E., Suite 620
Bellevue, WA 98006-1334
Facsimile No. (425) 643-7215
In addition, any notice or other communication sent hereunder by hand delivery
or certified or registered United States mail shall also be sent by facsimile to
the recipient; provided, however, any notice or other communication sent by
facsimile shall not be deemed given for purposes of the computation of time
within which a response is required since it is the express intent of the
parties that all official notices or communications hereunder be given by hand
delivery or certified or registered United States mail. Either party may
specify a different address for notice purposes by written notice to the other.
Any notice by Tenant may be addressed to Landlord at the address where the last
previous Rent hereunder was payable or in the case of subsequent change upon
notice given, to the latest address furnished.
24. HOLDING OVER
Should Tenant continue to occupy the Premises after expiration of the Lease
term or any renewal or renewals thereof, or after a forfeiture should occur,
such tenancy shall be from month to month at a monthly Rent equal to one hundred
fifty percent (150%) of the Rent paid for the last month of the Term.
25. CONSTRUCTION OF BUILDING AND TENANT IMPROVEMENTS
25.1 Initial Shell Construction. Landlord, at its sole cost and expense,
---------------------------
shall construct the Building Shell and parking garage shell as defined in the
construction drawings and specifications listed in Exhibit "C-2" and as
generally described in Exhibit "C-3". Tenant shall have the ability to
participate in the process of finalizing and approving the final construction
drawings and specifications for the Building and in the selection of materials
and colors as required by same. Additions and/or modifications to the Building
which are requested by the Tenant shall be subject to Landlord's prior approval
pursuant to the provisions of the Construction Agreement. Additions and/or
modifications to the Building which are requested by the Tenant shall be
incorporated at Tenant's expense if the changes involve any increase in the
design and/or construction related costs of the Building, provided such requests
by Tenant are made in a timely manner so as not to delay Substantial Completion.
If Tenant's requested additions and/or modifications to the Building will result
in a delay of Substantial Completion, Landlord shall so notify Tenant prior to
the commencement of such work. If Tenant elects to continue with such work, and
a delay in Substantial Completion results therefrom, Tenant shall be liable for
any additional costs and expenses incurred by Landlord. If the modifications
requested by Tenant do not increase the cost or delay construction of the
Building and are otherwise approved by Landlord, then they shall be made without
cost to Tenant.
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25.2 Initial Tenant Improvements. Landlord's sole tenant improvement
---------------------------
obligation is set forth in Exhibit "C" and it is the Tenant's obligation to pay
for the cost of constructing the Link as set forth in Exhibit "C-4", if it is
constructed, which is Tenant's choice. Landlord shall enter into a construction
contract with its contractor for the construction of said improvements in
accordance with Exhibit "C" and shall thereafter monitor the completion of such
work. Tenant Improvements shall be in accordance with construction drawings and
specifications prepared by Tenant's architect from space plans indicating
Tenant's finalized requirements for partitions, electric, telephone and all
other requirements Tenant's space plans shall be signed off by Tenant and
approved by Landlord. Tenant agrees to provide said space plans and
construction drawings at its sole cost per the work schedule set forth in
Exhibit "C-1".
25.3 Tenant Improvement Allowance. In addition, it is hereby agreed and
----------------------------
understood that Landlord will contribute the amount of Twenty-Five Dollars
($25.00) per square foot of Useable Area of the Premises (the "Improvement
Allowance") toward the cost of the Tenant Improvements to be made to the
Premises, including without limitation engineering fees, permits and Washington
state sales tax. Tenant shall pay its space planning and architectural fees
directly and not from the Improvement Allowance. Said Improvement Allowance
shall be in addition to those costs and expenses for which Landlord is
responsible under Section 25.1 above. However, Landlord shall have no
additional responsibility or obligation to pay any amounts in excess of the
Improvement Allowance and any cost or expenses incurred by Tenant in excess of
the Improvement Allowance shall be the sole and exclusive responsibility of the
Tenant.
25.4 Pricing. Landlord agrees that, following Landlord's receipt of Tenant's
-------
space plans and design development documents, the construction drawings and the
contractor's price schedule for such work, Landlord will promptly notify Tenant
in writing of such prices. Landlord will require of the contractor that all
construction costs and expenses for core, shell and Tenant Improvements shall be
competitive. Landlord will further require of its architect and engineers that
all fees and expenses in connection with this project shall be competitive.
25.5 Title to Tenant Improvements. Legal title to all Tenant Improvements
----------------------------
shall immediately vest in Landlord upon substantial completion thereof.
25.6 Link Construction. Landlord shall use its reasonable best efforts to
-----------------
construct the Link at the same time as Landlord constructs the Building Shell
and to obtain all necessary governmental permits and approvals for the Link
provided, however, that any delays in the construction of the Link or in
obtaining necessary permits for the Link shall not result in a delay of
Substantial Completion or Final Completion. The specific provisions regarding
the design and construction of the Link are set forth in more detail in Exhibit
"C". Landlord agrees to provide Tenant with weekly updates on the status of the
governmental permits and approvals for the Link. If Landlord is delayed in
obtaining the necessary governmental permits and approvals beyond December 31,
1998, Tenant shall have the right to work in a coordinated effort with Landlord
to obtain such permits and approvals or, at Tenant's election, take over the
permit and approval process provided, however, that if Tenant takes over the
permit and approval process Tenant shall provide Landlord with weekly updates on
the status of the
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permits and approvals and shall use its good faith reasonable best efforts to
obtain all of the necessary permits and approvals promptly.
25A. ALTERATIONS AND ADDITIONS BY TENANT
25A.1 Alterations Process. Following the Commencement Date:
-------------------
(a) Tenant may make or cause to be made non-structural, interior
alterations, additions or improvements to the Premises without the prior
approval of Landlord when such alterations, additions or improvements are under
Ten Thousand Dollars ($10,000.00). Within thirty (30) days of completion of such
work Tenant shall provide Landlord with copies of all as-builts and plans and
specifications. All contractors shall be licensed and bonded.
(b) Tenant may make or cause to be made non-structural, interior
alterations, additions or improvements to the Premises in excess of Ten Thousand
Dollars ($10,000.00) without the prior approval of Landlord if Tenant has
provided Landlord with written notice of its intent to make changes at least
fourteen (14) days prior to the start of any work. Notice shall include detailed
information concerning the following items:
(i) general description of the changes to be made including the
description of any demolition work;
(ii) list of licensed and bonded contractors selected to do the work;
(iii) estimate of the costs of work;
(iv) intended work schedule including duration and indicating whether
the work will be accomplished during "normal building hours" or on an off-hours
basis;
(v) plans and specifications for the work.
(c) Tenant shall complete any work done pursuant to this Section and in
accordance with the Building Rules and Regulations and the Construction Rules
and Regulations attached and incorporated hereto as Exhibits "E" and "F",
respectively, at Tenants sole risk, cost and expense, and shall keep the
Premises, Building and Real Property free and clear of liens of any kind. If any
such liens are filed, Tenant shall have ten (10) days from the receipt of notice
from Landlord informing Tenant of such filing to either remove such liens or to
provide a bond in the amount of one hundred fifty percent (150%) of the lien
claim indemnifying Landlord as security for the removal or certification
thereof. Tenant covenants and agrees that all work done by Tenant shall be
performed in full compliance with all laws, rules, orders, ordinances,
regulations and requirements of all governmental agencies, offices and boards
having jurisdiction over the Premises. Further, Tenant shall provide to
Landlord, within thirty (30) days of completion of any work, copies of all as-
builts and plans and specifications. Tenant agrees to hold harmless and
indemnify Landlord in the event of any breach of Tenant's obligations.
25A.2 Title to Property. Landlord shall notify Tenant in writing prior to
-----------------
commencement of any alterations or additions under Section 25A.1(b) if Tenant
will be required to remove such alterations or additions at the end of the Term
and restore the Premises to the same condition they were in prior to such
installation. At the expiration or earlier
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termination of this Lease, all alterations or additions made by Tenant after the
Commencement Date shall, at Tenant's option, unless otherwise required by
Landlord at the time constructed or added, either be removed and the Premises
returned to their original configuration or shall become the property of
Landlord, free and clear of liens, claims and encumbrances and to remain upon
and to be surrendered with the Premises. Notwithstanding anything to the
contrary herein, all movable partitions, business and trade fixtures, machinery
and equipment, communications equipment and office equipment affixed to or
located within the Premises, which can be removed without structural damage to
the Building shall remain the property of Tenant; provided, Tenant shall
promptly repair any damage to the Premises upon their removal. Furniture,
furnishings and other articles of personal property owned by Tenant and located
in the Premises shall be and shall remain the property of Tenant and may be
removed by Tenant at any time during the Term.
26. RENT TAX
If during the term of this Lease, any tax be imposed upon the privilege of
renting the space leased hereunder or upon the amount of Rents collected
therefore, Tenant will pay as Additional Rent each month a sum equal to such tax
or charge that is so imposed, but nothing herein shall be taken to require
Tenant to pay any income tax imposed upon Landlord.
27. PRIOR AGREEMENT, AMENDMENTS
Neither party hereto has made any representations or promises except as
contained herein or in some further writing signed by the party making such
representation or promises. No agreement hereinafter made shall be effective to
change, modify, discharge or effect an abandonment of this Lease, in whole or in
part, unless such agreement is in writing and signed by or on behalf of the
party against whom enforcement of the charge, modification, discharge or
abandonment is sought.
28. PERSONAL PROPERTY TAXES
Tenant shall pay, or cause to be paid, before delinquency, any and all taxes
levied or assessed which become payable during the term hereof upon all Tenant's
leasehold improvements, equipment, furniture, fixtures and personal property
located in the Premises; except that which has been paid for by Landlord and is
standard in the Building. In the event any of the Tenant's leasehold
improvements, equipment, furniture, fixtures and personal property shall be
assessed and taxed with the Building, Tenant shall pay to Landlord its share of
such taxes within thirty (30) days after delivery to Tenant by Landlord of a
statement in writing setting forth the amount of such taxes applicable to
Tenant's property. If any such taxes on Tenant's personal property or trade
fixtures are levied against Landlord or Landlord's property, or if the assessed
value of the Premises is increased by the inclusion therein of a value placed
upon such personal property or trade fixtures of Tenant, Landlord shall not pay
such taxes until after prior written notice thereof to Tenant, which Landlord
shall have the right to do, but only under proper protest if requested by
Tenant.
29. SUCCESSORS
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All of the covenants, agreements, terms and conditions contained in this Lease
shall apply to and be binding upon Landlord and Tenant and their respective
heirs, executors, administrators, successors and assigns.
30. RIGHT TO PERFORM
If Tenant shall fail to pay any sum of money, other than Rent and Additional
Rent required to be paid by it hereunder, or shall fail to perform hereunder,
and such failure shall continue for ten (10) days after notice thereof by
Landlord, Landlord may, but shall not be obligated to, and without waiving or
releasing Tenant from any obligations of Tenant, make any such payment
(provided, Landlord will pay "under protest" upon Tenant's request) or perform
any such other act on Tenant's part to be made or performed as provided in this
Lease. Landlord shall have (in addition to any other right or remedy of
Landlord) the same rights and remedies in the event of nonpayment of sums due
under this Section as in the case of default by Tenant in the payment of Rent.
31. FORCE MAJEURE
Whenever performance is required of either party hereunder, that party shall use
all due diligence to perform and take all necessary measures in good faith to
perform; provided, however, that if completion of performance shall be delayed
at any time by reason of acts of God, war, civil commotion, riots, strikes,
picketing, or other labor disputes, or damage to work in progress by reason of
fire or other casualty, or other cause beyond the reasonable control of said
party (financial inability or negligence of that party or its agents excepted),
then the time for performance is herein specified shall be appropriately
extended by the amount of the delay actually so caused, except as otherwise
provided in Section 10.
32. LIMITATION ON LIABILITY
In consideration of the benefits accruing hereunder, Tenant and all successors
and assigns covenant and agree that, in the event of any actual or alleged
failure, breach or default hereunder by Landlord:
32.1 The sole and exclusive remedy shall be against Landlord's interest in
the Building;
32.2 No general or limited partner of any partnerships who have any interest
in the property, or member or manager of Landlord shall be sued or named as a
party in any suit or action (except as may be necessary to secure jurisdiction
of the partnership or limited liability company);
32.3 No service of process shall be made against any general or limited
partner of any partnerships who have any interest in the property, or member or
manager of Landlord (except as may be necessary to secure jurisdiction of the
partnership or limited liability company);
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32.4 No general or limited partner of any partnerships who have any interest
in the property, or member or manager of Landlord shall be required to answer or
otherwise plead to any service or process;
32.5 No judgment will be taken against any general or limited partner of any
partnerships who have any interest in the property, or member or manager of
Landlord;
32.6 Any judgment taken against any general or limited partner of any
partnerships who have any interest in the property, or member or manager of
Landlord may be vacated and set aside at any time nunc pro tunc;
32.7 No writ of execution will ever be levied against the asset of any
general or limited partner of any partnerships who have any interest in the
property, or member or manager of Landlord; and
32.8 These covenants and agreements are enforceable both by Landlord and also
by any partner of any partnerships who have any interest in the property, or
member or manager of Landlord.
33. INTENTIONALLY DELETED
34. MISCELLANEOUS
34.1 Brokerage Commissions. Tenant represents and warrants to Landlord that
---------------------
it has not engaged any broker, finder or other person who would be entitled to
any commission or fees in respect of the negotiation, execution or delivery of
this Lease, except for Colliers, Macaulay, Nicolls International, and shall
indemnify and hold harmless Landlord against any loss, cost, liability or
expense, including attorneys' fees, incurred by Landlord as a result of any
claim asserted by any such broker, finder or other person on the basis of any
arrangement or agreements made or alleged to have been made by or on behalf of
Tenant. The provisions of this Section 34.1 shall not apply to brokers with
whom Landlord has an agreement, including Colliers, Macaulay, Nicolls
International, with whom Landlord has a separate agreement.
34.2 Definition of "Landlord". The term "Landlord", as used in this Lease,
-------------------------
so far as covenants or obligations on the part of Landlord are concerned, shall
be limited to mean and include only the owner or owners, at the time in
question, of the fee title of the Premises or the Lessees under any ground
lease, if any. In the event of any transfer, assignment or other conveyance or
transfers of any such title, Landlord herein named (and in case of any
subsequent transfers or conveyances, the then grantor) shall be automatically
freed and relieved from and after the date of such transfer, assignment or
conveyance of all liability as respects the performance of any covenants or
obligations on the part of Landlord contained in this Lease thereafter to be
performed. Without further agreement, the transferee of such title shall be
deemed to have assumed and agreed to observe and perform any and all obligations
of Landlord hereunder, during its ownership of the Premises. Landlord may
transfer its interest in the Premises without the consent of the Tenant and such
transfer or subsequent transfer shall not be deemed a violation on Landlord's
part of any of the terms and conditions of this Lease.
45
<PAGE>
34.3 Captions. The captions of the paragraphs in this Lease are inserted and
--------
included solely for convenience and shall never be considered or given any
effect in construing or interpreting the provisions hereof if any question of
intent should arise.
34.4 Waivers. The waiver by Landlord or Tenant of any breach of any term,
-------
covenant or condition herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant or condition herein
contained, nor shall any custom or practice which may grow up between the
parties in the administration of the terms hereof be deemed a waiver of or in
any way affect the right of either party to insist upon the performance by the
other party in strict accordance with said terms. The subsequent acceptance or
payment of Rent shall not be deemed to be a waiver of any preceding breach by
either party of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular Rent so accepted, regardless of either
party's knowledge of such preceding breach at the time of acceptance of such
Rent.
34.5 Quiet Enjoyment. Provided Tenant observes its obligations under this
---------------
Lease, Tenant shall have peaceable and quiet enjoyment of the Premises
throughout the Term, and Landlord shall not act or permit any third person to
act in any manner which would interfere with or disrupt Tenant's business or
frustrate Tenant's business purposes at the Premises.
34.6 Parking. Tenant shall have the right to non-exclusive use of non-
-------
specific contiguous parking stalls under the Building, at no cost during the
initial Term, for up to four (4) cars per 1,000 square feet of Useable Area in
the Premises leased by Tenant. Tenant's parking shall be located on contiguous
floors of the Building parking garage. Landlord agrees to designate at least
twelve (12) parking stalls in the Building parking garage for visitor parking
only (which number may be adjusted by mutual agreement of the parties). Tenant
acknowledges that the lower three (3) floors of the Building parking garage
(except for the loading docks and shipping and receiving areas located on P-9,
together with all access ways thereto, which are Common Areas as defined in
1.5(a)(i) above) may be designated by Landlord for the exclusive use of a new
building in the Newport Corporate Center located adjacent to the Building. Such
parking shall be subject to such rules, regulations, and codes as may from time
to time be established by Landlord and/or governing authorities. If a parking
administration program needs to be implemented at the Building, Tenant and
Landlord agree to cooperate in the program implementation and Tenant
acknowledges that Landlord's reasonable costs associated with the program will
be borne by all tenants in the Building on a pro rata basis, using the Tenant's
Percentage for each of the tenants affected. In the event Tenant requests
reserved parking, Tenant shall pay rent for reserved parking at the rate of
$25.00 per stall, which rate may be adjusted by Landlord at the expiration of
the initial Term to market rate. The thirty-three (33) parking stalls
designated for the Building located on parking level P-6 shall not be considered
"reserved" for Tenant despite the fact that they will be designated as reserved
parking for the Building.
34.7 Examination of Lease. Submission of this instrument for examination or
--------------------
signature by Tenant does not constitute a reservation of or option of Lease, and
it is not effective as a Lease or otherwise until execution by and delivery to
both Landlord and Tenant.
46
<PAGE>
34.8 Time. Time is of the essence of this Lease with respect to the
-----
performance of every provision of this Lease in which time or performance is a
factor.
34.9 Severability. Any provision of this Lease which shall prove to be
------------
invalid, void or illegal in no way affects, impairs, or invalidates any other
provision hereof, and such other provisions shall remain in full force and
effect.
34.10 Recording. Neither Landlord or Tenant shall record this Lease.
---------
Landlord and Tenant shall execute simultaneously with the signing of this Lease
and, at the Landlord's or Tenant's request, thereafter record a short form
memorandum hereof in the form attached hereto as Exhibit "H".
34.11 Consents. Whenever the consent or approval of either party is required
--------
hereunder such consent or approval shall not be unreasonably withheld,
conditioned or delayed including all Exhibits incorporated into this Lease.
34.12 Light and Air. This Lease does not grant any right of access to light
-------------
air, or view, over the property, and Lessor shall not be liable for any
diminution of such light, air, or view by an adjacent structure and/or
vegetation.
34.13 Name. Tenant shall not, without the written consent of Landlord, use
----
the name of the Building or the Project for any purpose other than as the
address of the business to be conducted by Tenant in the Premises, and in no
event shall Tenant acquire any rights in or to such names. Landlord agrees to
not change the project name of Newport Corporate Center or the name of the
Building to a company name or trade name without Tenant's consent, which consent
shall not be unreasonably withheld, conditioned or delayed.
34.14 Construction. This Lease shall be construed in accordance with the laws
------------
of the State of Washington.
34.15 Merger. This Lease supersedes any and all other agreements, either
------
oral or in writing between the parties hereto with respect to the Premises and
contains all of the covenants, agreements and other obligations between the said
parties with respect to said Premises. Landlord and Tenant specifically agree
that this Lease represents the complete agreement of the parties, unless
specifically amended, and that the parties specifically waive their rights to
resort to extrinsic evidence contained in earlier Lease drafts and
correspondence in connection with the Lease negotiations. In that regard, the
parties waive their rights as set forth in Berg v. Hudesman, 115 Wn.2d 657
----------------
(1990).
34.16 Accord and Satisfaction. No payment by Tenant or receipt by Landlord
-----------------------
of a lesser amount than the Rent payment herein stipulated shall be deemed to be
other than on account of the Rent, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as Rent be deemed an
accord and satisfaction, and Landlord's right to recover the balance of such
Rent or pursue any other remedy provided in this Lease, shall be unaffected by
said payment, endorsement or statement.
47
<PAGE>
34.17 Rule Against Perpetuities. If this Lease has not been previously
-------------------------
terminated pursuant to the terms and provisions contained herein, and the term
of this Lease and/or the accrual of Rent hereunder shall not have commenced
within two (2) years for the date of this Lease, then and in that event this
Lease shall thereupon become null and void and have no further force and effect
whatsoever in law or equity.
34.18 Corporate Authority. The persons executing this Lease on behalf of
-------------------
both parties do hereby covenant and warrant that both parties are duly
authorized and are qualified to do business in the State of Washington, that
each party has full right and authority to enter into this Lease, and that each
person signing on behalf of each party was authorized to do so.
34.19 Exhibits. All exhibits attached to this Lease are
--------
incorporated herein by reference.
34.20 Building Signage. Provided Tenant's occupancy does not drop below
----------------
50,000 rentable square feet in the Building, Tenant shall have the exclusive
right to install signage on the Building that complies with applicable
governmental regulations, upon Landlord's prior written approval. Such approval
shall not be unreasonably withheld, conditioned or delayed.
34.21 Interior Signage. Landlord, at Landlord's cost, shall provide Tenant
----------------
with Building standard suite signage and tenant directory signage.
34.22 Storage. Tenant shall have the option to lease from Landlord from time
-------
to time some or all of the storage space on parking levels P-1 through P-5
within the Building (the "Storage Space") on the following terms:
(a) If Tenant occupies the entire Building, Landlord agrees not to lease
storage space on parking levels P-1 through P-5 to any third party (provided
that Landlord may use storage space not leased by Tenant) and Tenant shall have
the right, by giving notice to Landlord, to lease up to all of the Storage Space
on levels P-1 through P-5; and
(b) In the event Tenant occupies Floors 1 - 4 of the Building, Tenant shall
have the right, by giving notice to Landlord, to lease up to Tenant's Percentage
(as defined in Section 4.2) of the Storage Space.
Tenant's lease of Storage Space shall be for a minimum of twelve (12) continuous
months at a time. In the event Tenant leases Floors 1 - 4 of the Building, the
Storage Space shall be leased at a rental rate of $12.00 per square foot per
year and if Tenant leases the entire Building the Storage Space shall be leased
at a rental rate of $12.00 per square foot per year for space located on levels
P-6 through P-9 and $6.00 per square foot per year for space located on levels
P-1 through P-5 (the "Storage Rent"). Storage Rent shall be paid monthly in
advance at the same time and in the same manner as monthly Basic Rent. Landlord
agrees to build-out the Storage Space pursuant to specifications approved by
both Landlord and Tenant, which approval shall not be unreasonably withheld,
unreasonably conditioned, or delayed.
34.23 Confidentiality. The confidentiality of all business information
---------------
provided by either party to this Lease to the other pursuant to the terms of
this Lease shall be preserved and
48
<PAGE>
protected by the party receiving such information, unless the party providing
the information has expressly stated in writing to the other party that the
information provided is not confidential.
34.24 Limitations on Compliance with Laws. Except to the extent that
-----------------------------------
alterations or remedial work is required as a result of Tenant's particular use
of the Premises, Tenant's agreement to comply with all laws does not extend to
making structural alterations or doing remedial work required by any existing
statute, code or ordinance, or to correct pre-existing conditions or defects in
the Building and/or the Tenant Improvements constructed by Landlord which are
existing on the Commencement Date.
34.25 Survival. The indemnities between the Landlord and Tenant contained in
--------
this Lease and any liabilities arising during or attributable to the Lease term
shall survive the termination of this Lease.
34.26 Transportation Management. Tenant acknowledges that Landlord is
-------------------------
required to comply with the Transportation Management Program imposed with
respect to the Building by the City of Bellevue pursuant to Bellevue City Code
("BCC") Section 14.60.070. Tenant agrees to comply with the provisions of the
BCC which are applicable to Tenant and Tenant's employees, including, without
limitation, providing financial incentives under BCC Section 14.60.070.F.5 and
satisfying the guaranteed ride home requirements of BCC Section 14.60.070.F.6.
35. RIDERS
Clauses, plats and riders, if any, signed by Landlord or Tenant and affixed to
this Lease are a part hereof.
36. LEASE AND LEASE AMENDMENTS
Tenant currently leases or subleases space in other buildings within Newport
Corporate Center commonly known as Newport Terrace, One Newport, Two Newport,
and Newport Tower. The leases pursuant to which Tenant leases space in these
buildings are referred to in this Lease as the Newport Terrace Lease, One
Newport Lease, Two Newport Lease, and Newport Tower Lease, respectively. This
Lease is conditioned upon execution of the following:
(a) Newport Terrace. An Amended and Restated Newport Terrace Lease
---------------
intended as of the Commencement Date of this Lease to: (1) extend the term of
the Newport Terrace Lease to be coterminous with this Lease; (2) delete Tenant's
options to additional space in the entire Newport Corporate Center in favor of
the Right of First Opportunity granted in this Lease; (3) grant Tenant extension
options like those in this Lease; (4) provide Tenant a refurbishment allowance
for the Newport Terrace; (5) delete Tenant's option to purchase; and (6) provide
Tenant with a "Sublease Limit" of 45,000 feet similar to the provisions of
Section 8.8 of this Lease, among other things.
(b) One Newport. An amendment to the One Newport Lease intended as of the
-----------
Commencement Date of this Lease to: (1) provide that the One Newport Lease
will terminate
49
<PAGE>
upon Tenant's occupancy of the Premises and provide for a 100% hold-over rate
during Tenant's staged move-in into the Premises for up to thirty (30) days; (2)
grant Tenant an option to lease space in One Newport for a term of five (5)
years at the following rates: Year 1, $18.50; Years 2-3, $19.00; Year 4, $20.00;
and Year 5, $21.00, with parking to be paid at published market rates, the
option to be exercised by the later of May 12, 1999, or six (6) months prior to
the Scheduled Substantial Completion Date (as set forth in the Construction
Agreement and as may adjusted from time to time) and with an allowance of $5.00
per useable square foot, and (3) provide that there will be no rate increase on
March 31, 1999.
(c) Two Newport. An amendment to the Two Newport Lease intended as of the
-----------
Commencement Date of this Lease to provide that the Two Newport Lease will
terminate upon Tenant's occupancy of the Premises and provide for a 100% hold-
over rate during Tenant's staged move-in into the Premises for up to thirty (30)
days.
(d) Newport Tower. An agreement that the then existing Newport Tower
-------------
Lease will terminate upon Tenant's occupancy of the Premises and provide for a
100% hold-over rate during Tenant's staged move-in into the Premises for up to
thirty (30) days.
For the purposes of this Lease, the Amended and Restated Newport Terrace Lease
described in subsection (a) above, the amendment to the One Newport Lease
described in subsection (b) above, the amendment to the Two Newport Lease
described in subsection (c) above, and the amendment to the Newport Tower lease
described in subsection (d) above are collectively referred to as the
"Amendments".
IN WITNESS WHEREOF, the respective parties hereto have executed this Lease or
caused this Lease to be executed by their duly authorized representative the day
and year first hereon written.
LANDLORD TENANT
Bentall Newport Centre, L.L.C., a Attachmate Corporation, a
Washington limited liability company Washington corporation
By: Bentall U.S. L.L.C., a
Washington limited liability
company its Manager
/s/ Gary J. Carpenter /s/ William E. Boisvert
____________________________________ _______________________________________
By: Gary J. Carpenter By: William E Boisvert, its President
Its: Chief Operating Officer Its: Executive Vice
50
<PAGE>
/s/ Lisa C. Rowe
____________________________________
By: Lisa C. Rowe
Its: Director of Leasing
51
<PAGE>
Bentall Newport Centre L.L.C.'s Acknowledgment
STATE OF WASHINGTON )
)
COUNTY OF KING )
On this 1st day of May, 1998, before me, a Notary Public in and for the State
of Washington, personally appeared Gary J. Carpenter and Lisa C. Rowe to me
known to be the Chief Operating Officer and Director of Leasing, respectively,
of Bentall U.S. L.L.C., a Washington limited liability company, the Manager of
Bentall Newport Centre L.L.C., a Washington limited liability company, the
limited liability company that executed the within and foregoing instrument, and
acknowledged the said instrument to be the free and voluntary act and deed of
said limited liability company, for the uses and purposes therein mentioned, and
on oath stated that they were authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
the day and year first above written.
/s/ Victoria C. Border
--------------------------------------
Printed Name: Victoria C. Border
[Notary Seal] NOTARY PUBLIC in and for the State of
Washington,
residing at Bothell, WA
My commission expires: 6/23/2000
52
<PAGE>
Attachmate Corporation's Acknowledgment
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 29th day of April, 1998, before me the undersigned, a Notary Public in
and for the State of Washington, duly commissioned and sworn, personally
appeared William E. Bolvert to me known to be the President of Attachmate
Corporation, a Washington corporation, the entity that executed the foregoing
instrument, and acknowledged the same instrument to be the free and voluntary
act and deed of Attachmate Corporation for the uses and purposes therein
mentioned, and on oath stated that he is authorized to execute said instrument.
IN WITNESS WHEREOF my hand and official seal hereto affixed the day and year
in this instrument above written.
/s/ Sarah M. Mills
--------------------------------------
Printed Name: Sarah M. Mills
[Notary Seal] NOTARY PUBLIC in and for the State of
Washington,
residing at Seattle
My commission expires: 3-19-2000
53
<PAGE>
EXHIBIT B
---------
SUBLEASED PREMISES
------------------
(see attached)
<PAGE>
NEWPORT 4-6TH
N.T.S.
-------------
2.23.00
[Architectural Rendering of the Subleased Premises]
<PAGE>
EXHIBIT C
---------
NOTICE
------
THIS NOTICE made on ___________________, 20_____, between Attachmate
Corporation, a Washington corporation, ("Attachmate") and Mercata, Inc., a
Delaware corporation ("Mercata");
WITNESSETH:
WHEREAS, Attachmate and Mercata entered into a Sublease Agreement
dated _________, 2000 for certain real property located at: the Four Newport
Building, Bellevue, Washington, which Sublease provides that it is for a Term
of Two (2) years beginning on the fourteenth (14th) day following the date of
Substantial Completion; and
WHEREAS, Mercata was in possession of the Substantially Complete
Subleased Premises on _____________, 2000.
NOW THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. The rentable square feet of the Subleased Premises are
______________ and the usable square feet are _____________________.
2. That the Term shall be for two (2) years beginning
______________ and ending _____________ at an annual Base Rent of
______________ DOLLARS ($__________), payable in advance on the first (1st)
day of each month in equal monthly installments of ___________________ DOLLARS
($__________) each.
3. Mercata's pro rata share of building operating costs and real
estate taxes shall be ___% and Mercata's share of operating costs attributable
to the Newport Corporate Centre Common Areas shall be ___%.
Except as herein stated to the contrary all of the covenants,
agreements, and conditions contained in said Sublease dated ________, 2000 are
hereby ratified and confirmed.
IN WITNESS WHEREOF, Attachmate and Mercata have caused this
agreement to be executed as of the day and year first above mentioned.
MERCATA, INC. ATTACHMATE CORPORATION
By:______________________ By:_______________________
Its:_______________________ Its:________________________
14
<PAGE>
EXHIBIT 10.28
*** Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 CFR (S)(S) 200.80(b)(4),
200.83 and 240.24b-2
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Advertising Agreement
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Go2Net Insertion Order # BD 4040-00-1311
999 Third Avenue Suite 4700 Rep: J. Lefebvre Coordinator: H2
Seattle, WA 98104 Date: 3/1/2000
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Advertiser: Mercata, Inc. Parent Company:
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Advertising Contact: Jerome Pache Agency N/A
- -------------------------------------------------------------------------------------------------------------------------
Contact's Telephone: 425-468-9800 Fax: 425-468-9989
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Advertiser's Address: 110 110th Ave East
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
City: Bellevue State/Province: WA Zip/Postal Code: 98004 Country: USA
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Billing Address: 110 110th Ave East, Bellevue, WA 98004
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Billing Contact: Accounts Payable - Pete Crouch Telephone: 425-468-9800
- -------------------------------------------------------------------------------------------------------------------------
Billing email address: [email protected]
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
URL Advertisement is to be linked to: www.mercata.com
- -------------------------------------------------------------------------------------------------------------------------
Email address of ad created contact: Randy Nargi - [email protected]
- -------------------------------------------------------------------------------------------------------------------------
Alt Text:
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Advertising Package:
<S> <C> <C> <C> <C> <C>
----------- ---------- ---------- ----------------
MC main page MC Keywords MC-OD Shop Go2Net ROS SI Marketplace HyperMart
----------- ---------- ---------- ----------------
-----------
Marketplace PlaySite MetaSpy MC Marketplace WebMarket
-----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Start Date: 3/1/2000 End Date: 3/15/2001
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Keywords: Mercata, groupbuy, groupbuying, powerbuy, powerbuys
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Pricing:
Total Cost per Month: [...***...]
Revenue Share: Go2Net to receive [...***...] of Mercata's net sales derived from customer sessions originating
directly through links from the Go2Net Network of sites. For purposes of this provision, "net sales" shall mean
sales minus any shipping and handling charges, sales tax, and returns.
- -------------------------------------------------------------------------------------------------------------------------
Billing Terms: Net 20 Days, payable monthly.
----------------------------
Advertiser's P.O. or Reference number for Invoicing:_____________________________________
- -------------------------------------------------------------------------------------------------------------------------
Contract Placements and details:
Go2Net will manage and maintain placement of all creative and links but shall have the flexibility to move
these placements as necessary. Mercata shall have the right to change keywords and any creative material as
necessary. Such changes shall be made within 5 business days. If Mercata finds any placement of its links or
ads to be objectionable, Mercata shall provide prompt notice to Go2Net, and Go2Net will work in good faith with
Mercata to resolve any outstanding issues regarding placement.
BONUS IMPRESSIONS: Go2Net will allocate to Mercata [...***...] of Go2Net Run of Network unused monthly inventory,
subject to availability.
Placement Detail --------------------------------------------------------------------------------------------------------
* MetaCrawler Keywords -- Mercada, groupbuy, groupbuying, powerbuy, powerbuys
</TABLE>
- ----------------------------------
* Confidential Treatment Requested
1
<PAGE>
* Webmarket permanent Tab - "Group Buying" tab integrated in
navigational bar
* Go2Net Portal - Shopping Tab "Group Buying" integration in navigation
bar; linking to Go2Net/Mercata co-branded pager - Full content
integration
* MetaCrawler Open Directory "Shopping" - "Group Buying" tab placed at
the top of each page view,
* Webmarket ROS Buttons - [ ...***... ] impressions
* S! Marketplace link
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Estimated Start Date: 3/1/2000
Revenue Share:
Until such time as Mercata is able to track transaction revenue based on the
origin of each customer visit, the revenue shares under this agreement shall be
based on the percentage of Mercata's overall monthly net sales likely to have
resulted from Go2Net links. This percentage will be calculated by Mercata based
on the percentage of overall user sessions received through links from the
Go2Net site. Such percentage will be applied to Mercata's overall net sales on a
monthly basis to get the net sales presumably attributable to Go2Net. Go2Net's
revenue share will be [...***...] of such presumed net sale. The parties agree
not to artificially inflate the number of reported click throughs by their own
visits to the linked web page or other inappropriate means.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Impression Delivery Guarantee:
Go2Net agrees to guarantee Mercata [...***...] impressions over the course of
this advertising agreement. Should Go2Net fail to deliver all [...***...]
impressions prior to the expiration of this advertising agreement, Go2Net will
deliver the remainder of the impressions owed within 90 days of the contract
expiration at no extra charge.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Reporting Confidentiality/Audit Rights:
Go2Net will provide Mercata with a User ID and Password to access the Go2Net
reports database, providing detailed monthly reports accurately stating the
click through traffic from each Go2Net link to the Mercata site on a daily
basis, as well as all impressions delivered. Within 15 days of end of each
calendar month, Mercata will provide Go2Net with monthly reports accurately
stating overall user sessions per month and overall sales, and will present
Go2Net with calculations specifying the portion of net sales presumably
attributable to Go2Net (per the formula above), upon which the [...***...]
revenue share will be applied. Mercata's overall traffic, sales data and
customer information is highly confidential and proprietary to Mercata. As such,
Go2Net agrees to hold all such information in strict confidence and only use it
for the purposes of reviewing the revenue share calculations provided by
Mercata. Either party shall have the right, at its own expense and upon
reasonable notice, to audit reports supplied by the other party and the party
supplying the reports in question shall cooperate in good faith to facilitate
any audit that is requested.
Mercata may utilize a third-party partner to track and report transaction
revenue and make payments to Go2Net. In this matter, Go2Net agrees to work in
good faith with Mercata to negotiate an amendment to this agreement so that it
will be consistent with this third-party's tracking and payment practices.
- --------------------------------------------------------------------------------
Cancellation:
Either party will require 6 months of this contract to be completed before the
other party may cancel. After 5 months has been completed, the canceling party
would be required to provide the other party with 30 day written notice of
contract cancellation.
Advertising Agreement Terms & Conditions
The advertiser named on the Advertising Order attached herein ("Order") desires
to have certain material developed and published on the World Wide Web/Internet
by Go2Net, Inc. ("Go2Net") upon the terms and conditions set forth herein and on
the terms and conditions set forth in the Advertising Order attached hereto
(together, this Agreement").
Billing
- ----------------------------------
* Confidential Treatment Requested
2
<PAGE>
Mercata will be invoiced on the 1st of each month for the term of this
advertising agreement. Payment will be net 20 days terms. A late charge of 1.5
percent per month of the outstanding balance shall be applied to each payment
not made within 20 days from receipt of the invoice. All non-sufficient fund
checks will be subject to a $50 charge.
Accounts billing less than $500 per month require a $500 pre-pay in order to
launch the campaign. All subsequent invoices will be billed in advance, either
in $500 increments, or for the remaining balance of the campaign.
Go2Net shall have the right to hold Advertiser and/or its agency or agent
jointly and severally liable for such monies Go2Net is due and payable on
publication of the advertisement. If payments are not made in a timely manner
Go2Net, at its option, may terminate this Agreement.
Materials
- ---------
All materials that Advertiser desires to have Go2Net place online are subject
to Go2Net's approval. Go2Net expressly reserves the right, at its sole
discretion and at any time, to reasonably cancel any Advertising Order or reject
any advertising material, including withdrawing any advertising materials which
are currently on display or have previously been published. If any advertising
materials are withdrawn or canceled, prior to display, Go2Net's only obligation
to Advertiser will be to refund any fees paid to advance for the canceled
advertising.
Termination, Representatives, Warranties and Indemnities
- --------------------------------------------------------
The term of the advertising shall be as set forth on the Advertising Order
incorporated above. Either party may terminate this Agreement at any time in
the event of a material breach by the other party, which remains uncured after
thirty days written notice thereof. Notice shall be deemed to have been
received five days after mailing such notice if sent by first class mail or on
the day transmitted if sent by facsimile transmission. For any reason other
than a material breach by Go2Net, Advertiser may not terminate this agreement
except as specified above. Advertiser is solely responsible for any legal
- -------------------------
liability arising out of or relating to the material, including keywords, that
Advertiser desires to have Go2Net place online for purposes of the advertising
("Advertising Material") or any Web site linked to from such Advertising
Material. Advertiser represents and warrants that the Advertising Material it
seeks to have Go2Net place online and any Web site linked to from such
Advertising Material complies with all local, state, federal and foreign
regulations and laws; and that the use reproduction, distribution, or
transmission, of the Advertising Material will not violate the rights of any
third parties, including, but not limited to, such violations as infringement or
misappropriation of any copyright, patent, trademark, trade secret, music,
image, or other proprietary or property right, false advertising, unfair
competition, defamation, invasion of privacy or rights of celebrity, violation
of any anti-discriminatory law or regulation, or any other right of any person
or entity. Advertiser agrees to indemnify Go2Net and to hold Go2Net harmless
from any and all liability, loss, damages, claims, or causes of action,
including reasonable legal fees and expenses that may be incurred by Go2Net,
arising out of or related to Advertiser's breach of any of the foregoing
representations and warranties.
Go2Net is not responsible or liable for any errors in content or omissions or
consequences, damages, costs, refunds or rebates of any kind arising from any
interruption of service or other unavailability of the Internet or Web site in
which the advertising is displayed for whatever reason.
Go2Net makes no representations or warranties relating to the results of
Advertiser's advertising by means of the Internet, including without limitation,
the number of page views or clicks-throughs such advertising will receive and
any promotional effect thereof.
Press Releases
- --------------
Neither an Advertiser nor its agency will make or issue any external press
statement regarding the terms of this Agreement unless: (a) it has received the
express written consent of Go2Net or Mercata which will not be unreasonably
-------
withheld or (b) it is required to do so by Law or the rules of any securities
market.
Advertiser Initials _________
Dispute Resolution
- ------------------
This Agreement shall be governed by and construed in accordance with the laws of
the State of Washington, without giving effect to its conflicts of laws rules.
Any dispose or controversy arising under or related to this Agreement shall be
adjudicated in a court of competent jurisdiction within the City of Seattle,
State of Washington. The parties hereto each hereby waive any jurisdiction,
venue and inconvenient forum objections to any state or federal court sitting in
the City of Seattle, Washington.
This Agreement supersedes and replaces any existing written or oral agreements
between Go2Net and Advertiser and may be modified only in writing signed by both
parties. Any failure by Go2Net or Mercata to enforce any provision of this
-------
Agreement shall not constitute a waiver of any term hereof. This Agreement
contains the entire agreement between the parties with respect to the subject
matter hereof. If any provision of this Agreement is determined to be invalid,
illegal or unenforceable, the enforceability of the remaining provisions shall
not be affected.
We ask that all ad banners/buttons be sent to Go2Net in email as attached files.
This email should also include:
1) the alt tag(s) desired for banner(s)
2) the url(s) the ad(s) should be linked to
3
<PAGE>
- --------------------------------------------------------------------------------
3) If ad(s) correspond to specific keywords, a detailed listing of which ad(s)
corresponds to which word(s) is also required.
4) Specific text for any keyword textlinks.
Send ads to:[email protected]
Private URL for checking ad delivery and click-throughs will be provided when ad
goes live.
Please send all payments and direct any billing question attn: Accounts
Receivable.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
AD SPECS:
- --------
<S> <C>
MetaCrawler:
Banner: 230x33; 6k file size
Banner: 468x60; 12k file size Note: Please submit one creative per 1 million
Square (portal) 125x125; 8k file size impressions. Review
Marketplace: 120x60; 6k file size ad specs at
PlaySite www.go2net.com/ads/adspecs.html
-------------------------------
Banner: 468x60; 12k file size
Go2Net content (StockSite/Useless Pages):
Banner: 468x60; 12k file size
Square (portal): 125x125
We ONLY accept image advertising in GIF, JPEG, and HTML format to be run on the Go2Net sites. No shockwave, cgi script, real
audio, image maps, pull-down menus, or Java.
Ads are limited to one image only
Also, the ads must comply with the ad specs found at http://www.Go2Net.com/ads/adspecs.html
Advertiser's Initials_______________ Go2Net______________
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Must Select One:
Ads will be served (please check one):
[ ]from Go2Net's servers
[ ]by advertiser
[ ]by agency
[ ]by 3rd party ________________________________ (specify)
The undersigned is legally empowered to enter into this Agreement and agrees to
be bound by the terms and conditions of this Agreement. Sign contract and
-----------------
return to Go2Net, Inc.
- ----------------------
Advertiser:
Signature: /s/ Tom Van Horn Title: President & CEO
----------------------- ----------------------------
Print Name: Tom Van Horn Date: 3-3-00
---------------------- ----------------------------
Go2Net, Inc.
Signature: /s/ Thomas M. Camp Title: V.P., Business Development
------------------------- -----------------------------
Print Name: Thomas M. Camp Date: 3-3-00
------------------------ -----------------------------
4
<PAGE>
WE-COMMERCE(TM) NETWORK ADDENDUM TO GO2NET ADVERTISING AGREEMENT
This Addendum, dated _________, 2000, is made a part of the March 1, 2000
Advertising Agreement between Go2Net, Inc. and Mercata, Inc. (the "Advertising
Agreement"), and is incorporated in the Advertising Agreement by this reference.
Unless otherwise defined herein, capitalized terms used in this Addendum shall
have the meanings assigned to them in the Advertising Agreement.
RECITALS
--------
A. Go2Net, Inc. ("Go2Net") owns and operates a collection of information,
community, and commerce sites (collectively the "Go2Net Properties") on the
World Wide Web (the "Web").
B. Mercata, Inc. ("Mercata") is an electronic commerce company, offering
certain merchandising and group buying services through its proprietary We-
Commerce technology and proprietary PowerBuy (TM) group purchases and its
www.mercata.com Web site (the "Mercata Web site"). Mercata offers others access
- ---------------
to these services through its proprietary We-Commerce Network.
C. The parties wish to expand their relationship by adding the Go2Net
Properties to Mercata's We-Commerce Network.
Therefore, in consideration of the mutual promises contained herein, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
AGREEMENT
---------
1. We-Commerce Network. "We-Commerce Network" means the network of Web sites
-------------------
through which Mercata offers its proprietary PowerBuy method of group
purchasing.
2. Platform Store. Mercata shall create a Web site to be hosted and served by
--------------
Mercata on its computer systems and servers and maintained by Mercata (the
"Platform Store"). The Platform Store shall contain the trademarks and logos of
both parties and shall use a color scheme similar to and consistent with the
home page on Go2Net's main web site, currently located at www.go2net.com (the
--------------
"Go2Net Web Site"), as illustrated in the site design mock-ups attached hereto
as Exhibit A-1; provided that Mercata shall at all times retain all control over
-----------
the look and feel of the Platform Store, the format of content on and the
placement of merchandise within the Platform Store, the timing and structure of
particular PowerBuy group purchases, and other issues related to the Platform
Store. Commencing on the Launch Date and continuing thereafter during the term
of the Advertising Agreement, all links from the Go2Net Properties to Mercata
shall be to the Platform Store.
3. Launch Date. "Launch Date" shall mean the date the Platform Store is
-----------
operational and available on the Web. The estimated Launch Date is February 10,
2000. Mercata shall have no liability for failing to meet the estimated Launch
Date.
4. Linking to the Platform Store. The Go2Net Properties shall be linked to
-----------------------------
the Platform Store in the manner described in the Advertising Agreement.
Mercata shall also have the right, but not the obligation, to provide links
between the Platform Store and various sites comprising the We-Commerce Network
(the "Network Links"). The Network Links, if any, shall be developed by
Mercata, may be graphical or text links, and may contain Client Content.
5. Publicity. Upon execution of this Addendum, Mercata may issue a press
---------
release regarding this Addendum, the Platform Store and the We-Commerce Network.
Thereafter, neither party shall issue any press release or other public
statements without the prior written consent of both parties; provided that
Mercata shall have the right to generally publicize the existence of the
Platform Store and Go2Net's participation in the We-Commerce Network without
Go2Net's consent. Except as specifically provided otherwise in this Addendum
and/or the Advertising Agreement, neither party shall use the name, trademarks
or service marks of the other party without first obtaining the prior written
consent of the other party.
6. License Granted to Mercata. During the term of the Advertising Agreement,
--------------------------
Go2Net hereby grants to Mercata a royalty-free, non-exclusive, limited license
to: (i) organize, reproduce, create derivative works from, publicly display,
distribute and otherwise use the graphics, logos, trademarks, and tradenames
provided to Mercata by Go2Net, including without limitation the materials listed
in Exhibit A-2, (collectively the "Client Content"),
-1-
<PAGE>
solely in connection with the Platform Store, the We-Commerce Network, and any
related promotional activities. Go2Net shall promptly notify Mercata, in
writing, if it becomes aware of any restrictions or limitations on Mercata's
rights to use the Client Content.
7. Ownership of Intellectual Property. Go2Net understands and agrees that
----------------------------------
Mercata is the sole and exclusive owner of the Platform Store and all of
Mercata's proprietary business methods and technology, including without
limitation its PowerBuy method of group buying, its We-Commerce technology, its
We-Commerce Network business methods, its We-Commerce Network technology, and
any expansions, improvements, or developments related thereto, whether created
solely by Mercata, solely by Go2Net, or jointly by the parties. Go2net further
acknowledges and agrees that nothing herein shall create a license of Mercata's
proprietary business methods or technology.
8. Ownership of Data. All information collected in connection with the
-----------------
Platform Store or the We-Commerce Network, including without limitation any
personal or other information collected from any customer of the Platform Store
or the We-Commerce Network, the number, amount and frequency of PowerBuy offers
(whether on particular products or in the aggregate), and all individual and
aggregated data and pricing curves obtained from PowerBuy group purchases and
the We-Commerce Network shall be the trade secrets of Mercata and the sole and
exclusive property of Mercata. Mercata shall have no obligation to share any
such information with Go2Net.
9. Confidentiality. Go2Net and Mercata will each hold in confidence and,
---------------
without the prior written consent of the other, will not reproduce, distribute,
transmit, transfer or disclose, directly or indirectly, in any form, by any
means, for any purpose, any Confidential Information of the other except for
internal use on an as needed basis in connection with the Platform Store and/or
the We-Commerce Network. As used herein, the term "Confidential Information"
shall mean: (a) the terms of this Addendum; (b) business and technical
information relating to the We-Commerce Network, Mercata's We-Commerce
technology and/or PowerBuy group purchases; (c) information related to Mercata's
operations, strategies, performance, forecasts, and/or finances, including
without limitation any information relating to the number, amount, or frequency
of PowerBuy offers on particular products or in the aggregate, and (d) any other
information that is provided to one party by the other that is confidentially
maintained and proprietary to the disclosing party, and particularly any
information which derives economic value, actual or potential, from not being
generally known to, and not generally ascertainable through proper means by,
other persons who can obtain economic value from its disclosure or use. The
recipient of Confidential Information will exercise reasonable commercial care
in protecting the confidentiality of the other party's Confidential Information.
Notwithstanding the forgoing, either party may disclose the terms of this
Addendum when required to do so (i) by law or pursuant to any governmental rule,
regulation or request, or (ii) to any investor or prospective investor or
acquirer; provided that the party shall disclose only those terms required to be
disclosed. Prior to any disclosure pursuant to (i) above, the party proposing
to disclose the terms of this Addendum shall provide the other party prior
written notice of such proposed disclosure and an opportunity to seek injunctive
or other similar relief preventing or limiting such disclosure. Any disclosure
pursuant to (ii) above shall be subject to the terms of a nondisclosure
agreement no less strict than the terms of this confidentiality provision.
10. Disclaimer of Warranties. MERCATA MAKES NO WARRANTIES, EXPRESS OR IMPLIED,
------------------------
WITH RESPECT TO THE PLATFORM STORE AND/OR THE WE-COMMERCE NETWORK. THE PLATFORM
STORE AND THE WE-COMMERCE NETWORK ARE PROVIDED TO GO2NET "AS IS." MERCATA
DISCLAIMS ANY IMPLIED WARRANTIES, IMPLIED PROMISES, AND/OR IMPLIED CONDITIONS OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND/OR NON-
INFRINGEMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MERCATA
SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING (1) THE PROFITABILITY OF THE
PLATFORM STORE OR THE WE-COMMERCE NETWORK; OR (2) THE FUNCTIONALITY,
PERFORMANCE, OR OPERATION OF THE PLATFORM STORE, THE WE-COMMERCE NETWORK, OR
MERCATA'S WEB SITE.
MERCATA, INC. GO2NET, INC.
By /s/ Tom Van Horn By /s/ Jackie Lefebvre
--------------------------------- ---------------------------------
Printed Name Tom Van Horn Printed Name Jackie Lefebvre
----------------------- -----------------------
Its President and CEO Its
-------------------------------- --------------------------------
-2-
<PAGE>
EXHIBIT A-1
[Graphic of Mercata Web page]
B-1
<PAGE>
EXHIBIT A-2
(Graphic of Go2Net logo)
B-2
<PAGE>
EXHIBIT 10.29
WE-COMMERCE(TM) NETWORK SERVICES AGREEMENT
THIS WE-COMMERCE(TM) NETWORK SERVICES AGREEMENT ("Agreement") is entered this
third day of March 2000, by and between Mercata, Inc., a Delaware corporation
("Mercata"), and Football Northwest LLC, a Washington limited liability company
("FNW").
RECITALS
A. FNW owns certain sponsorship rights related to the National Football
League Franchise for the Seattle Seahawks. In connection with those sponsorship
rights, FNW operates a Web site on the World Wide Web (the "Web") at
www.seahawks.com (the "FNW Web site").
B. Mercata, Inc. ("Mercata") is an electronic commerce company, offering
certain merchandising and group buying services through its proprietary We-
Commerce technology and proprietary PowerBuy(TM) group purchases and its
www.mercata.com Web site (the "Mercata Web site"). Mercata offers others access
to these services through its proprietary We-Commerce Network.
C. The parties wish to link the FNW Web site to Mercata's We-Commerce
Network.
Therefore, in consideration of the mutual promises contained herein, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
AGREEMENT
---------
1. We-Commerce Network. "We-Commerce Network" means the network of Web sites
through which Mercata offers its proprietary PowerBuy method of group
purchasing.
2. Platform Store. Mercata shall create a new Web site to be hosted and
served by Mercata on its computer systems and servers and maintained by Mercata
(the "Platform Store"). The Platform Store shall have a look and feel similar to
and consistent with the FNW Web site, as illustrated in the site design mock-ups
attached hereto as Exhibit A-1; provided that Mercata shall at all times retain
all control over the look and feel of the Platform Store, the format of content
on and the placement of Merchandise within the Platform Store, the timing and
structure of particular PowerBuy group purchases, and other issues related to
the Platform Store. Commencing on the Launch Date and continuing thereafter
during the term of the Participation Agreement, all links from the FNW Web site
to Mercata shall be to the Platform Store.
3. Launch Date. "Launch Date" shall mean the date the Platform Store is
operational and available on the Web. The estimated Launch Date is March 10,
2000. Mercata shall have no liability for any failure of the Launch Date to be
earlier than the estimated Launch Date.
4. Linking to the Platform Store. FNW shall link the FNW Web site to the
Platform Store using graphical links provided by Mercata (the "Mercata Graphical
Links"). Mercata shall also have the right, but not the obligation, to provide
links between the Platform Store and various sites comprising the We-Commerce
Network (the "Network Links"). The Network Links, in any, shall be developed by
Mercata, may be graphical or text links and may contain Client Content.
5. Term and Termination.
(a) Term. Unless terminated earlier as provided in this Agreement, this
Agreement shall remain in effect for ninety (90) days from the Launch
Date.
(b) General Termination Rights. Either party may terminate this Agreement
for any reason upon thirty (30) days' prior written notice to the
other party
(c) Termination Upon Default. Either party shall have the right to
terminate this Agreement upon a Default by the other party. "Default"
shall mean any material breach of any term or condition of this
Agreement where such material breach is not cured within fourteen (14)
days after receipt by the breaching party of a written notice sent by
the non-breaching party identifying the material breach.
-1-
<PAGE>
(d) Effect of Termination. Upon the expiration or termination of this
Agreement, (i) the parties shall return or destroy all Confidential
Information of the other party in their possession, (ii) all use of
the other party's trademarks, brands, logos, and other materials and
information provided hereunder shall cease as promptly as commercially
reasonable, (iii) all licenses granted hereunder shall immediately
terminate.
6. Publicity. Upon execution of this Agreement, the parties may issue a joint
press release regarding this Agreement, the Platform Store and the We-Commerce
Network, the terms of which shall be approved by both Mercata and FNW.
Thereafter, neither party shall issue any press release or other public
statements without the prior written consent of both parties; provided that
Mercata shall have the right to generally publicize the existence of the
Platform Store and FNW's participation in the We-Commerce Network without FNW's
consent, and provided further that in any future state or federal securities
filings, Mercata may disclose the terms of this Agreement and identify FNW as a
We-Commerce Network participant. Except as specifically provided otherwise in
this Agreement, neither party shall use the name, trademarks or service marks of
the other party without first obtaining the prior written consent of the other
party.
7. License Granted to Mercata. In exchange for the payments described in
Paragraph 14, during the term of this Agreement FNW hereby grants to Mercata a
non-exclusive, limited license to organize, reproduce, publicly display,
distribute and otherwise use the graphics, logos, trademarks, and tradenames
provided to Mercata by FNW, including without limitation the materials listed in
Exhibit A-2, (collectively the "Client Content"), solely in connection with the
Platform Store, the We-Commerce Network, and any related promotional activities.
FNW shall promptly notify Mercata, in writing, if it becomes aware of any
restrictions or limitations on Mercata's rights to use the Client Content.
8. License Granted to FNW. During the term of this Agreement, Mercata hereby
grants to FNW a royalty-free, non-exclusive, limited license to organize,
reproduce, distribute and otherwise use the Mercata Graphical Links provided to
Mercata by FNW, solely in connection with the Platform Store and any related
promotional activities. Mercata shall promptly notify FNW, in writing, if it
becomes aware of any restrictions or limitations on FNW's rights to use the
Mercata Graphical Links.
9. Ownership of Intellectual Property. FNW understands and agrees that
Mercata is the sole and exclusive owner of the Platform Store and all of
Mercata's proprietary business methods and technology, including without
limitation its PowerBuy method of group buying, its We-Commerce technology, its
We-Commerce Network business methods, its We-Commerce Network technology, and
any expansions, improvements, or developments related thereto, whether created
solely by Mercata, solely by FNW, or jointly by the parties. FNW further
acknowledges and agrees that nothing herein shall create a license of Mercata's
proprietary business models, methods or technology.
10. Ownership of Data. All information collected in connection with the
Platform Store or the We-Commerce Network, including without limitation any
personal or other information collected from any customer of the Platform Store
or the We-Commerce Network, the number, amount and frequency of PowerBuy offers
(whether on particular products or in the aggregate), and all individual and
aggregated data and pricing curves obtained from PowerBuy group purchases and
the We-Commerce Network shall be the trade secrets of Mercata and the sole and
exclusive property of Mercata. Mercata shall have no obligation to share any
such information with FNW.
11. Confidentiality. Except as otherwise provided in this Agreement, FNW and
Mercata will each hold in confidence and, without the prior written consent of
the other, will not reproduce, distribute, transmit, transfer or disclose,
directly or indirectly, in any form, by any means, for any purpose, any
Confidential Information of the other except for internal use on an as needed
basis in connection with the Platform Store and/or the We-Commerce Network. As
used herein, the term "Confidential Information" shall mean: (a) the terms of
this Agreement; (b) business and technical information relating to the We-
Commerce Network, Mercata's We-Commerce technology and/or PowerBuy group
purchases; (c) information related to Mercata's operations, strategies,
performance, forecasts, and/or finances, including without limitation any
information relating to the number, amount, or frequency of PowerBuy offers on
particular products or in the aggregate, and (d) any other information that is
provided to one party by the other that is confidentially maintained and
proprietary to the disclosing party, and particularly any information which
derives economic value, actual or potential, from not being generally known to,
and not generally ascertainable through proper means by, other persons who can
obtain economic value from its disclosure or use. The recipient of Confidential
Information will exercise reasonable commercial care in protecting the
confidentiality of the other party's Confidential Information. Notwithstanding
the forgoing, either party may disclose the terms of this Agreement when
required to do so (i) by law or pursuant to any governmental rule, regulation or
request, or (ii)
-2-
<PAGE>
to any investor or prospective investor or acquirer; provided that the party
shall disclose only those terms required to be disclosed. Prior to any
disclosure pursuant to (i) above, the party proposing to disclose the terms of
this Addendum shall provide the other party prior written notice of such
proposed disclosure and an opportunity to seek injunctive or other similar
relief preventing or limiting such disclosure. Any disclosure pursuant to (ii)
above shall be subject to the terms of a nondisclosure agreement no less strict
than the terms of this confidentiality provision.
12. Disclaimer of Warranties. THIS AGREEMENT CONTAINS THE ONLY WARRANTIES,
EXPRESS OR IMPLIED, MADE BY MERCATA WITH RESPECT TO THE PLATFORM STORE AND/OR
THE WE-COMMERCE NETWORK. ANY AND ALL OTHER WARRANTIES REGARDING THE PLATFORM
STORE AND/OR THE WE-COMMERCE NETWORK, EXPRESS OR IMPLIED, ARE EXPRESSLY EXCLUDED
AND DECLINED. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, THE PLATFORM
STORE AND THE WE-COMMERCE NETWORK ARE PROVIDED TO FNW "AS IS." MERCATA DISCLAIMS
ANY IMPLIED WARRANTIES, IMPLIED PROMISES, AND/OR IMPLIED CONDITIONS OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND/OR NON-
INFRINGEMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MERCATA
SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING (1) THE PROFITABILITY OF THE
PLATFORM STORE OR THE WE-COMMERCE NETWORK; OR (2) THE FUNCTIONALITY,
PERFORMANCE, OR OPERATION OF THE PLATFORM STORE, THE WE-COMMERCE NETWORK, OR
MERCATA'S WEB SITE.
13. Good Faith Negotiations - Mercata agrees in good faith to continue its
negotiations and discussions to secure a sponsorship of the Seahawks for the
2000 football season.
14. Payment.
a. During the term of this Agreement, Mercata shall pay to FNW five percent
(5%) of Mercata's total Gross Revenue (defined below) on sales through the
Platform Store, less any amounts not received due to returns, bad debt
and/or fraudulent credit/debit transactions relating to such sales (the
"Commission"). For purposes of this provision, "Gross Revenue" shall mean
the total of all revenue actually received by Mercata on the sale of
merchandise through the Platform Store, resulting from customer sessions
that originate through a link from the FNW Web site to the Platform Store,
minus reasonable shipping and handling charges for the exact item ordered
if billed to the user, and any sales tax charged on such sales.
b. Payments pursuant to this Section shall be made within thirty (30) days
of the end of each calendar quarter in which such revenue is received by
Mercata. Mercata shall submit with each payment made pursuant to this
Section a report of the calculation of each such payment.
c. - FNW reserves the right to transfer revenue to a third party.
<TABLE>
<CAPTION>
MERCATA, INC. FOOTBALL NORTHWEST LLC
<S> <C>
By_____________________________________ By______________________________________
Printed Name___________________________ Printed Name____________________________
Its____________________________________ Its_____________________________________
</TABLE>
[The Remainder of this Page is Intentionally Left Blank]
-3-
<PAGE>
EXHIBIT A-1
[graphic of Seahawks web page]
<PAGE>
EXHIBIT 23.1
REPORT AND CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Mercata, Inc.:
The audits referred to in our report dated March 8, 2000, included the
related financial statement schedule for the period from September 23, 1998
(inception) to December 31, 1998 and the year ended December 31, 1999, included
in the registration statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Seattle, Washington
March 8, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 13,874
<SECURITIES> 0
<RECEIVABLES> 453
<ALLOWANCES> 50
<INVENTORY> 1,512
<CURRENT-ASSETS> 18,867
<PP&E> 4,644
<DEPRECIATION> 835
<TOTAL-ASSETS> 22,793
<CURRENT-LIABILITIES> 10,558
<BONDS> 0
0
25
<COMMON> 2
<OTHER-SE> 12,209
<TOTAL-LIABILITY-AND-EQUITY> 22,793
<SALES> 6,308
<TOTAL-REVENUES> 6,308
<CGS> 5,776
<TOTAL-COSTS> 5,776
<OTHER-EXPENSES> 37,092
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> (36,092)
<INCOME-TAX> 0
<INCOME-CONTINUING> (36,092)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (36,092)
<EPS-BASIC> (21.33)
<EPS-DILUTED> (21.33)
</TABLE>
