<PAGE>
As filed with the Securities and Exchange Commission on February 4, 2000.
Registration No. 333-93533
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Amendment
No. 1 to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
Register.com, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 7379 11-3239091
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification number)
</TABLE>
---------------
575 Eighth Avenue, 11th Floor
New York, NY 10018
Telephone: (212) 798-9100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
Richard D. Forman
President and Chief Executive Officer
Register.com, Inc.
575 Eighth Avenue, 11th Floor
New York, NY 10018
Telephone: (212) 798-9100
(Name, address, including zip code, and telephone number, including area code
of agent for service)
---------------
Copies to:
Alexander D. Lynch, Esq. Stacy J. Kanter, Esq.
Scott L. Kaufman, Esq. Skadden, Arps, Slate, Meagher & Flom LLP
Brobeck, Phleger & Harrison LLP Four Times Square
1633 Broadway, 47th Floor New York, NY 10036
New York, NY 10019 (212) 735-3000
(212) 581-1600
---------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
<PAGE>
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================
Proposed Maximum
Title of Each Class of Aggregate Amount of
Securities to be Registered Offering Price (1) Registration Fee (2)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Common stock, par value $0.0001 per share ...... $97,750,000 $25,806
=============================================================================================
</TABLE>
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o).
(2) $21,120 was previously paid at the time of the initial filing on December
23, 1999.
---------------
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 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
<PAGE>
The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
preliminary prospectus is not an offer to sell and is not soliciting an offer
to buy these securities in any jurisdiction where the offer or sale is not
permitted.
Subject to Completion, Dated February 4, 2000
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Register.com, Inc.
5,000,000 Shares
Common Stock
- --------------------------------------------------------------------------------
This is an initial public offering of common stock of Register.com, Inc. We
anticipate that the initial public
offering price will be between $15.00 and $17.00 per share.
We have applied to have our common stock approved for quotation on The Nasdaq
National Market under the symbol "RCOM."
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Per Share Total
----------- --------
Public offering price $ $
Underwriting discounts and commissions $ $
Proceeds, before expenses, to Register.com $ $
Proceeds, before expenses, to selling
stockholders $ $
The underwriters have the right to purchase up to an additional 750,000 shares
from us and the selling stockholders at the public offering price within 30
days from the date of this prospectus to cover over-allotments. We will not
receive any of the proceeds from the sale of shares by the selling
stockholders.
Deutsche Banc Alex. Brown Thomas Weisel Partners LLC
Legg Mason Wood Walker
Incorporated
WIT SOUNDVIEW
The date of this prospectus is , 2000.
<PAGE>
[Inside Front Cover]
Internet screen shot of Register.com home page.
"Value-Added Products and Services" above six button links for online products
and services featured on the Register.com website.
"Co-Branded Websites" above the register.com and Net Objects logo taken from a
co-branded website.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the common stock we are selling in this
offering, including the risk factors and our financial statements and related
notes, included elsewhere in this prospectus.
Register.com, Inc.
Our Business
We are a provider of Internet domain name registration services worldwide.
Domain names, such as mybrand.com, are the equivalent of addresses on the
Internet and are registered through companies known as registrars. Domain names
serve as part of the infrastructure for Internet communications and registering
a domain name is one of the first steps for individuals and businesses seeking
to establish an online identity. We believe that we offer a quick and
user-friendly registration process and responsive and reliable customer
support. We also offer a suite of value-added products and services targeted to
assist our customers in developing and maintaining their online identities.
These products and services which are provided by us and by third parties
include:
o email;
o maintaining, storing and connecting web sites to the Internet, also known
as web hosting;
o domain name forwarding, which allows customers to forward traffic from
their domain names to other web addresses; and
o real-time domain name management, which allows customers to view online
and change, on an instantaneous basis, domain name information.
Our goal is to become a one-stop resource through which our customers will
establish, maintain and enhance their presence on the Internet.
In June 1999, we became the first registrar other than Network Solutions,
Inc. to register domain names in the .com, .net and .org domains directly on
behalf of customers. As of January 28, 2000, Network Solutions and 24
registrars other than us were actively registering domain names in the .com,
.net and .org domains. For the three months ended December 31, 1999, we
registered approximately 308,000 domain names in these domains, representing an
increase of 94% over the approximately 159,000 domain names we registered in
these domains for the three months ended September 30, 1999.
We derive our revenues from domain name registration fees, online products
and services and advertising. Our net revenues for the three months ended
December 31, 1999 were $5.2 million, which represents a 137% increase in net
revenues over the three months ended September 30, 1999. For the three months
ended December 31, 1999, our cost of revenues was $1.7 million and our net loss
was $1.0 million, representing a 51% increase and a 61% decrease, respectively,
for these items over the three months ended September 30, 1999.
3
<PAGE>
Market Opportunity
As a result of the growth of the Internet and the introduction of
competition into the domain name registration industry, we believe there is
great potential for growth in the market for domain name registrations. We also
believe that this growth will be driven by individuals' and businesses' desire
for an online identity and brand, as well as the need to promote products,
services and events. We estimate that growth in global domain name
registrations will accelerate over the next few years from approximately 11
million domain names registered through September 30, 1999 to approximately 140
million domain names by the end of 2003, based on our internal calculations.
Our Solution
Registration Services. Our core expertise is providing domain name
registration services. Domain names are generally classified according to
industry custom either as "generic" for the .com, .net, .org, .gov, .edu and
.mil domains or as "country code" if they are associated with a particular
country. In addition, the domain name system is organized according to industry
custom by levels so that, for example, in the domain name mybrand.com, .com is
the top level domain and mybrand is the second level domain. We register domain
names in the .com, .net and .org generic domains and are able to register
domain names in over 120 country code domains, of which 24 may currently be
registered directly through our www.register.com website. In addition, through
a dedicated team of account managers, our Corporate Services department
provides domain name registration and other services, such as multiple domain
name registrations and international brand protection, which are targeted to
the needs of corporate customers.
Online Products and Services. We have assembled a suite of targeted
products and services to assist our customers with their online identities,
including email, web hosting and real-time domain management.
Customer Service. Our customer support group seeks to provide dependable
and timely resolution of customer inquiries, 24 hours per day, seven days per
week. We manage and respond to customer inquiries through our internally
developed Internet-based customer care tracking system. We have teams of
customer service representatives who specialize in key aspects of our business,
and who are informed about our products, services and technology through our
ongoing training.
Distribution. We believe that our direct and indirect distribution
channels enable us to reach a broad range of potential customers with products
and services targeted to their needs and to increase our exposure across the
market. We provide our products and services directly to our customers through
our www.register.com website as well as through our Corporate Services
department. We also offer domain name registration services indirectly through
our network of co-brand and private label websites, which include Internet
service providers, also known as ISPs, web-hosting companies and other
companies whose websites may appeal to our target customers. A co-brand network
participant offers our domain name registration services through a website
similar in appearance to our www.register.com website, but branded with the
participant's and our logos. A customer typically accesses a co-brand website
through the participant's home page. A co-brand website also typically provides
links back to the participant's website to facilitate the sale of products and
services by the participant. A private label network participant offers our
domain name registration and other services through a website of its own design
but the actual domain name registrations are processed through our systems.
4
<PAGE>
Our Strategy
Our objectives are to continue to increase our share of domain name
registrations, to differentiate our products and services and to develop
long-term relationships with our customers by helping them to establish,
maintain and enhance their online presence. Our key strategies for achieving
these objectives include:
o introducing new products and services;
o enhancing brand awareness;
o extending distribution channels;
o expanding our Corporate Services department;
o pursuing strategic acquisitions;
o offering names in additional domains; and
o expanding internationally.
Risk Factors
We face a number of risks that you should consider before you decide to
buy our common stock. These risks, which are set forth in greater detail in
"Risk Factors," include, among other things, that we have never been profitable
and anticipate incurring additional losses in the foreseeable future; that our
accumulated losses totaled $12.2 million as of December 31, 1999 and that,
following the consummation of the offering, our existing stockholders will hold
approximately 84% of our outstanding common stock and will be able to control
the election of directors and all other matters requiring stockholder approval.
Our History
We were founded by Richard D. Forman, Peter A. Forman and Dan B. Levine as
Forman Interactive Corp., a New York corporation, on November 23, 1994. Forman
Interactive merged with and into Register.com, Inc., a Delaware corporation, on
June 25, 1999. Our principal executive offices are located at 575 Eighth
Avenue, 11th Floor, New York, New York 10018. Our telephone number at that
location is (212) 798-9100. References in this prospectus to "Register.com,"
"we," "our" and "us" refer to Register.com, Inc. and Forman Interactive.
--------------------
We maintain a corporate website at www.register.com. The contents of our
website are not part of this prospectus.
5
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered by Register.com ...................... 5,000,000 shares
Common stock to be outstanding after the offering ......... 30,759,380 shares
Use of proceeds ........................................... We plan to use the proceeds from
this offering for general corporate
purposes, including marketing,
working capital, and acquisitions and
strategic investments. Please see "Use
of Proceeds."
Proposed Nasdaq National Market symbol .................... RCOM
</TABLE>
The foregoing information is based on the shares outstanding as of
December 31, 1999. The total number of shares of common stock that we assume
will be outstanding after the offering excludes:
o 1,750 shares of common stock issued upon the exercise of stock options
between January 1, 2000 and January 31, 2000.
o 4,353,286 shares of common stock issuable upon the exercise of stock
options outstanding as of January 31, 2000, with a weighted average
exercise price of $7.50 per share;
o 52,500 shares of common stock issuable upon exercise of stock options to
be granted upon the consummation of this offering with an exercise price
equal to the initial public offering price of our common stock;
o 4,779,964 shares of common stock available for issuance under our stock
option plans for options not yet granted;
o 350,000 shares reserved for issuance under our employee stock purchase
plan; and
o 6,155,676 shares of common stock issuable upon exercise of outstanding
warrants with a weighted average exercise price of $1.50 per share.
Unless otherwise noted, the information in this prospectus assumes:
o the conversion of each outstanding share of our preferred stock into one
share of our common stock upon the consummation of this offering; and
o no exercise of the underwriters' over-allotment option.
All share numbers in this prospectus have been adjusted to reflect
3.5-for-1 stock splits of our common stock and preferred stock effected in
January 2000 as stock dividends.
6
<PAGE>
Our Summary Financial Data
The following table summarizes financial data for our business. You should
read the summary financial data in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our
financial statements and the notes to those financial statements included
elsewhere in this prospectus. The pro forma basic and diluted net loss per
share data give effect to the conversion of our Exchangeable Preferred Stock
and Series A Convertible Preferred Stock at the date of original issuance.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------
1995 1996 1997 1998 1999
-------------- ---------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues ..................... $ 87,696 $ 868,018 $ 713,263 $ 1,319,359 $ 9,644,552
Gross profit ..................... 75,297 525,878 521,724 858,207 6,562,053
Operating expenses:
Sales and marketing ............ 166,330 935,495 366,975 863,720 7,149,693
Research and development ....... 102,901 390,814 71,471 276,687 1,767,158
General and administrative
(exclusive of non-cash
compensation ) ................ 94,704 743,609 263,017 795,425 2,380,190
Non-cash compensation .......... -- -- -- 149,682 4,929,200
---------- ------------ ---------- ------------ ------------
Total operating expenses ...... 363,935 2,069,918 701,463 2,085,514 16,226,241
Net loss ......................... $ (288,638) $ (1,714,076) $ (205,526) $ (1,160,748) $ (8,776,918)
========== ============ ========== ============ ============
Basic and diluted net loss per
share .......................... $ (0.07) $ (0.26) $ (0.02) $ (0.07) $ (0.46)
========== ============ ========== ============ ============
Weighted average common
shares used in basic and
diluted net loss per share ..... 4,429,859 6,633,905 8,884,709 15,697,013 19,117,027
========== ============ ========== ============ ============
Pro forma basic and diluted net
loss per share ................. $ (0.40)
============
Weighted average shares used
in pro forma basic and
diluted net loss per share ..... 22,112,252
============
</TABLE>
The following table is a summary of our balance sheet at December 31,
1999. The pro forma data give effect to the conversion of each outstanding
share of preferred stock into one share of common stock and the pro forma as
adjusted data reflect the sale of 5,000,000 shares of common stock offered
hereby at an assumed initial public offering price of $16.00 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
-------------- -------------- ---------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents ......... $40,944,122 $40,944,122 $114,144,122
Working capital ................... 29,813,357 29,813,357 103,013,357
Total assets ...................... 68,336,046 68,336,046 141,146,046
Total deferred revenue ............ 32,101,232 32,101,232 32,101,232
Total liabilities ................. 46,423,191 46,423,191 46,033,191
Stockholders' equity .............. 21,912,855 21,912,855 95,112,855
</TABLE>
7
<PAGE>
RISK FACTORS
Any investment in our common stock involves a high degree of risk. You
should consider carefully the risks described below, together with the other
information contained in this prospectus, before you decide to buy our common
stock. If any of the following events actually occurs, our business, financial
condition and results of operations may suffer materially. As a result, the
market price of our common stock could decline, and you could lose all or part
of your investment in our common stock.
Risks Related to Our Industry and Our Business
We have a limited operating history as a domain name registrar and expect to
encounter difficulties faced by early-stage companies.
We only recently entered the domain name registration industry. In
February 1998, we began providing a consumer interface for registering domain
names in the .com, .net and .org domains and in country code domains by
forwarding the information we gathered from the consumer to Network Solutions
or the applicable country code registrars or registries. In June 1999, we began
to compete directly with Network Solutions for registrations in the .com, .net
and .org domains. Accordingly, we have only a limited operating history as a
domain name registrar upon which our current business and prospects can be
evaluated, and our operating results, since June 1999, are not comparable to
our results for prior periods. As a company operating in a newly competitive
and rapidly evolving industry, we face risks and uncertainties relating to our
ability to implement our business plan successfully. We cannot assure you that
we will adequately address these risks and uncertainties or that our business
plan will be successful.
We have a history of losses and expect losses to continue for the foreseeable
future.
We have never been profitable. We incurred net losses of approximately
$1.2 million for the year ended December 31, 1998 and $8.8 million for the year
ended December 31, 1999. As of December 31, 1999, our accumulated losses
totaled $12.2 million. We anticipate that our operating expenses will increase
substantially in the foreseeable future as we develop new products and
services, increase our sales and marketing operations, develop new distribution
channels and strategic relationships, improve our operational and financial
systems and broaden our customer service capabilities. Accordingly, although we
had positive cash flow from operations for 1999, we expect to incur additional
losses for the foreseeable future, primarily due to an increase in our
marketing expenses to build our brand, which we expect to exceed $25.0 million
in 2000, and our capital expenditures, which we expect to exceed $10.0 million
in 2000. These losses are expected to increase significantly from current
levels, which in turn will increase our accumulated losses. We cannot assure
you that we will become profitable or, if we become profitable, that we will be
able to sustain or increase our profitability in the future.
The domain name registration industry is in its early stages of development
and, since April 1999, has been in a transitional phase to introduce
competition.
Before April 1999, the domain name registration system for the .com, .net
and .org domains was managed by Network Solutions pursuant to a cooperative
agreement with the U.S. government. In November 1998, the Department of
Commerce recognized the Internet Corporation for Assigned Names and Numbers,
commonly known as ICANN, to oversee key aspects of the Internet domain name
registration system. We cannot assure you that any future measures adopted by
the Department of Commerce or ICANN will benefit us or that they will not
materially harm our business, financial condition and results of operations. In
addition, we continue to face the risks that:
8
<PAGE>
o the U.S. government may, for any reason, reassess its decision to
introduce competition into, or ICANN's role in overseeing, the domain name
registration market;
o the Internet community may become dissatisfied with ICANN and refuse to
recognize its authority or support its policies, which could create
instability in the domain name registration system; and
o ICANN may attempt to impose additional fees on registrars if it fails to
obtain funding sufficient to run its operations.
We may not be able to maintain or improve our competitive position because of
strong competition from Network Solutions.
Network Solutions' authorization by the U.S. government to act as the sole
domain name registrar prior to April 1999 in the .com, .net and .org domains
gives it a significant competitive advantage in the domain name registration
industry.
Before the recent introduction of competition into the domain name
registration industry, Network Solutions was the sole entity authorized by the
U.S. government to serve as the registrar for domain names in the .com, .net
and .org domains. This position allowed Network Solutions to develop a
substantial customer base, which gives it advantages in securing customer
renewals and in developing and marketing ancillary products and services. We
face significant competition from Network Solutions as we seek to increase our
overall share of the market for domain name registration services, and we
cannot assure you that we will be able to maintain or improve our competitive
position. Based on its press release dated October 28, 1999, Network Solutions
registered 1.3 million net new registrations in the .com, .net and .org domains
for the three months ended September 30, 1999, representing 87% of all new
registrations for the period. For a more detailed discussion of the
introduction of competition into the domain name registration services
industry, see "Business--Administration of the Internet; Government Regulation
and Legal Uncertainties."
Network Solutions' exclusive control over the registry for the .com, .net
and .org domains has given it an advantage over all competitive registrars.
The Internet domain name registration system is composed of two principal
functions: registry and registrar. Registries maintain the database that
contain names registered within the top level domains and their corresponding
Internet protocol addresses. Registrars act as intermediaries between the
registry and individuals and businesses, referred to as registrants, seeking to
register domain names. The agreements among Network Solutions, ICANN and the
U.S. Department of Commerce have given Network Solutions the exclusive right to
operate and maintain the registry for the .com, .net and .org domains at least
until November 30, 2003. Registrars other than Network Solutions are known in
the industry as "competitive registrars." As the exclusive registry for these
domains, Network Solutions receives from us, and every other competitive
registrar, $6 per domain name per year. Although registry fees may not be used
directly to fund Network Solutions' registrar business, the substantial net
revenues from these fees, and the certainty of receiving them, provide Network
Solutions significant advantages over any competitive registrar.
If Network Solutions sells the registry for the .com, .net and .org
domains and uses the proceeds to fund its registrar business or related product
and service offerings, it will have a substantial competitive advantage over
all competitive registrars.
The agreements among Network Solutions, ICANN and the U.S. Department of
Commerce provide that if Network Solutions separates its registry and registrar
operations by May 9, 2001 and sells the registry assets to a third party, the
term of exclusivity for the third party extends for an additional four years to
November 30, 2007. If a sale of the registry occurs, Network Solutions could
use the proceeds of the sale, which we believe would be
9
<PAGE>
substantial, to fund its registration operations and related product and
service offerings. We believe that the use of these proceeds to finance Network
Solutions' registrar business could have a material adverse effect on our
business, financial condition and results of operations.
We also face competition from other competitive registrars and others in the
domain name registration industry and expect this competition to intensify.
Competition in the domain name registration services industry will
intensify as the number of entrants into the market increases.
When we began providing online domain name registrations in the .com, .net
and .org domains in June 1999, we were one of only five testbed competitive
registrars accredited by ICANN to interface with the Shared Registration
System. The Shared Registration System was designed to allow registrars to
interface directly with Network Solutions' registry for domain names. The
testbed period ended on November 30, 1999. As of January 28, 2000, ICANN has
accredited 77 competitive registrars to register domain names in the .com, .net
and .org domains. As of January 28, 2000, 25 of these competitive registrars
had actively begun to register domain names. An additional 33 companies have
qualified for accreditation but have yet to sign the agreements required by
ICANN and Network Solutions. We face substantial competition from competitive
registrars and others in that:
o many accredited registrars that are not currently registering domain
names may begin to do so in the near future;
o companies that are not accredited registrars may offer domain name
registrations through a competing accredited registrar's system; and
o ICANN may accredit new registrars to register domain names in the .com,
.net and .org domains.
We face competition from other competitive registrars and others in the
domain name registration industry who may have longer operating histories,
greater name recognition or greater resources.
Our competitors in the domain name registration industry include companies
with strong brand recognition and Internet industry experience, such as major
telecommunications firms, cable companies, ISPs, web-hosting providers,
Internet portals, systems integrators, consulting firms and other registrars.
Many of these companies also possess core capabilities to deliver ancillary
services, such as customer service, billing services and network management.
Our market position could be harmed by any of these existing or future
competitors, some of which may have longer operating histories, greater name
recognition and greater financial, technical, marketing, distribution and other
resources than we do. Also, as a result of increased competition, our
period-over-period growth rates may decline.
Our ability to register domain names in the .com, .net and .org domains depends
upon the continued availability and functionality of the Shared Registration
System.
The success of our business as a competitive registrar depends upon the
continued availability and functionality of the Shared Registration System,
which is maintained by Network Solutions, and its ability to adapt to an
expanding market for domain name registrations. As of January 28, 2000, there
were 25 registrars registering names through the Shared Registration System and
an additional 85 that may begin using the system at any time. Because the
Shared Registration System has been in general use only since April 1999, we
cannot assure you that it will be able to handle the growing traffic generated
by large numbers of registrars or registrations. Our ability to provide domain
name registration services in the
.com, .net and .org domains would be materially harmed by any failure of the
Shared Registration System to accommodate our registration needs.
10
<PAGE>
Our business will be materially harmed if in the future the administration and
operation of the Internet no longer relies upon the existing domain name
system.
The Internet is expected to continue to develop at a rapid rate. This
development may include changes in the administration or operation of the
Internet, which could include the creation and institution of alternate systems
for directing Internet traffic without the use of the existing domain name
system. Widespread acceptance of these alternative systems would eliminate the
need to register a domain name to establish an online presence and could
materially adversely affect our business, financial condition and results of
operations.
Competition in the domain name registration industry could force us to reduce
our prices for our products and services and would negatively impact our
results of operations.
Since competition in the domain name registration industry is in its early
stages, we cannot assure you that we will not be required, by market factors or
otherwise, to reduce, perhaps significantly, the prices we charge for our
domain name registration and related products and services. Further, some of
our competitors are offering domain name registrations for free and derive
their revenues from other sources. Reducing the prices we charge for domain
name registration services in order to remain competitive could materially
adversely affect our results of operations.
If our customers do not renew their domain name registrations through us, and
we fail to replace their business or develop alternative sources of revenue,
our business, financial condition and results of operations would be materially
adversely affected.
The growth of our business depends in part on our customers' renewing
their domain name registrations through us. Having only recently become an
accredited registrar, we do not have any actual experience with registration
renewals. If our customers decide, for any reason, not to renew their
registrations through us, our business, financial condition and results of
operations would be materially adversely affected.
If we fail to become accredited to offer domain names in additional generic top
level domains that may be introduced, and our customers turn to other
registrars for these registration needs, our business, financial condition and
results of operations would be materially adversely affected.
ICANN or another approving entity may introduce new generic top level
domains, such as .web, .firm and .store. We cannot assure you that, if
introduced, we will be accredited to offer registrations in these domains or
that customers will rely on us to provide registration services within any new
generic top level domains. Our business, financial condition and results of
operations would be adversely affected if substantial numbers of our customers
turn to other registrars for these registration needs.
Our ability to register domain names in the .com, .net and .org domains depends
upon our continued accreditation by ICANN.
We need to be an ICANN-accredited registrar in order to register domain
names in the .com, .net and .org domains. Our current ICANN accreditation
agreement expires on April 26, 2000. While we anticipate that ICANN will renew
this agreement, we cannot assure you that it will do so. If ICANN does not
renew our accreditation, our business, financial condition and results of
operations would be materially adversely affected.
If our customers do not find our expanded product and service offerings
appealing, we will not achieve an important part of our strategy and our net
revenues may not grow.
Part of our strategy includes diversifying our revenue base by offering
value-added products and services to our customers. We expect to incur
significant costs in acquiring,
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developing and marketing these new products and services. Domain name
registration services generated approximately 46% of our net revenues during
the year ended December 31, 1999 and we expect it to account for an increasing
percentage of our revenues in future periods. If we fail to offer products and
services that meet our customers' needs, or our customers elect not to purchase
our products and services, our anticipated net revenues may fall below
expectations, we may not generate sufficient revenue to offset these related
costs and we will remain dependent on domain name registrations as a primary
source of revenue.
Our failure to establish and maintain online business relationships that
generate a significant amount of traffic could limit the growth of our
business.
We expect that in the future approximately 15% of our customers will
purchase their domain name registrations through our network of co-brand and
private label websites comprising our indirect distribution channel. We
currently have contractual agreements with participants in this network, and if
these third parties do not attract a significant number of visitors to their
websites, we may not receive a significant number of customers from these
network relationships and our net revenues may decrease or not grow. In
addition, we plan to expand our network of co-brand and private label websites.
Our net revenues may suffer if we fail to expand or maintain our network or if
our network does not result in a number of new customers sufficient to justify
the cost.
Rapid growth in our business could strain our managerial, operational,
financial, accounting and information systems, customer service staff and
office resources.
The anticipated future growth necessary to expand our operations will
place a significant strain on our resources. In order to achieve our growth
strategy, we will need to expand all aspects of our business, including our
computer systems and related infrastructure, customer service capabilities and
sales and marketing efforts. The demands on our network infrastructure,
technical staff and technical resources have grown rapidly with our expanding
customer base. In 1999, our number of full-time employees grew from
approximately 33 to approximately 122. We cannot assure you that our
infrastructure, technical staff and technical resources will adequately
accommodate or facilitate the anticipated growth of our customer base. We also
expect that we will need to continually improve our financial and managerial
controls, billing systems, reporting systems and procedures, and we will also
need to continue to expand, train and manage our workforce. If we fail to
manage our growth effectively, our business, financial condition and results of
operation could be materially adversely affected.
In addition, as we offer new products and services, we will need to
increase the size and expand the training of our customer service staff to
ensure that they can adequately respond to customer inquiries. If we fail to
provide our customer service staff training and staffing sufficient to support
new products and services, we may lose customers who feel that their inquiries
have not adequately been addressed.
If we are unable to attract and retain highly qualified management and
technical personnel, our business may be harmed.
Our success depends in large part on the contributions of our senior
management team and technology personnel and in particular Richard D. Forman,
our President and Chief Executive Officer. We face intense competition in
hiring and retaining personnel from a number of sectors, including technology
and Internet companies. Many of these companies have greater financial
resources than we do to attract and retain qualified personnel. In addition,
although we maintain employment agreements with Mr. Forman and Jack S. Levy,
our General Counsel, we have not in the past executed, and do not have any
current plans to execute employment agreements with our other employees.
Further, our agreement with Mr.
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Forman expires in June 2000. As a result, we may be unable to retain our
employees or attract, integrate, train and retain other highly qualified
employees in the future. If we fail to attract new personnel or retain and
motivate our current personnel, our business, financial condition and results
of operations could be materially adversely affected.
Our business will suffer if we fail to build awareness of our brand name.
Building recognition of our brand is critical to attracting additional
traffic and customers to our website, new business alliances, acquisition
candidates, advertisers and employees. Accordingly, we intend to continue
pursuing an aggressive brand-enhancement strategy, which includes mass market
and multimedia advertising, promotional programs and public relations
activities. We intend to make significant expenditures, over $25 million in
2000, on advertising and promotional programs and activities. These
expenditures may not result in an increase in net revenues sufficient to cover
our advertising and promotional expenses. We cannot assure you that promoting
our brand name will increase our net revenues. Accordingly, if we incur
expenses in promoting our brand without a corresponding increase in our net
revenues, our business, financial condition and results of operations would be
materially adversely affected.
Our failure to respond to the rapid technological changes in our industry may
harm our business.
If we are unable, for technological, legal, financial or other reasons, to
adapt in a timely manner to changing market conditions or customer
requirements, we could lose customers, strategic alliances and market share.
The Internet and electronic commerce are characterized by rapid technological
change. Sudden changes in user and customer requirements and preferences, the
frequent introduction of new products and services embodying new technologies
and the emergence of new industry standards and practices could render our
existing products, services and systems obsolete. The emerging nature of
products and services in the domain name registration industry and their rapid
evolution will require that we continually improve the performance, features
and reliability of our products and services. Our success will depend, in part,
on our ability:
o to enhance our existing products and services;
o to develop and license new products, services and technologies that
address the increasingly sophisticated and varied needs of our current and
prospective customers; and
o to respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
The development of additional products and services and other proprietary
technology involves significant technological and business risks and requires
substantial expenditures and lead time. We may be unable to use new
technologies effectively or adapt our websites, internally developed technology
and transaction-processing systems to customer requirements or emerging
industry standards. Updating our technology internally and licensing new
technology from third parties may require us to incur significant additional
capital expenditures.
If we are unable to make suitable acquisitions and strategic investments, our
long-term growth strategy could be impeded.
Our long-term growth strategy includes identifying and, from time to time,
acquiring or investing in suitable candidates on acceptable terms. In
particular, we intend to acquire or make strategic investments in providers of
product offerings that complement our business and other companies in the
domain name registration industry. In pursuing acquisition and
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investment opportunities, we may be in competition with other companies having
similar growth and investment strategies. Competition for these acquisitions or
investment targets could also result in increased acquisition or investment
prices and a diminished pool of businesses, technologies, services or products
available for acquisition or investment. Our long-term growth strategy could be
impeded if we fail to identify and acquire or invest in promising candidates on
terms acceptable to us.
Our acquisition strategy could subject us to significant risks, any of which
could harm our business.
Acquisitions involve a number of risks and present financial, managerial
and operational challenges, including:
o diversion of management attention from running our existing business;
o increased expenses, including compensation expenses resulting from newly
hired employees;
o adverse effects on our reported operating results due to possible
amortization of goodwill associated with acquisitions; and
o potential disputes with the sellers of acquired businesses, technologies,
services or products.
In addition, we may not be successful in integrating the business, technology,
operations and personnel of any acquired company. Performance problems with an
acquired business, technology, service or product could also have a material
adverse impact on our reputation as a whole. In addition, any acquired
business, technology, service or product could significantly underperform
relative to our expectations. For all these reasons, our pursuit of an overall
acquisition and investment strategy or any individual acquisition or investment
could have a material adverse effect on our business, financial condition and
results of operations.
Our international expansion strategy could subject us to significant risks,
many of which could harm our business.
If we do not successfully manage our expansion into foreign markets, our
business may suffer. We intend to expand our operations into international
markets, primarily through business alliances with non-U.S. ISPs and the
creation of local language websites. While we have no current plans to open
offices outside the United States, we may choose to do so in the future,
particularly in Europe and Japan. Operating internationally may require us to
modify the way we conduct our business and deliver our services in these
markets. If we do not appropriately anticipate changes and adapt our practices,
our business, financial condition and results of operations could be materially
adversely affected. As we expand into international markets, we anticipate
facing the following challenges:
o the burden and expense of complying with a wide variety of foreign laws
and regulatory requirements;
o potentially adverse tax consequences;
o longer payment cycles and problems in collecting accounts receivable for
products other than domain name registrations;
o technology export and import restrictions or prohibitions;
o tariffs and other trade barriers;
o political and economic instability;
o cultural and language differences;
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o fluctuations in currency exchange rates;
o difficulties in staffing and managing foreign operations to the extent
any are established; and
o seasonal reductions in business activity, especially during the summer
months in Europe and certain other parts of the world.
If we fail to comply with the regulations of the country code registries or are
unable to register domain names with those registries, our business would be
materially adversely affected.
Each of the country code registries requires registrars to comply with
specific regulations. Many of these regulations vary from country code to
country code. If we fail to comply with the regulations imposed by country code
registries, these registries will likely prohibit us from registering or
continuing to register names in their country codes. Further, in most cases,
our rights to provide country code domain name registration services are not
governed by written contract. As a result, we cannot be certain that we will
continue to be able to register domain names in the country code domains we
currently offer. Any restrictions on our ability to offer domain name
registrations in a significant number of country codes could materially
adversely affect our business, financial condition and results of operations.
If country code registries cease operations or otherwise fail to process
registrations or related information accurately, we would be unable to honor
our subscriptions relating to those country codes.
Country code registries may be administered by the host country,
entrepreneurs or other third parties. If these registry businesses cease
operations or otherwise fail to process domain name registrations or the
related information in country code domains, we would be unable to honor the
subscriptions of registrants who have registered, or are in the process of
registering, domain names in the applicable country code domain. If we are
unable to honor a substantial number of subscriptions for our customers for any
reason, our business, financial condition and results of operations would be
materially adversely affected.
We are restricted from entering into agreements with web-hosting service
providers as a result of an agreement we have with Concentric Network
Corporation.
As part of our marketing and distribution agreement with Concentric
Network Corporation, we have agreed that no more than three service providers,
one of which must be Concentric, may market, advertise or otherwise promote
their web-hosting services on our website. This agreement expires on June 25,
2000 and may be renewed by the parties for an additional year. Accordingly, we
are severely restricted in our ability to enter agreements with other providers
of these services.
We may not be able to protect and enforce our intellectual property rights or
protect ourselves from the intellectual property claims of third parties.
We may be unable to protect and enforce our intellectual property rights
from infringement.
We rely upon copyright, trade secret and trademark law, invention
assignment agreements and confidentiality agreements to protect our proprietary
technology, including software and
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applications and trademarks, and other intellectual property to the extent that
protection is sought or secured at all. We do not have patents on any of our
technologies or processes. While we typically enter into confidentiality
agreements with our employees, consultants and strategic partners, and
generally control access to and distribution of our proprietary information, we
cannot ensure that our efforts to protect our proprietary information will be
adequate to protect against infringement and misappropriation of our
intellectual property by third parties, particularly in foreign countries where
laws or law enforcement practices may not protect our proprietary rights as
fully as in the United States.
Furthermore, because the validity, enforceability and scope of protection
of proprietary rights in Internet-related industries is uncertain and still
evolving, we cannot assure you that we will be able to defend our proprietary
rights. In addition to being difficult to police, once any infringement is
detected, disputes concerning the ownership or rights to use intellectual
property could be costly and time-consuming to litigate, may distract
management from operating the business and may result in our losing significant
rights and our ability to operate our business.
We cannot assure you that third parties will not develop technologies or
processes similar or superior to ours.
We cannot ensure that third parties will not be able to independently
develop technology, processes or other intellectual property that is similar to
or superior to ours. The unauthorized reproduction or other misappropriation of
our intellectual property rights, including copying the look, feel and
functionality of our website, could enable third parties to benefit from our
technology without our receiving any compensation and could materially
adversely affect our business, financial condition and results of operations.
We may be subject to claims of alleged infringement of intellectual
property rights of third parties.
We do not conduct comprehensive patent searches to determine whether our
technology infringes patents held by others. In addition, technology
development in Internet-related industries is inherently uncertain due to the
rapidly evolving technological environment. As such, there may be numerous
patent applications pending, many of which are confidential when filed, with
regard to similar technologies. Third parties may assert infringement claims
against us and these claims and any resultant litigation, should it occur,
could subject us to significant liability for damages. Even if we prevail,
litigation could be time-consuming and expensive to defend, and could result in
the diversion of management's time and attention. Any claims from third parties
may also result in limitations on our ability to use the intellectual property
subject to these claims unless we are able to enter into agreements with the
third parties making these claims. Such royalty or licensing agreements, if
required, may be unavailable on terms acceptable to us, or at all. If a
successful claim of infringement is brought against us and we fail to develop
non-infringing technology or to license the infringed or similar technology on
a timely basis, it could materially adversely affect our business, financial
condition and results of operations.
As a registrar of domain names and a provider of web-hosting services, we
may be subject to various claims, including claims from third parties asserting
that their rights have been infringed by domain names registered or websites
hosted on behalf of other parties.
We may be subject to various claims, including trademark infringement,
unfair competition and violations of publicity and privacy rights, to the
extent that such parties consider their rights to be violated by the
registration of particular domain names by other parties or our hosting of
third-party websites. If these claims against us are successful, our business,
financial condition and results of operations could be materially adversely
affected.
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We may be held liable if third parties misappropriate our users' personal
information.
A fundamental requirement for online communications is the secure
transmission of confidential information over public networks. If third parties
succeed in penetrating our network security or otherwise misappropriate our
customers' 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, including for unauthorized marketing
purposes. These claims could result in litigation and adverse publicity which
could have a material adverse effect on our business, financial condition and
results of operations, as well as our reputation.
In addition, the Federal Trade Commission and state agencies have been
investigating various Internet companies regarding their use of personal
information. We could have additional expenses if new regulations regarding the
use of personal information are introduced or if our privacy practices are
investigated.
We may incur significant expenses related to the security of personal
information online.
The need to securely transmit confidential information online has been a
significant barrier to electronic commerce and online communications. Any
well-publicized compromise of security could deter people from using online
services such as the ones we offer, or from using them to conduct transactions
that involve transmitting confidential information. Because our success depends
on the acceptance of online services and electronic commerce, we may incur
significant costs to protect against the threat of security breaches or to
alleviate problems caused by these breaches.
We may be held liable for Year 2000 problems relating to one of our former
product offerings.
From July 1995 until October 1998, we sold Internet Creator, a website
creation and management software program. We later offered this product to our
web-hosting customers at no cost. Although we have conducted usability tests to
confirm to our satisfaction that Internet Creator is Year 2000 compliant, we
cannot be certain that users of the product will not experience systems
failures, delays or miscalculations affecting their websites that result from
Year 2000 problems. If users of the product experience Year 2000 problems and
successfully assert actions against us, our business, financial condition and
results of operations could be materially adversely affected.
Risks Related to Our Technology and the Internet
Systems disruptions and failures could cause our customers and advertisers to
become dissatisfied with us and may impair our business.
Our customers, advertisers and business alliances may become dissatisfied
with our products and services due to interruptions in access to our website.
Our ability to maintain our computer and telecommunications equipment in
working order and to reasonably protect them from interruption is critical to
our success. Our website must accommodate a high volume of traffic and deliver
frequently updated information. Our website has in the past experienced slower
response times as a result of increased traffic. We have conducted planned site
outages and experienced unplanned site outages with minimal impact on our
business. Our customers, advertisers and business alliances may become
dissatisfied by any systems failure that interrupts our ability to provide our
products and
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services to them. Substantial or repeated system failures would significantly
reduce the attractiveness of our website and could cause our customers,
advertisers and business alliances to switch to another domain name
registration service provider.
Our customers, advertisers and business alliances may become dissatisfied
with our products and services due to interruptions in our access to the Shared
Registration System or country code registries.
We depend on the Shared Registration System and country code registries to
register domain names on behalf of our customers. We have in the past
experienced problems with the Shared Registration System, including outages,
particularly during its implementation phase. Any significant outages in the
Shared Registration System or country code registries would prevent us from
delivering or delay our delivery of our services to our customers. Prolonged or
repeated interruptions in our access to the Shared Registration System or
country code registries could cause our customers, advertisers and business
alliances to switch to another domain name registration service provider.
Delays or systems failures unrelated to our systems could harm our
business.
Our customers depend on ISPs, online service providers and others to
access our website. Many of these parties have experienced outages and could in
the future experience outages, delays and other difficulties due to systems
failures unrelated to our systems. Although we carry general liability
insurance, our insurance may not cover any claims by dissatisfied customers,
advertisers or strategic alliances, or may be inadequate to indemnify us for
any liability that may be imposed in the event that a claim were brought
against us. Our business could be materially harmed by any system failure,
security breach or other damage that interrupts or delays our operations.
Our business would be materially harmed if our computer systems become
damaged.
Our network and communications systems are located at Exodus
Communications' hosting facility in Jersey City, New Jersey and Globix
Corporation's hosting facility in New York, New York. We are currently adding
network capacity to our systems located at Globix Corporation's New York, New
York hosting facility to make our systems geographically redundant. Although we
plan to complete this project by the second quarter of 2000, we cannot assure
you that our systems will be geographically redundant by this time. Fires,
floods, earthquakes, power losses, telecommunications failures, break-ins and
similar events could damage these systems. Computer viruses, electronic
break-ins, human error or other similar disruptive problems could also
adversely affect our systems. We do not carry business interruption insurance.
Accordingly, any significant damage to our systems would have a material
adverse effect on our business, financial condition and results of operations.
Our ability to deliver our products and services and our financial condition
depend on our ability to license third-party software, systems and related
services on reasonable terms from reliable parties.
We depend upon various third parties for software, systems and related
services, including access to the Shared Registration System provided by
Network Solutions. Some of these parties have a limited operating history or
may depend on reliable delivery of services from others. If these parties fail
to provide reliable software, systems and related services on agreeable license
terms, we may be unable to deliver our products and services.
Failure by our third-party provider of credit card processing services, to
process payments in a timely fashion will have a negative effect on our
business,
Under the terms of the accreditation agreement with ICANN, all registrars
are required to obtain a reasonable assurance of payment of registration fees
prior to registering or renewing
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domain names. We rely upon Cybersource to process credit card payments for our
individual customers. If Cybersource or its system fails for any reason to
process credit card payments in a timely fashion, the domain name reservation
process will be delayed and customers may be unable to obtain their desired
domain name. In addition, any significant delay would create a substantial
burden upon our customer support representatives as they attempt to resolve
issues and respond to inquiries resulting from the processing failures. These
problems could have a material adverse effect on our business, financial
condition and results of operations.
Year 2000 problems may disrupt our internal operations.
Many currently installed computer systems and software products are coded
to accept or recognize only two-digit entries to identify the year in any date.
These systems may interpret the date code "00" as the year 1900 rather than the
year 2000. This Year 2000 problem could result in systems failures, delays or
miscalculations that cause disruptions to our operations or the operations of
third-party providers of products and services that we offer. We are not aware
of any material Year 2000 problems that have harmed or threaten to harm our
business, but we cannot assure you that we will not experience problems in the
future. Our failure to correct a material Year 2000 problem, or the failure of
third-party providers to correct any material Year 2000 problems affecting
products and services upon which we rely, could materially adversely affect our
business, financial condition and results of operations. For a more detailed
discussion of year 2000 issues, please, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
If Internet usage does not grow, or if the Internet does not continue to expand
as a medium for commerce, our business may suffer.
Our success depends upon the continued development and acceptance of the
Internet as a widely used medium for commerce and communication. Rapid growth
in the uses of and interest in the Internet is a relatively recent phenomenon
and we cannot assure you that use of the Internet will continue to grow at its
current pace. A number of factors could prevent continued growth, development
and acceptance, including:
o the unwillingness of companies and consumers to shift their purchasing
from traditional vendors to online vendors;
o the Internet infrastructure may not be able to support the demands placed
on it, and its performance and reliability may decline as usage grows;
o security and authentication issues may create concerns with respect to
the transmission over the Internet of confidential information, such as
credit card numbers, and attempts by unauthorized computer users,
so-called hackers, to penetrate online security systems; and
o privacy concerns, including those related to the ability of websites to
gather user information without the user's knowledge or consent, may
impact consumers' willingness to interact online.
Any of these issues could slow the growth of the Internet, which could have a
material adverse effect on our business, financial condition and results of
operations.
If the use of the Internet as an advertising and marketing medium fails to
develop or develops more slowly than we expect, our future business could be
materially adversely affected.
Our future success depends in part on a significant increase in the use of
the Internet as an advertising and marketing medium. Advertising revenues
constituted 32% of our net revenues for the year ended December 31, 1999. The
Internet advertising market is
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new and rapidly evolving, and it cannot yet be compared with traditional
advertising media to gauge its effectiveness. As a result, demand for and
market acceptance of Internet advertising are uncertain. Many of our current
and potential customers have little or no experience with Internet advertising
and have allocated only a limited portion of their advertising and marketing
budgets to Internet activities. The adoption of Internet advertising,
particularly by entities that have historically relied upon traditional methods
of advertising and marketing, requires the acceptance of a new way of
advertising and marketing. These customers may find Internet advertising to be
less effective for meeting their business needs than traditional methods of
advertising and marketing. Furthermore, there are software programs that limit
or prevent advertising from being delivered to a user's computer. Widespread
adoption of this software by users would significantly undermine the commercial
viability of Internet advertising. These factors could materially adversely
affect our business, financial condition and results of operations.
We depend on the technological stability and maintenance of the Internet
infrastructure.
Our success and the viability of the Internet as an information medium and
commercial marketplace will depend in large part upon the stability and
maintenance of the infrastructure for providing Internet access and carrying
Internet traffic. Failure to develop a reliable network system or timely
development and acceptance of complementary products, such as high-speed
modems, could materially harm our business. In addition, the Internet could
lose its viability due to delays in the development or adoption of new
standards and protocols required to handle increased levels of Internet
activity or due to increased government regulation.
We may become subject to burdensome government regulations and legal
uncertainties affecting the Internet.
To date, government regulations have not materially restricted the use of
the Internet. The legal and regulatory environment pertaining to the Internet,
however, is uncertain and may change. Both new and existing laws may be applied
to the Internet by state, federal or foreign governments, covering issues that
include:
o sales and other taxes;
o user privacy;
o pricing controls;
o characteristics and quality of products and services;
o consumer protection;
o cross-border commerce;
o libel and defamation;
o copyright, trademark and patent infringement;
o pornography; and
o other claims based on the nature and content of Internet materials.
The adoption of any new laws or regulations or the new application or
interpretation of existing laws or regulations to the Internet could hinder the
growth in use of the Internet and other online services generally and decrease
the acceptance of the Internet and other online services as media of
communications, commerce and advertising. Our business may be
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harmed if any slowing of the growth of the Internet reduces the demand for our
services. In addition, new legislation could increase our costs of doing
business and prevent us from delivering our products and services over the
Internet, thereby harming our business, financial condition and results of
operations.
For example, in November 1999, the Anticybersquatting Consumer Protection
Act was enacted to curtail a practice commonly known in the industry as
"cybersquatting." A cybersquatter is generally defined in this Act as one who
registers a domain name that is identical or similar to another party's
trademark or the name of a living person, in each case with the bad faith
intent to profit from use of the domain name. Although the Act states that
registrars may not be held liable for registering or maintaining a domain name
for another person absent a showing of the registrar's bad faith intent to
profit from the use of the domain name, registrars may be held liable if they
fail to comply promptly with procedural provisions. If we are held liable under
this law, any liability could have a material adverse effect on our business,
financial condition and results of operations.
We file tax returns in such states as required by law based on principles
applicable to traditional businesses. However, one or more states could seek to
impose additional income tax obligations or sales tax collection obligations on
out-of-state companies, such as ours, which engage in or facilitate electronic
commerce. A number of proposals have been made at state and local levels that
could impose such taxes on the sale of products and services through the
Internet or the income derived from such sales. Such proposals, if adopted,
could substantially impair the growth of electronic commerce and materially
adversely affect our business, financial condition and results of operations.
Legislation limiting the ability of the states to impose taxes on
Internet-based transactions has been enacted by the United States Congress.
However, this legislation, known as the Internet Tax Freedom Act, imposes only
a three-year moratorium, which commenced October 1, 1998 and ends on October
21, 2001, on state and local taxes on electronic commerce. It is possible that
the tax moratorium could fail to be renewed prior to October 21, 2001. Failure
to renew this legislation would allow various states to impose taxes on
Internet-based commerce. The imposition of such taxes could materially
adversely affect our business, financial condition and results of operations.
Risks Related to This Offering
There has been no prior market for our common stock and our stock may
experience extreme price and volume fluctuations.
The stock market has experienced extreme price and volume fluctuations
that have particularly affected the market prices of the securities of
Internet-related companies. Prior to this offering, there has been no public
market for our common stock. We cannot predict the extent to which investor
interest in our stock will lead to the development of an active trading market
or how liquid that market might become. The initial public offering price for
the shares will be determined by negotiations between us and the
representatives of the underwriters and may not be indicative of prices that
will prevail in the trading market. The market price of our common stock may
decline below the initial public offering price. In the past, companies that
have experienced volatility in the market price of their stock have been the
objects of securities class action litigation. If we were the object of
securities class action litigation, it could result in substantial costs and a
diversion of our management's attention and resources.
Our management has broad discretion over how to use the proceeds of this
offering and may not use the proceeds in ways that help our business succeed.
We estimate that our net proceeds from this offering will be $73.2
million, assuming an initial public offering price of $16.00 per share after
deducting underwriting discounts and
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estimated offering expenses. Other than our 2000 marketing and capital
expenditure plans, we have no specific plans for the net proceeds of this
offering other than to fund general corporate purposes, including working
capital, and acquisitions and strategic investments. Accordingly, our
management will have broad discretion as to how to apply the net proceeds of
this offering. If we fail to use the proceeds effectively, our business may not
grow and our net revenues and net income may decline.
Our directors, executive officers and principal stockholders own enough of our
shares to control Register.com, which will limit your ability to influence
corporate matters.
Our directors, executive officers and principal stockholders currently
beneficially own approximately 88.5% of our common stock, and after the
offering will beneficially own approximately 78.2% of our common stock.
Accordingly, these stockholders could control the outcome of any corporate
transaction or other matter submitted to our stockholders for approval,
including mergers, consolidations and the sale of all or substantially all of
our assets, and also could prevent or cause a change in control. The interests
of these stockholders may differ from the interests of our other stockholders.
In addition, third parties may be discouraged from making a tender offer or bid
to acquire us because of this concentration of ownership.
Shares eligible for public sale after this offering could adversely affect our
stock price.
Based on shares outstanding on January 31, 2000, from time to time after
this offering, a total of 26,880 and 23,395,177 shares of common stock may be
sold in the public market by existing stockholders 90 days and 180 days,
respectively, after the date of this prospectus, subject to applicable volume
and other limitations imposed under federal securities laws. In addition,
existing stockholders owning an aggregate of 29,894,846 shares of common stock
and common stock issuable upon the exercise of outstanding options and warrants
have the right to require us to register their shares under the Securities Act.
If we register these shares, they can be sold in the public market. The market
price of our common stock could decline as a result of sales by these existing
stockholders of their shares of common stock in the market after this offering,
or the perception that these sales could occur. These sales also might make it
difficult for us to sell equity securities in the future at a time and price
that we deem appropriate.
Our charter documents and Delaware law may inhibit a takeover that stockholders
may consider favorable.
Provisions in our amended and restated certificate of incorporation, our
amended and restated bylaws and Delaware law could delay or prevent a change of
control or change in management that would provide stockholders with a premium
to the market price of their common stock. The authorization of undesignated
preferred stock, for example, gives our board the ability to issue preferred
stock with voting or other rights or preferences that could impede the success
of any attempt to change control of the company. If a change of control or
change in management is delayed or prevented, this premium may not be realized
or the market price of our common stock could decline.
You will incur immediate and substantial dilution.
The initial public offering price per share will significantly exceed the
net tangible book value per share. Accordingly, investors purchasing shares in
this offering will suffer immediate dilution of their investment equal to
$13.19 per share, based on an assumed initial offering price of $16.00. If we
issue additional shares of common stock in the future, investors purchasing
shares in this offering may experience further dilution. Any further dilution
could adversely affect the trading price of our stock.
22
<PAGE>
USE OF PROCEEDS
We estimate that we will receive net proceeds from the sale of the shares
of common stock in this offering of approximately $73.2 million, assuming an
initial public offering price of $16.00 per share and after deducting
underwriting discounts and commissions and estimated offering expenses. If the
underwriters exercise their over-allotment option in full, we estimate that our
net proceeds will be approximately $76.3 million.
We plan to use the proceeds from this offering for general corporate
purposes, including marketing and working capital, and acquisitions and
strategic investments. We intend to spend over $25.0 million in 2000 on
advertising and promotional programs and activities and over $10.0 million in
2000 for capital expenditures. As of the date of this prospectus, we have not
made any other specific expenditure plans with respect to the proceeds of this
offering. Therefore, we cannot specify with certainty the particular uses for
the remaining net proceeds to be received upon completion of this offering.
Accordingly, our management will have significant flexibility in applying the
net proceeds of this offering. Pending any use, we intend to invest the net
proceeds of this offering in short-term, investment-grade, interest-bearing
securities.
The principal purposes of this offering are to increase our working
capital, to create a public market for our common stock, to facilitate future
access to the public capital markets and to increase our visibility in the
marketplace. Although we engage in discussions with potential acquisition and
strategic investment candidates from time to time, we have no present
commitments with respect to any acquisition or strategic investment. In
addition, as part of our overall acquisition and investment strategy, we are
currently engaged in discussions with respect to a possible $2.5 million equity
investment in a company in the domain name industry.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently anticipate retaining any future earnings for the development and
operation of our business. Accordingly, we do not anticipate declaring or
paying any cash dividends in the foreseeable future.
23
<PAGE>
CAPITALIZATION
The following table shows our capitalization as of December 31, 1999 on an
actual basis, a pro forma basis and a pro forma as adjusted basis. The pro
forma column reflects the conversion of each outstanding share of preferred
stock into one share of common stock, which will occur upon the closing of this
offering. The pro forma as adjusted column further reflects our sale of shares
of common stock in this offering at an assumed initial public offering price of
$16.00 per share, after deducting underwriting discounts and commissions and
estimated offering expenses payable by us.
You should read the following table in conjunction with our financial
statements and the notes to those financial statements included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
December 31, 1999
----------------------------------------------------
Pro Forma
Actual Pro Forma As Adjusted
--------------- --------------- ----------------
<S> <C> <C> <C>
Capital lease obligations ...................... $ 33,825 $ 33,825 $ 33,825
----------- ----------- -----------
Stockholders' equity:
Preferred Stock, $.0001 par value; 5,000,000
shares authorized:
Series A Convertible Preferred Stock;
5,000,000 shares authorized; 4,694,333
shares issued and outstanding (actual);
no shares issued or outstanding (pro
forma and pro forma as adjusted) .......... 469 -- --
Common Stock, $.0001 par value;
60,000,000 shares authorized; 21,065,047
shares issued and outstanding (actual);
25,759,380 shares issued and outstanding
(pro forma); 30,759,380 shares issued and
outstanding (pro forma as adjusted) ......... 2,106 2,575 3,075
Additional paid-in capital ................... 36,709,821 36,709,821 109,909,321
Unearned compensation ........................ (2,647,770) (2,647,770) (2,647,770)
Accumulated deficit .......................... (12,151,771) (12,151,771) (12,151,771)
----------- ----------- -----------
Total stockholders' equity .................. 21,912,855 21,912,855 95,112,855
----------- ----------- -----------
Total capitalization ...................... $21,946,680 $21,946,680 $95,146,680
=========== =========== ===========
</TABLE>
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of December 31, 1999. It does
not include:
o 1,750 shares of common stock issued upon the exercise of stock options
between January 1, 2000 and January 31, 2000;
o 4,353,286 shares of common stock issuable upon the exercise of stock
options outstanding as of January 31, 2000 with a weighted average
exercise price of $7.50 per share;
o 52,500 shares of common stock issuable upon the exercise of stock options
to be granted upon the consummation of this offering, with an exercise
price equal to the initial offering price of our common stock;
o 4,779,964 shares of common stock available for issuance under our stock
option plans for options not yet granted;
o 350,000 shares reserved for issuance under our employee stock purchase
plan; and
o 6,155,676 shares of common stock issuable upon exercise of outstanding
warrants with a weighted average exercise price of $1.50 per share.
24
<PAGE>
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma net tangible book value per share of our common
stock after this offering. We calculate pro forma net tangible book value per
share by dividing the net tangible book value (total tangible assets less total
liabilities) by the pro forma number of outstanding shares of common stock.
Our pro forma net tangible book value at December 31, 1999 was $12.9
million or $0.50 per share, based on 25,759,380 shares of our common stock
outstanding after giving effect to the conversion of all outstanding shares of
our preferred stock into common stock upon the closing of this offering.
After giving effect to the issuance and sale of the shares of common stock
that we are offering (less the underwriting discounts and estimated offering
expenses payable by us), our pro forma net tangible book value at December 31,
1999 would be $86.5 million or $2.81 per share or if the underwriters exercise
their over-allotment option in full, $89.6 million or $2.89 per share. This
represents an immediate increase in pro forma net tangible book value of $2.31
per share to existing stockholders or $2.39 per share if the underwriters
exercise their over-allotment option in full, and an immediate dilution of
$13.19 per share or, if the underwriters exercise their over-allotment option
in full, $13.11 per share to investors purchasing shares in the offering. If
the initial public offering price is higher or lower, the dilution to new
investors will be greater or less, respectively. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share ........................... $ 16.00
Pro forma net tangible book value per share at December 31, 1999 .......... $ 0.50
Increase in pro forma net tangible book value per share attributable to
this offering ........................................................... 2.31
------
Pro forma net tangible book value per share after this offering ........... 2.81
-------
Dilution per share to new investors ....................................... $ 13.19
=======
</TABLE>
The following table shows on a pro forma basis at December 31, 1999, after
giving effect to the conversion of all outstanding shares of our preferred
stock into an aggregate of 4,694,333 shares of common stock upon the closing of
this offering, the number of shares of common stock purchased from us, the
total consideration paid to us and the average price per paid share by existing
stockholders and by new investors purchasing common stock in this offering:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average Price
Number Percentage Amount Percentage Per Share
------------ ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1) ......... 25,759,380 83.7% $ 28,809,799 26.5% $ 1.12
New investors ..................... 5,000,000 16.3 80,000,000 73.5 16.00
---------- ----- ------------ -----
Total (1) ....................... 30,759,380 100.0% $108,809,799 100.0%
========== ===== ============ =====
</TABLE>
If the underwriters' exercise their over-allotment option in full, the
number of shares of common stock held by existing stockholders will be reduced
to 25,217,658 or 81.4% of the total number of shares of common stock to be
outstanding after this offering. The average price per share for existing
stockholders would increase to $1.14. In addition, the number of shares of
common stock held by new investors will be increased to 5,750,000, or 18.6% of
the total number of shares of common stock to be outstanding after this
offering.
- -------------
(1) The above information is based on shares outstanding as of December 31,
1999. It excludes:
o 1,750 shares of common stock issued upon the exercise of stock options
between January 1, 2000 and January 31, 2000;
o 4,353,286 shares of common stock issuable upon the exercise of stock
options outstanding as of January 31, 2000, with a weighted average
exercise price of $7.50 per share;
25
<PAGE>
o 52,500 shares of common stock issuable upon the exercise of stock options
to be granted upon the consummation of this offering, with an exercise
price equal to the initial offering price of our common stock.
o 4,779,964 shares of common stock available for issuance under our stock
option plans for options not yet granted;
o 350,000 shares reserved for issuance under our employee stock purchase
plan; and
o 6,155,676 shares of common stock issuable upon exercise of outstanding
warrants with a weighted average exercise price of $1.50 per share.
To the extent that any of these stock options or warrants are exercised,
new investors will experience further dilution.
26
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data below as of December 31, 1998 and 1999 and for
the years ended December 31, 1997, 1998 and 1999 have been derived from our
financial statements included in this prospectus, which have been audited by
PricewaterhouseCoopers LLP, independent accountants. The selected financial
data as of December 31, 1997 have been derived from our audited financial
statements not included in this prospectus. The selected financial data below
as of and for the years ended December 31, 1995 and 1996 have been derived from
our unaudited financial statements. These unaudited financial statements have
been prepared on the same basis as our audited financial statements and, in our
opinion, include all adjustments, consisting of normal recurring adjustments,
necessary for the fair presentation of our financial position and results of
operations. Historical results are not necessarily indicative of results to be
expected for any future period. You should read the data below together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and the notes to those statements
included in this prospectus. The pro forma basic and diluted net loss per share
data give effect to the conversion of our Exchangeable Preferred Stock and the
Series A Convertible Preferred Stock at the date of original issuance.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------
1995 1996 1997 1998 1999
------------- --------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues ......................... $ 87,696 $ 868,018 $ 713,263 $ 1,319,359 $ 9,644,552
Cost of revenues ..................... 12,399 342,140 191,539 461,152 3,082,499
---------- ------------ ---------- ------------ ------------
Gross profit ......................... 75,297 525,878 521,724 858,207 6,562,053
Operating expenses:
Sales and marketing ................ 166,330 935,495 366,975 863,720 7,149,693
Research and development ........... 102,901 390,814 71,471 276,687 1,767,158
General and administrative
(exclusive of non-cash
compensation) ..................... 94,704 743,609 263,017 795,425 2,380,190
Non-cash compensation .............. -- -- -- 149,682 4,929,200
---------- ------------ ---------- ------------ ------------
Total operating expenses ........... 363,935 2,069,918 701,463 2,085,514 16,226,241
---------- ------------ ---------- ------------ ------------
Loss from operations ................. (288,638) (1,544,040) (179,739) (1,227,307) (9,664,188)
Other income (expenses), net ......... -- (170,036) (25,787) 66,559 887,270
---------- ------------ ---------- ------------ ------------
Net loss ............................. $ (288,638) $ (1,714,076) $ (205,526) $ (1,160,748) $ (8,776,918)
========== ============ ========== ============ ============
Basic and diluted net loss per
share .............................. $ (0.07) $ (0.26) $ (0.02) $ (0.07) $ (0.46)
========== ============ ========== ============ ============
Weighted average shares used
in basic and diluted net loss
per share .......................... 4,429,859 6,633,905 8,884,709 15,697,013 19,117,027
========== ============ ========== ============ ============
Pro forma basic and diluted net
loss per share ..................... $ (0.40)
============
Weighted average shares used
in pro forma basic and
diluted net loss per share ......... 22,112,252
============
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ------------- --------------- --------------- --------------
Balance Sheet Data:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents .............. $226,995 $ 21,074 $ 60,845 $ 1,284,684 $40,944,122
Working capital (deficiency) ........... 179,345 (949,383) (1,131,173) 569,616 29,813,357
Total assets ........................... 260,002 141,774 180,786 1,611,025 68,336,046
Total deferred revenues ................ -- -- 32,038 113,527 32,101,232
Total liabilities ...................... 147,451 1,002,920 1,243,457 788,245 46,423,191
Stockholders' equity (deficit) ......... 112,551 (861,146) (1,062,671) 822,780 21,912,855
</TABLE>
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and
results of operations together with "Selected Financial Data," our financial
statements, the notes to those statements and the other information appearing
elsewhere in this prospectus.
Overview
We are a provider of Internet domain name registration services worldwide.
Domain names serve as part of the infrastructure for Internet communications
and registering a domain name is one of the first steps for individuals and
businesses seeking to establish an online identity. We believe that we offer a
quick and user-friendly registration process and responsive and reliable
customer support. We also offer a suite of value-added products and services
targeted to assist our customers in developing and maintaining their online
identities. These products and services, which are provided by us and by third
parties include:
o email;
o web hosting;
o domain name forwarding; and
o real-time domain name management.
Our goal is to become a one-stop resource through which our customers will
establish, maintain and enhance their presence on the Internet.
We are the successor by merger to Forman Interactive Corp. Forman
Interactive commenced operations in 1994 as a developer of electronic commerce
software, and began offering web-hosting and related products and services in
1997. In February 1998, we began to distribute domain names either for free or,
to a lesser extent, were paid commissions for the domain names we distributed
for international registrars and registries. In April 1999, we commenced
offering registration services for country code domains and in June 1999, we
began offering registrations in the .com, .net and .org domains.
Net Revenues
We derive our net revenues from domain name registrations, online products
and services and advertising. Net revenues from domain name registrations
consist of fees paid by registrants over the course of the registration period
reduced by referral commissions and a provision for credit card chargebacks. We
currently earn registration fees in connection with new registrations and
transferred registrations. We pay referral commissions on domain name
registrations processed through the participants in our network of co-brand and
private label websites and those we process through our www.register.com
website that are referred to us by participants in our affiliate network. From
June 1999 until January 14, 2000, we offered two-year registration periods for
the initial domain name registration in the .com, .net and .org domains with
annual renewals and either one- or two-year registration periods for domain
names in the country code domains. As of January 15, 2000, we have supplemented
our registration period offerings to include one-, five- and ten-year
registration periods for both initial and renewal domain name registrations in
the .com, .net, and .org domains. For our .com, .net and .org domain names, we
currently charge $35 for a one-year registration, $70 for a two-year
registration, $159 for a five-year registration and $299 for a ten-year
registration. For our country code domains, we currently charge approximately
$40 to $299 for one- or two-year registrations. We intend to charge the same
rates for renewals as we do for corresponding initial registration periods.
Because we only began operating as a registrar in April 1999, we have not
processed any registration renewals. We anticipate that registration renewals
will contribute to our net revenues once our customers' initial registrations
reach the end of their terms.
28
<PAGE>
Domain name registration revenues are deferred at the time of the
registration and are recognized ratably over the term of the registration
period. Under this subscription-based model, we recognize revenue when we
provide the registration services, including customer service and maintenance
of the individual domain name records. ICANN requires us to have reasonable
assurance of payment in order to register a domain name. Therefore, we require
prepayment via credit card for all online domain name registration sales, which
provides us with the full cash fee at the beginning of the registration period
while recognizing the revenues over the registration period. For some of our
customers who register domain names through our Corporate Services department,
we establish lines of credit based on credit worthiness, thereby reasonably
assuring payment.
Online products and services, which consist of email, domain name
forwarding and web hosting, are sold either as annual or monthly subscriptions,
depending on the product or service offering. These revenues are recognized
ratably over the period in which we provide our services. We offer web hosting
through our own servers and through web-hosting services provided by third
parties. We have shifted our business model, and have chosen to direct our
resources toward our domain name registration business and not toward our
web-hosting business. As such, we do not actively promote our own web-hosting
service and, therefore, do not anticipate significant revenue growth from this
service in future periods.
Advertising revenues are derived from the sale of sponsorships and banner
advertisements under short-term contracts that range from one month to one year
in duration. We recognize these revenues ratably over the period in which the
advertisements are displayed provided that no significant company obligation
remains and collection of the resulting receivable is probable.
Cost of Revenues
Our cost of revenues consists of the costs associated with providing
domain name registrations and online products and services. Cost of revenues
for domain name registrations primarily consists of registry fees, depreciation
on the equipment used to process the domain name registrations, the fees paid
to the co-location facilities maintaining our equipment and fees paid to the
financial institutions to process credit card payments on our behalf. Through
January 14, 2000, we paid a $9 per year registry fee for each .com, .net and
.org domain name registration. This fee has been reduced to $6 per year
commencing on January 15, 2000. We currently pay registry fees of approximately
$5 to $150 for one- or two-year country code domain name registrations. The
largest component of our cost of revenues is the registry fees which, while
paid in full at the time that the domain name is registered, are recorded as a
prepaid expense and recognized ratably over the term of the registration.
Cost of revenues for our online products and services consists of fees
paid to third party service providers, depreciation on the equipment used to
deliver the services, fees paid to the co-location facilities maintaining our
equipment and fees paid to the financial institutions to process credit card
payments on our behalf.
While we have no direct cost of revenues associated with our advertising
revenue we do incur operational costs including salaries and commissions which
are classified as operating expenses. We have no incremental cost of revenues
associated with advertising since we use the same equipment to deliver the
advertisements as we use for our domain name registration services.
Operating Expenses
Our operating expenses consist of sales and marketing, research and
development, general and administrative and non-cash compensation expenses. Our
sales and marketing expenses consist primarily of employee salaries, marketing
programs such as advertising and,
29
<PAGE>
to a lesser extent, commissions paid to our sales representatives. Research and
development expenses consist primarily of employee salaries, fees for outside
consultants and related costs associated with the development and integration
of new products and services, the enhancement of existing products and services
and quality assurance. General and administrative expenses consist primarily of
employee salaries and other personnel related expenses for executive, financial
and administrative personnel, as well as professional services fees and bad
debt accruals. Non-cash compensation expenses are related to grants of common
stock, stock options and warrants made to employees, directors, consultants and
vendors. Facilities expenses are allocated across our different operating
expense categories. In addition to the $4.9 million non-cash compensation
charge taken in 1999, we will be recording $1.8 million in non-cash
compensation charges in each of 2000, 2001 and 2002, and $639,000 in 2003.
These charges relate to the issuance through January 2000 of employee stock
options having exercise prices below fair market value on the date of grant.
Net Losses
We have incurred annual and quarterly losses from our operations since our
inception, and we expect to incur operating losses on both an annual and
quarterly basis for the foreseeable future. We have incurred significant net
losses in the past and expect these losses to continue to increase from current
levels as we grow our business by hiring additional employees, increasing our
marketing expenses to build our brand and increasing our capital expenditures.
Furthermore, given the rapidly evolving nature of our business and our limited
operating history as a competitive registrar, our operating results are
difficult to forecast, and period-to-period comparisons of our operating
results will not be meaningful and should not be relied upon as an indication
of future performance. Due to these and other factors, many of which are
outside our control, quarterly operating results may fluctuate significantly in
the future.
Results of Operations
Because we began operating as a domain name registrar only in the second
quarter of 1999 and generated only limited revenues from domain name
registration services prior to this time, we believe that year-to-year
comparisons of 1997 against 1998 and 1998 against 1999 are not meaningful and
you should not rely upon them as indications of our future performance.
We anticipate that in future periods net revenues from domain name
registrations will be the largest component of our net revenues and cost of
domain name registrations will be the largest component of our cost of
revenues. The following table presents selected statement of operations data
for the periods indicated as a percentage of net revenues.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1997 1998 1999
---------- ---------- ---------
<S> <C> <C> <C>
Net revenues .............................. 100% 100% 100%
Cost of revenues .......................... 27 35 32
--- --- ---
Gross profit .............................. 73 65 68
--- --- ---
Operating expenses
Sales and marketing .................... 51 66 74
Research and development ............... 10 21 18
General and administrative (exclusive of
non-cash compensation) ............... 37 60 25
Non-cash compensation .................. -- 11 51
--- --- ---
Total operating expenses .................. 98 158 168
--- --- ---
Loss from operations ...................... (25) (93) (100)
Other income (expenses), net .............. (4) 5 9
------ --- ----
Net loss .................................. (29)% (88)% (91)%
===== === ====
</TABLE>
30
<PAGE>
Years Ended December 31, 1998 and 1999
Net Revenues
Total net revenues increased from $1.3 million for 1998 to $9.6 million
for 1999.
Domain Name Registrations. Revenues from domain name registrations
increased from $37,000 for 1998 to $4.5 million for 1999. Domain name
registrations represented 3% of 1998 net revenues and 46% of 1999 net revenues.
This increase was primarily from the shift in our business from serving as a
distributor of domain names to serving as a generic top level domain name
registrar in June 1999. Additionally, we had no deferred revenue from domain
name registrations in 1998 while deferred revenue was $32.1 million in 1999. We
anticipate that revenues from domain name registrations will increase in
absolute dollars and as a percentage of our net revenues in future periods as a
result of growth in the market for domain name registrations, renewals and
transfers and the implementation of our business strategy.
Online Products and Services. Revenues from online products and services
increased 91% from $1.1 million in 1998 to $2.1 million for 1999 primarily from
increased sales of web hosting provided through our servers. Online products
and services represented 87% of 1998 net revenues and 22% of 1999 net revenues.
We anticipate that revenues from online products and services will remain flat
in the near term as we begin to introduce new online products and services and
no longer actively promote our own web-hosting services. We anticipate that
these revenues will increase over the longer term as we expand our online
product and service offerings.
Advertising. Revenues from advertising increased from $133,000 for 1998 to
$3.1 million for 1999 primarily from the increased number of page views and the
volume of advertising and sponsorships sold on our www.register.com and
FutureSite websites. Advertising represented 10% of 1998 net revenues and 32%
of 1999 net revenues. We anticipate that revenues from advertising will
increase in absolute dollars but decrease as a percentage of total net
revenues.
Cost of Revenues
Total cost of revenues increased from $461,000 for 1998 to $3.1 million
for 1999.
Cost of Domain Name Registrations. Cost of domain name registrations
increased from $19,000 for 1998 to $2.5 million for 1999. The increase was
primarily from the shift in our business from serving as a distributor of
domain names to serving as a generic top level domain name registrar in June
1999. As a distributor, we generally passed through registry costs to the
applicable registry or registrar. We anticipate that cost of revenues for
domain name registrations will increase in absolute dollars primarily as a
result of growth in our domain name registrations and renewals.
Cost of Online Products and Services. Cost of online products and services
increased 24% from $442,000 for 1998 to $548,000 for 1999. The increase was
primarily from the additional depreciation expense associated with the
equipment dedicated to our operations to support our growing online product and
service offerings. We anticipate these costs will increase in absolute dollars
as we expand our online product and service offerings.
Operating Expenses
Total operating expenses increased from $2.1 million for 1998 to $16.2
million for 1999.
Sales and Marketing. Sales and marketing expenses increased from $864,000
for 1998 to $7.1 million for 1999. The increase was primarily from the costs
associated with the launch of our radio and print media advertising campaign in
September 1999 and from salaries
31
<PAGE>
associated with newly hired sales, marketing and customer service
professionals. We anticipate that sales and marketing expenses will increase
substantially in absolute dollars as we further our marketing programs and
international expansion. Additionally, we anticipate increasing our customer
service staff and domain name registration sales force to support both the
demands of our customers as well as to further our direct and indirect sales
strategy for domain name registrations.
Research and Development. Research and development expenses increased from
$277,000 for 1998 to $1.8 million for 1999. The increase resulted primarily
from salaries associated with newly hired technology personnel to support our
growth. We anticipate that research and development expenses will continue to
increase in absolute dollars as we continue to invest in developing and
modifying our systems to grow our business.
General and Administrative. General and administrative expenses increased
from $795,000 for 1998 to $2.4 million for 1999. The increase was primarily
from salaries associated with newly hired personnel and related costs required
to manage our growth and facilities expansion. We expect that our general and
administrative expenses will increase in absolute dollars to support our
overall growth including increased expenses relating to our new
responsibilities as a public company.
Non-cash Compensation. Non-cash compensation expenses increased from
$150,000 for 1998 to $4.9 million for 1999. The increase in non-cash
compensation was primarily associated with the modification of warrants
previously granted to some of our stockholders and the issuance of warrants in
connection with a financial consulting agreement. Non-cash compensation expense
included $18,000 in 1998 and $329,000 in 1999 of amortization of deferred
compensation related to employee stock options. Amortization of deferred
compensation related to employee stock options issued through January 2000 will
be $1.8 million in each of 2000, 2001 and 2002, and $639,000 in 2003.
Other Income (Expenses), Net.
Other income (expenses), net consists primarily of interest income net of
interest expense. Other income (expenses), net increased from $67,000 for 1998
to $887,000 for 1999. The increase was primarily from interest earned on our
cash balance as a result of our equity financings and cash provided by
operations.
Net Loss
Net loss increased $7.6 million to $8.8 million in 1999 from $1.2 million
in 1998.
Years Ended December 31, 1997 and 1998
Net Revenues
Total net revenues increased 85% from $713,000 for 1997 to $1.3 million
for 1998.
Domain Name Registrations. We had no revenues from domain name
registrations for 1997 as we did not distribute domain names until February
1998. Revenues from commissions earned from distributing domain name
registrations was $37,000 in 1998 and represented 3% of 1998 net revenues.
Online Products and Services. Revenues from online products and services
increased 54% from $713,000 for 1997 to $1.1 million for 1998. Online products
and services represented 100% of 1997 net revenues and 87% of 1998 net
revenues. The increase in net revenues from 1997 to 1998 was attributable to
the growth of our web-hosting service.
Advertising. We had no revenues from advertising for 1997. Revenues from
advertising were $133,000 for 1998 and represented 10% of 1998 net revenues.
The increase in net revenues from 1997 to 1998 was attributable to the launch
of our www.register.com website and our initial advertising sales efforts.
Cost of Revenues
Total cost of revenues increased 141% from $192,000 for 1997 to $461,000
for 1998.
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Cost of Domain Name Registrations. We incurred no cost of domain name
registrations for 1997 because we did not begin to distribute domain names
until February 1998. As a distributor of domain names, we simply forwarded a
registration request to the appropriate registrar without paying any registry
fees. Cost of domain name registrations was $19,000 for 1998.
Cost of Online Products and Services. Cost of online products and services
increased 131% from $192,000 for 1997 to $442,000 for 1998. The increase
resulted primarily from the depreciation expense associated with the equipment
dedicated to our operations to support our web-hosting business.
Operating Expenses
Total operating expenses increased 197% from $701,000 for 1997 to $2.1
million for 1998.
Sales and Marketing. Sales and marketing expenses increased 135% from
$367,000 for 1997 to $864,000 for 1998. The increase was primarily attributable
to costs associated with additional customer service personnel, marketing
personnel and telemarketers for our web-hosting business as well as limited
advertising campaigns.
Research and Development. Research and development expenses increased 287%
from $71,000 for 1997 to $277,000 for 1998. The increase was primarily
attributable to the salaries associated with newly hired technology personnel.
General and Administrative. General and administrative expenses increased
202% from $263,000 for 1997 to $795,000 for 1998. The increase was primarily
due to salaries of newly hired executive and financial personnel to help manage
our growth.
Non-cash Compensation. We had no non-cash compensation expenses for 1997.
Non-cash compensation expenses was $150,000 for 1998, which was primarily from
our issuance of non-plan options at exercise prices below fair market value.
Other Income (Expenses), Net.
Other income (expenses), net increased from ($26,000) for 1997 to $67,000
for 1998, which was primarily from interest earned on our cash balance as a
result of our equity financings.
Net Loss
Net loss increased $1.0 million to $1.2 million in 1998 from $200,000 in
1997.
Quarterly Results of Operations
The following tables set forth selected unaudited quarterly statement of
operations data, in dollar amounts and as a percentage of net revenue, for each
of the four quarters ended December 31, 1999. In our opinion 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 of operations data. The quarterly data should be read with our
financial statements and the notes to those statements appearing elsewhere in
this prospectus. The operating results for any quarter are not necessarily
indicative of results for any future period.
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<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------
March 31, June 30, September 30, December 31,
1999 1999 1999 1999
----------- ------------ --------------- -------------
(in thousands)
<S> <C> <C> <C> <C>
Net revenues .............................. $ 747 $ 1,521 $ 2,187 $ 5,189
Cost of revenues .......................... 92 233 1,097 1,661
-------- -------- -------- --------
Gross profit .............................. 655 1,288 1,090 3,528
-------- -------- -------- --------
Operating expenses
Sales and marketing .................... 720 998 2,898 2,534
Research and development ............... 267 357 470 673
General and administrative (exclusive of
non-cash compensation) ............... 202 199 553 1,426
Non-cash compensation .................. 586 3,945 41 357
-------- -------- -------- --------
Total operating expenses .................. 1,775 5,499 3,962 4,990
-------- -------- -------- --------
Loss from operations ...................... (1,120) (4,211) (2,872) (1,462)
Other income (expenses), net .............. 13 71 336 468
-------- -------- -------- --------
Net loss .................................. $ (1,107) $ (4,140) $ (2,536) $ (994)
======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------
March 31, June 30, September 30, December 31,
1999 1999 1999 1999
----------- ---------- --------------- -------------
<S> <C> <C> <C> <C>
Net revenues .............................. 100% 100% 100% 100%
Cost of revenues .......................... 12 15 50 32
--- --- --- ---
Gross profit .............................. 88 85 50 68
--- --- --- ---
Operating expenses
Sales and marketing .................... 96 66 133 49
Research and development ............... 36 24 21 13
General and administrative (exclusive of
non-cash compensation) ............... 27 13 25 27
Non-cash compensation .................. 79 259 2 7
--- --- --- ---
Total operating expenses .................. 238 362 181 96
--- --- --- ---
Loss from operations ...................... (150) (277) (131) (28)
Other income (expenses), net .............. 2 5 15 9
---- ---- ---- ---
Net loss .................................. (148)% (272)% (116)% (19)%
==== ==== ==== ===
</TABLE>
Our net revenues have increased significantly in absolute dollars over the
past four quarters as a result of repositioning our focus on the domain name
registration services business. We expect that net revenues will continue to
increase in the future as we continue to expand our business and the market for
domain name registrations grows.
Our operating expenses have increased significantly in absolute dollars
over the past four quarters as a result of our repositioning our focus on the
domain name registration service business. We expect operating expenses will
continue to increase in the future as we continue to expand our business.
Liquidity and Capital Resources
Since 1997, we have funded our operations and met our capital expenditure
requirements primarily through private sales of equity securities, cash
generated from operations, and borrowings. Since inception, proceeds from the
sale of our common and preferred stock through 1999 totaled approximately $28.8
million. At December 31, 1999, we had $40.9 million of cash.
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Our business generated $22.4 million of cash from operations during 1999.
This cash generated from operations was primarily due to increased domain name
registrations. Net cash used in operating activities was $693,000 and $123,000
for 1998 and 1997, respectively. The principal use of cash for these periods
was to fund our losses from operations.
Net cash used for investing activities was $7.7 million, $267,000 and
$16,000 for 1999, 1998 and 1997, respectively. In each period, cash used for
investing activities related primarily to the purchase of property and
equipment and investments in our systems infrastructure.
We generated $24.9 million, $2.2 million and $178,000 in cash from
financing activities for 1999, 1998 and 1997, respectively. For 1999,
substantially all of these financing activities were private sales of equity
securities. For 1998, the $2.2 million represents the issuance of equity
securities offset by the repayment of indebtedness. For 1997, cash from
financing activities represents borrowed indebtedness.
Although we have no material commitments for capital expenditures or other
long-term obligations, we anticipate that we will substantially increase our
capital expenditures and lease commitments consistent with our anticipated
growth in operations, infrastructure and personnel, including the
implementation of additional co-location facilities and various capital
expenditures associated with expanding our facilities. We currently anticipate
that we will continue to experience significant growth in our operating
expenses for the foreseeable future and that our operating expenses will be a
material use of our cash resources. We intend to spend over $25.0 million in
2000 on advertising and promotional programs and over $10.0 million on capital
expenditures in 2000, and we believe that the net proceeds from this offering,
together with our existing cash and cash from operations will be sufficient to
meet our anticipated cash needs for working capital and capital expenditures
for at least the next 12 months. To the extent we require additional funds to
support our operations, acquisitions or investments or the expansion of our
business, we may need to sell additional equity, issue debt or convertible
securities, obtain credit facilities or obtain other sources of funding.
Additionally, if we are unsuccessful in completing our offering, we believe
that by reducing the anticipated marketing expenses, capital expenditures and
headcount, we will have sufficient cash to fund operations for the next 12
months. By reducing these planned areas of spending, however, we will
significantly limit our ability to grow.
Year 2000 Readiness
Many currently installed computer systems 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, it is necessary to update the computer systems and software
used by many companies and governmental agencies to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities. We are aware of no material cases in which our
software or hardware has malfunctioned due to interpreting the date code "00"
as the year 1900 rather than the year 2000, and as such we have yet to
encounter significant errors in the information we use to manage the business
and the computer systems that operate our domain name registration services.
We are exposed to the risk that the systems on which we depend to conduct
our operations are not Year 2000 compliant.
State of Readiness. We have completed our primary Year 2000 testing and
implementation of any necessary upgrades in order to become Year 2000
compliant.
Costs. To date we have not incurred any material costs in identifying or
evaluating year 2000 compliance issues. The total cost for our Year 2000
compliance efforts was approximately $50,000. Most of these expenses relate to
the operating costs associated with time spent by our employees in Year 2000
compliance matters.
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Continuing Risks. Although we have obtained compliance information from
many of our material third-party vendors, we have not received compliance
information from all of our third-party vendors. In addition, it is possible
that our third-party vendors were mistaken in certifying that their systems are
Year 2000 compliant. To date we have not experienced year 2000 compliance
problems with material third-party software, hardware, service promoters or
non-information technology infrastructure. If we fail to fix our internal
systems or to fix or replace material third-party software, hardware or
services on a timely basis, we may suffer lost revenues, increased operating
costs and other business interruptions, any of which could have a material
adverse effect on our business, results of operations and financial condition.
Moreover, if we fail to adequately address Year 2000 compliance issues, we may
be subject to claims of mismanagement and related litigation, which would be
costly and time-consuming to defend. Furthermore, if services we provided a
client cause damage or injury to that client because the service was not Year
2000 compliant, we could be liable to the client for breach of warranty. In
addition, we cannot assure you that governmental agencies, utility companies,
Internet access companies, third-party service providers and others outside our
control will be Year 2000 compliant. If those entities fail to be Year 2000
compliant, there may be a systemic failure beyond our control, such as a
prolonged Internet, telecommunications or electrical failure, which could have
a material adverse effect on our business, financial condition and results of
operations.
Contingency Plan. As a result of our Year 2000 testing we have deemed it
not necessary to develop a contingency plan.
Forward-looking Statements. The Year 2000 discussion above is provided as
a "Year 2000 Readiness Disclosure" as defined in the Year 2000 Information and
Readiness Disclosure Act of 1998 (Public Law 105-271, 112 Stat. 2386) enacted
on October 19, 1998 and contains forward-looking statements. These statements
are based on management's best current estimates, which were derived from a
number of assumptions about future events, including the continued availability
of resources, representations received from third parties and other factors.
However, we cannot assure you that these estimates will be achieved, and our
actual results could differ materially from those anticipated. Specific factors
that might cause material differences include:
o the ability to identify and remediate all relevant systems;
o results of Year 2000 testing;
o adequate resolution of Year 2000 issues by governmental agencies,
businesses and other third parties who are our outsourcing service
providers, suppliers, and vendors;
o unanticipated system costs; and
o our ability to implement adequate contingency plans.
Recent Accounting Pronouncements
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities"
("SOP 98-5"). SOP 98-5, which is effective for fiscal years beginning after
December 15, 1998, provides guidance on the financial reporting of start-up
costs and organization costs. It requires costs of start up activities and
organization costs to be expensed as incurred. As we have expensed these costs
historically, the adoption of this standard did not have a significant impact
on our results of operations or financial position.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging
Activities" ("SFAS 133"), which establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded
in other contracts, (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. We do not expect the adoption of this statement
to have a significant impact on our results of operations or financial
position.
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BUSINESS
Overview
We are a provider of Internet domain name registration services worldwide.
Domain names serve as part of the infrastructure for Internet communications
and registering a domain name is one of the first steps for individuals and
businesses seeking to establish an online identity. We believe that we offer a
quick and user-friendly registration process and responsive and reliable
customer support. We also offer a suite of value-added products and services
targeted to assist our customers in developing and maintaining their online
identities. These products and services which are provided by us and by third
parties include:
o email;
o web hosting;
o domain name forwarding; and
o real-time domain name management.
Our goal is to become a one-stop resource through which our customers
establish, maintain and enhance their presence on the Internet.
We offer our products and services directly through our www.register.com
website and through our Corporate Services department, and indirectly through
our network of co-brand and private label websites, which include ISPs,
web-hosting companies and other companies whose websites may appeal to our
target customers. These distribution channels enable us to reach a broad range
of potential customers with products and services targeted to their needs and
to increase our exposure across the market. We seek to enter into business
alliances, which are important sources for new customer opportunities, brand
building, revenue growth and increased product and service offerings. We derive
our revenues from domain name registration fees, online products and services
and advertising. Our net revenues for the three months ended December 31, 1999,
were approximately $5.2 million, representing a 137% increase over the three
months ended September 30, 1999.
We have been an active participant in the domain name registration
industry since February 1998. In June 1999, we became the first competitive
registrar to register domain names in the .com, .net and .org domains directly
on behalf of customers. For the three months ended December 31, 1999, we
registered approximately 308,000 new domain names in the .com, .net and .org
domains, representing an increase of 94% from the approximately, 159,000 domain
names we registered in the same domains for the three months ended September
30, 1999. During December 1999, we registered approximately 144,000 domain
names in the .com, .net and .org domains, representing a 252% increase over the
approximately 41,000 domain names we registered during July 1999, our first
full calendar month of operating as a registrar for these domains. We estimate,
based on our internal calculations, that growth in global domain name
registrations in all top level domains will accelerate over the next few years
from approximately 11 million domain names registered through September 30,
1999, to approximately 140 million domain names registered through the end of
2003.
Industry Background and Market Opportunity
The Internet and Electronic Commerce
The Internet has emerged as a significant global communications medium,
enabling businesses and individuals to conduct business and communicate
electronically. According to International Data Corporation, a technology and
Internet research consulting company commonly known as IDC, the number of
Internet users worldwide will grow from an estimated 142.2 million in 1998 to
approximately 502.4 million by the end of 2003. IDC also expects the number of
web pages to grow from 0.9 billion in 1998 to 13.1 billion by 2003.
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We believe that any growth in the number of Internet users and web pages will
result in a corresponding growth in the demand for domain name registration
services. In addition, IDC estimates that worldwide electronic commerce will
grow from $50.0 billion in 1998 to $1.3 trillion in 2003. We believe that this
rapid growth of electronic commerce will contribute to the growth in demand for
domain name registration services as businesses around the world establish an
Internet presence in order to remain competitive.
There is also a growing demand for products and services that enable
individuals and companies to establish and maintain their Internet presence.
IDC forecasts that the market for Internet and electronic commerce services
worldwide will grow from $7.4 billion in 1998 to $43.7 billion in 2002.
Businesses and individuals in the early stages of establishing their Internet
identities are seeking products and services such as website creation and
development tools, interactive capabilities, electronic commerce capabilities,
web hosting, website content and infrastructure. We believe that many of the
businesses and individuals registering domain names would appreciate the
convenience of being able to purchase these products and services through a
single source.
The Internet is evolving into an important medium for advertisers due to
its interactive nature, global reach, rapidly growing audience and the
significant increase in electronic commerce. IDC estimates that spending on
Internet advertising will grow from $1.9 billion in 1998 to approximately $10.8
billion in 2003.
Domain Name Registration System
The domain name system is organized according to industry custom by
levels, so that, for example, in the domain name mybrand.com, .com is the top
level domain and mybrand is the second level domain. Top level domains are
classified as either generic or country code. The most common generic top level
domains are .com, .net and .org.
There are over 250 different country code top level domains, such as
.co.uk and org.uk for the United Kingdom and .md for Moldova representing over
190 countries,. Each registry for country code domain names is responsible for
maintaining and operating its own database of registered domain names. Some
country code domains are unrestricted and allow anyone, from anywhere, to
register their domain names on a first-come, first-served basis. Over 80
countries follow this unrestricted practice. Others require that prospective
registrants have a local presence in the country to be able to register for
domain names in that country. While there have been movements directed at
creating uniform domain name registration rules and registrar administration
guidelines, to date there is no international uniformity.
From January 1993 until April 1999, Network Solutions was the sole entity
authorized by the U.S. government to act as registrar and registry for domain
names in the .com, .net and .org top level domains. Network Solutions continues
to act as sole registry, maintaining the files in the Shared Registration
System for the .com, .net and .org domains and the directory databases listing
these domain names and their numerical addresses.
In October 1998, the Department of Commerce called for the formation of a
non-profit corporation to oversee the management of the .com, .net and .org
domains and in November 1998, ICANN was recognized as this non-profit
corporation. In April 1999, as a preliminary step to introducing competition
into the domain name registration system for .com, .net and .org domains, ICANN
selected five registrars to participate in a testbed to evaluate whether the
Shared Registration System could accommodate multiple registrars. On June 2,
1999, we were the first of these five competitive registrars to launch our
registration services. On November 30, 1999, the testbed was completed, and all
registrars meeting ICANN's standards for accreditation were permitted to
register domain names in the .com, .net and .org domains. As of January 28,
2000, there were 77 ICANN-accredited registrars. Of these, only 25 are
connected to the Shared Registration System, and the remainder are still in the
development phase with respect to offering registration services. An additional
33 companies have qualified for accreditation but have yet to sign the
agreements required by ICANN and Network Solutions.
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For a detailed discussion of the regulatory background of the domain name
registration system, see "Administration of the Internet; Government Regulation
and Legal Uncertainties."
Domain Name Registration Market
As a result of the growth of the Internet and the introduction of
competition in the domain name registration industry, we believe there is great
potential for growth in the market for domain name registrations. We estimate,
based on our internal calculations, that growth in global domain name
registrations in all top level domains will accelerate over the next few years
from approximately 11 million domain names registered through September 30,
1999 to approximately 140 million domain names through the end of 2003.
Although there has been a market for domain name registrations for over
six years, a substantial percentage of the growth in domain name registrations
has occurred more recently. The following industry statistics related to domain
name registrations are based on information contained in press releases issued
by Network Solutions. Approximately 75% of all domain names were registered in
the 18 months ended September 30, 1999 and over 50% were registered in the 12
months ended September 30, 1999. During the nine months ended September 30,
1999, a total of approximately 3.6 million new domain names in the .com, .net
and .org domains were registered, an increase of 89% over approximately 1.9
million new domain names registered in all of 1998. We believe that the market
for domain name registrations will continue to grow and that this growth will
be driven primarily by:
Individuals. As more people begin to use the Internet and as online
activities become a greater part of family communications and identities, they
will want to establish their own unique presence on the Internet.
Corporations. As a result of the significant growth in electronic
commerce, as well as the increasing focus on the global promotion and
protection of their corporate identities, corporations will continue to be
significant users of domain name registration services.
Small offices and home offices. As small offices and home offices
increasingly move their businesses online, demand for domain name registration
and related online products and services will increase.
Further, we believe that businesses will use domain names for a number of
distinct purposes, including:
Products and services. Registering products and services as domain names
and establishing web identities related to particular products and services,
which are key components of a global promotional, marketing and brand
protection strategy.
One-time events. One-time events, such as sporting events and elections,
which represent additional domain name registration opportunities as sponsors
increasingly turn to the Internet to differentiate and promote their events.
The Register.com Solution
We offer products and services that assist individuals and businesses in
establishing, maintaining and enhancing their Internet presence. We believe
that our industry experience and our emphasis on, and ability to respond to,
the needs of our customers have positioned us to capitalize on the growing
market for domain name registration and related products and services. Our
competitive advantages include:
Substantial Industry Experience. We have been active in the domain name
registration industry since February 1998, when we began offering domain names
to customers throughout the world. We were one of five registrars selected by
ICANN to participate in the testbed process and, in June 1999, were the first
of these registrars to register domain names in the .com, .net and .org domains
directly on behalf of customers. Our experience in
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<PAGE>
providing a consumer interface for registrations prior to June 1999, our
participation in the testbed and our involvement with the development of
ICANN's policies contribute to our substantial operational experience in, and
knowledge of, the domain name registration industry.
Customer Service Focus. Our customer support group seeks to provide
dependable and timely resolution of customer inquiries, 24 hours per day, seven
days per week. We manage and respond to customer inquiries through our
internally developed Internet-based customer care tracking system. We have
teams of customer service representatives who specialize in key aspects of our
business, and who are informed about our products, services and technology
through our ongoing training.
Value-Added Products and Services. We have assembled a suite of targeted
products and services to assist our customers with their online identities. In
addition to our quick and easy-to-use domain name registration services, we
offer a range of value-added products and services that we provide or that are
provided by third parties, including advertisers. These products and services
include real-time domain management, web hosting, comprehensive email services,
domain name forwarding, trademark protection services, multi-year registration
and one-step registration for current users. We also offer services to
participants in our network of co-brand and private label websites to enable
them to manage their customers' domain names.
Broad and Efficient Distribution Channels. We believe that our direct and
indirect distribution channels enable us to reach a broad range of potential
customers with products and services targeted to their needs and to increase
our exposure across the market. We sell our services directly through our www.
register.com website and dedicated Corporate Services account managers. We also
offer domain name registration services indirectly through our network of
co-brand and private label websites. This network currently consists of over
290 participants. We serve as the exclusive registrar for a substantial
majority of these participants.
Scalable, Reliable and Secure Technological Platform. We designed and
developed our technological infrastructure with a view toward ensuring the
scalability, reliability and security essential to support the growth expected
in the domain name registration industry. Our selection by ICANN as a testbed
registrar was based in part on our technological plans.
The Register.com Strategy
Our objectives are to continue to increase our share of domain name
registrations, to differentiate our service and to develop a long-term
relationship with our customers by helping them to establish, maintain and
enhance their online presence. Our key strategies for achieving these
objectives include:
Introducing New Products and Services. We will continue to introduce new
products and services in order to empower our customers as they develop their
online presence. As part of this strategy, we will continue to enter into new
business alliances, develop new applications and website features and invest in
our technologies. We believe that these enhancements will increase traffic to
our website and strengthen customer loyalty, as well as position us as a
preferred registrar for ISPs, web-hosting companies and other companies whose
websites may appeal to our target customers.
Enhancing Brand Awareness. We will continue to build our brand awareness
and reputation in order to drive additional traffic to our website and attract
new strategic alliances, acquisition candidates, advertisers and talented
employees. We are promoting our brand through a marketing campaign, including
print and radio advertisements, increasing our distribution channels and adding
and improving our products and services. We also promote our brand through
speaking engagements, interviews and industry conferences.
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Extending Distribution Channels. We will continue to extend our
distribution channels in order to further broaden our potential customer base.
We are focusing on expanding the participants in our co-brand and private label
network and, in particular, to include companies that have significant
subscriber or user bases.
Expanding Corporate Services Department. We will expand our Corporate
Services department by offering new products and services and by increasing our
targeted marketing to our potential customers. Our dedicated Corporate Services
account managers focus on servicing large corporate customers with offerings
such as multiple domain name registrations, multiple registration and registrar
transfers and international brand protection. We expect to expand our current
products and services to offer international trademark infringement
notification and account consolidation and billing.
Pursuing Strategic Acquisitions. We intend to selectively pursue
acquisitions of, and strategic investments in, companies, including other
domain name registrars and developers of web-based applications and services.
We will target companies that offer complementary products, services and
technologies that can expand our business.
Offering Names in Additional Top Level Domains. We intend to continue to
offer our customers the ability to register domains in additional country codes
to meet their global needs. We also intend to register names in new generic top
level domains, such as .web, .firm and .store, if and when such domains become
available and we are authorized to do so by ICANN.
Expanding Internationally. We are expanding our relationships with foreign
ISPs and other foreign companies in order to offer our products and services to
the growing international Internet market. We also intend to pursue alliances
to create local language websites to provide domain name registration and
value-added products and services to non-English speaking people.
Products and Services
Registration Services. Our core expertise is providing domain name
registration services. We register domain names in the .com, .net and .org
domains and are able to register domain names in over 120 country code domains,
of which 24 may currently be registered through our www.register.com website.
As of January 15, 2000 we have supplemented our registration period offerings
to include one-, five- and ten-year registration periods for both the initial
and renewal domain name registration in the .com, .net and .org domains. For
our .com, .net and .org domain names, we currently charge $35 for a one-year
registration, $70 for a two-year registration, $159 for a five-year
registration and $299 for a ten-year registration. For our country code domain
names, we currently charge approximately $40 to $299 for one- or two-year
registrations. We intend to charge the same rates for renewals as we do for
corresponding initial registration periods. We provide the following basic
products and services, for no additional fee, together with our registration
services:
o FutureSite. We provide customers a presence on the Internet immediately
following registration until they launch their own website. Entering a
customer's new domain name will bring up a webpage stating: "Coming Soon!
We recently registered our domain name at register.com."
o Domain Manager. This quick and easy-to-use service enables our customers
to view and modify important domain name information online, on a
real-time basis, including their email address, the location of the server
that hosts their website and all billing information.
o One-Step Registration. We provide our existing users the ability to
register additional domain names through a one-step registration process
using Domain Manager.
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Corporate Services. Through our Corporate Services department, we offer:
o Multiple Domain Registrations. We register large numbers of domain names,
typically greater than 30 per customer.
o International Brand Protection. We are able to register domain names in
over 120 country code domains, thereby assisting customers in protecting
their brands.
o Multiple Registration and Registrar Transfers. We facilitate the
processing of domain name transfers between registrants. If we were not
originally the registrar for a customer's domain names, we will facilitate
our designation as the registrar for those domain names.
Online Products and Services. We offer value-added products and services,
some of which we provide and some of which are provided by third parties
including advertisers. These products and services include:
o Email. We resell comprehensive email services to our customers. These
email services enable our customers to use their unique domain names to
create branded email addresses, such as [email protected].
o SiteLink URL Forwarding. We have developed a domain name forwarding
system that allows customers to forward traffic from their domain names to
other web addresses.
o Web Hosting. We offer web hosting to our customers primarily through
Concentric Network Corporation and advertisers.
<PAGE>
In addition, we pursue advertisers for our website to offer additional products
and services that are complementary to our own offerings and appeal to our
customers. These include:
o trademark services;
o incorporation services;
o web hosting;
o online marketing;
o computer hardware and equipment; and
o virtual intranet applications for the small office and home office
market.
Customer Service
We believe that our ability to establish and maintain long-term
relationships with our customers depends, in part, on the strength of our
customer support operations and staff. Furthermore, we value frequent
communication with and feedback from our customers in order to continually
improve the quality of care provided by our customer service representatives.
Our customer service representatives handle general inquiries, investigate the
status of orders and payments and answer technical questions about the Internet
and domain name management.
Our technology team developed our Internet-based customer service inquiry
tracking system, which we use to respond to substantially all customer service
inquiries. This system enables our customer service representatives to access
customer account information efficiently, including all past requests and our
responses. Additionally, based on information provided by our customers at the
time of their inquiry, our system automatically routes the inquiry to the
appropriate team of customer service representatives. This system also allows
our management to monitor the efficiency and effectiveness of our
representatives. We solicit
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feedback from our customers by emailing quality-of-service surveys to them
after we have resolved their inquiries. We analyze the survey results on a
quantitative and qualitative basis. These responses provide us with real-time
feedback on the quality of our customer service.
Distribution
We believe that our direct and indirect distribution channels enable us to
reach a broad range of potential customers with products and services targeted
to their needs and to increase our exposure across the market. We believe that
we provide our customers quick, easy-to-use, value-added and flexible solutions
across both of our distribution channels.
Direct. We provide our products and services directly to our customers
through our www.register.com website. We also offer services to corporate
customers through our Corporate Services department.
o Website. Through our www.register.com website, customers may register a
domain name in six quick, easy-to-follow steps and access the value-added
products and services we offer to establish, maintain and enhance their
Internet presence. Through our affiliate program, we pay a commission for
customer referrals that result in domain name registrations to encourage
others to provide links to our website.
o Corporate Services. We launched this service to meet the needs of
corporate customers. Many companies currently rely on internal brand
managers and attorneys to register domain names related to their
trademarks and brand names. We believe that we can provide these services
more efficiently through our dedicated team of account managers.
Indirect. We offer our products and services indirectly through our
network of co-brand and private label websites, which include ISPs, web-hosting
companies and other companies whose websites may appeal to our target
customers. In addition, we provide ISP Manager, a real-time domain management
tool that allows these companies to control aspects of the domain name for
their customers directly and to monitor their customers' domain name
registration activity. We currently have approximately 290 participants in our
network of co-brand and private label websites of which 11 are private label
and the remaining are co-brand participants. Because our first private label
websites went live only recently, through December 31, 1999, over 95% of our
revenues derived from our indirect network have come from co-brand
participants.
o Co-brand. We provide our network participants with the opportunity to
earn incremental revenue with minimal cost or effort on their part by
providing them a co-branded website through which they can offer our
services. In less than one day, we can construct and deliver a customized,
co-branded website that offers the same quick, easy-to-use, six-step
registration process available on our website. Typically, a co-branded
website is accessed through the participant's home page and provides one
or more links back to its website to facilitate the sale of additional
products and services. Our "register.com" logo usually appears side by
side with our co-brand participant's logo, providing us with additional
brand visibility. We also typically manage all of the domain name support
services, including notification, billing, collections and customer
service. Co-brand participants typically enter into one-to-three year
contracts with renewal options and receive commissions depending upon the
volume of registrations and the nature of the relationship. A substantial
majority of these contracts provide for us to act as exclusive domain name
registrar for the co-brand participant.
o Private Label. We offer companies that we expect will provide a large
volume of registrations the opportunity to interface directly with our
domain name registration system through which they can offer our services.
This distribution channel allows an
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end-user to register a domain name and purchase other products and
services on a webpage that maintains the look and feel of the website of
our private label participant. We also offer our private label
participants a range of billing, notification and customer support
options.
International. Our direct and indirect distribution channels are
accessible through Internet access worldwide. We currently offer our customers
the ability to register domain names in over 120 country code domains and have
over ten co-brand network participants with principal places of business
outside the United States.
Marketing
Our marketing efforts focus on attracting customers by emphasizing our
simplified registration process and customer service. We use a combination of
Internet, print and radio advertisements. We believe this combination of online
and offline advertising is particularly effective in targeting individuals and
small- to medium-sized businesses.
From September through December 1999, we sponsored two telephone surveys
of males aged 25-49 to measure brand awareness in the domain name registration
services industry. The surveys were conducted by Data Development Corporation,
a marketing research firm specializing in customized research. The results of
the surveys indicated that, while there is no dominant brand in the domain
registration industry, through aided and unaided prompting approximately 20% of
people surveyed recognized our brand prior to our launching any significant
advertising campaign.
Business Alliances
We seek to enter into business alliances to expand our business. These
alliances are important sources for new customer opportunities, brand building,
revenue growth and increasing our product and service offerings. Our business
alliances include:
o Excite@Home. We have entered into a marketing relationship with
Excite@Home, a global media company. We will be a featured domain name
registration service sponsor on the Excite.com and WebCrawler.com
websites. Our relationship with Excite@Home provides us exposure to these
large website audiences.
o Staples, Inc. We are the exclusive registrar for Staples, Inc. and its
Staples.com website, and have entered into a cooperative marketing
agreement with Staples. Staples is a retailer of office supplies,
furniture and technology products to individuals and businesses. Our
relationship with Staples provides us a range of marketing and branding
opportunities, including through a co-branded website and promotion of our
brand name and services in Staples' retail stores. In addition, Staples
made an equity investment in us.
o Concentric Network Corporation. We are Concentric's exclusive provider of
registration services for Concentric-branded registrations. Concentric
advertises on our www.register.com website to provide complete,
easy-to-use Internet business solutions for small- to medium-sized
companies and data center services for larger corporations. Through a
private label distribution relationship, Concentric provides our domain
name registration services together with its virtual web-hosting and other
services to its customers. In addition, Concentric made an equity
investment in us.
o ZDNet. We are the exclusive registrar on the ZDNet website. ZDNet's
website offers nearly 30 channels centering on issues such as home
computing, technology, news and electronic commerce. Our relationship with
ZDNet provides us exposure to its technology and Internet-focused
audience.
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Advertising Sales
We believe that our growing user base provides advertisers and merchants
with an attractive platform from which to reach their target audience. During
the three-month period ended December 31, 1999, our advertising revenues
increased by 131% over the prior three-month period ended September 30, 1999.
Because we attract visitors to our website with the products and services we
offer, as compared to other sites that attract visitors with their content, we
believe these visitors are more likely to purchase goods or services through
our website. In addition, we sell advertising space on FutureSite pages.
Technology
Our technology infrastructure is built and maintained for reliability,
scalability, flexibility and security and is administered by our skilled
technical staff.
Facilities. Our online systems are located at Exodus Communications'
hosting facility in Jersey City, New Jersey and Globix Corporation's hosting
facility in New York, New York. We are currently adding network capacity to our
systems located at the Globix facility to make our systems geographically
redundant. We believe each facility has ample power redundancy, fire
suppression, peering to other ISPs, bandwidth and backbone redundancy to
support the current and anticipated growth of our business.
Reliability. Our technology platform uses technologies to maximize
reliability. All hardware components are redundant through highly available
systems. We provide software and data reliability through a variety of
processes and quality-assurance procedures. Our standard procedures include
daily database backups, offsite storage of critical information and incremental
backups of ongoing database modifications. Additional reliability is provided
by our fault-tolerant and redundant platform architecture, which utilizes
clustering technology that is designed to ensure uninterrupted service.
Scalability and Flexibility. We designed our systems to handle a large
volume of domain name registrations, general website traffic and domain name
server queries in an efficient, scalable and fault-tolerant manner. Our
application servers are clustered and use a shared file system which allows us
to add additional capacity. Our system is designed to scale easily and to
support rapid growth without the need to redesign the network.
Security. Our technology incorporates a variety of security techniques to
protect domain name registration data, including limiting access to users that
are authenticated through a Virtual Private Network (VPN) and encrypting user
passwords at the time of account creation. We have initiated processes to
maintain internal server passwords as well as to ensure limited accessibility
to critical components on the network. Our network is protected by a suite of
industry-leading hardware/software security solutions.
Ongoing Improvements. We are in the process of implementing new load
balancing and security protocols to help protect our network and further
improve scalability. We expect to add network operation centers in other
locations, which will help add redundancy and intelligent load balancing to our
systems. We believe that introducing geographic redundancy will enable us to
maintain systems that are less susceptible to regional Internet outages.
Technology Staff. Our technology team is skilled in developing scalable,
reliable and critical applications and solutions. Many of our technologies,
including our web-based customer care tracking system, were developed in-house.
Our team of engineers monitors our systems 24 hours per day, seven days per
week.
In 1997, 1998 and 1999, we spent $71,000, $277,000 and $1.8 million,
respectively, on our research and development activities.
Historical Operations
We are the successor by merger to Forman Interactive Corp. Forman
Interactive commenced operations in 1994 as a developer of electronic commerce
software and began
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offering web hosting and related products and services in 1997. Forman
Interactive's principal software product was Internet Creator, a website
management software program. We have not sold Internet Creator since October
1998 and ceased distributing it to our web-hosting customers at no cost in
spring 1999. We continue to operate our web-hosting service. However, since its
development is not part of our business strategy, we are not actively promoting
this service. In February 1998, we began to distribute domain names, in most
cases without charge and in a few cases on commission basis when we distributed
domain names for international registrars and registries. In April 1999, we
commenced offering registration services for country code domains and in June
1999, we began offering registrations in the .com, .net and .org domains.
Administration of the Internet; Government Regulation and Legal Uncertainties
The Internet domain name registration system is composed of two principal
functions: registry and registrar. The registry maintains the database that
contains the domain names registered in the top level domains and their
corresponding Internet protocol addresses. The registrar acts as an
intermediary between the registry and individuals and businesses, referred to
as registrants, seeking to register domain names.
Under a 1993 cooperative agreement with the U.S. Department of Commerce,
Network Solutions was authorized to act as the sole registry and sole registrar
for domain names in the .com, .net and .org, top level domains. On July 1,
1997, President Clinton approved and released a report entitled A Framework for
Global Electronic Commerce, in which he authorized the creation of an
inter-agency working group under the leadership of the Department of Commerce
to study domain name system registration and administration issues,
specifically the issue of privatizing the management of the domain name system.
In October 1998, in response to this report, the Department of Commerce amended
the Network Solutions cooperative agreement to call for the formation of a
not-for-profit corporation to oversee the management of, and create policies
regarding, domain names in the .com, .net and .org top level domains. The
Department of Commerce also proposed that additional registrars be authorized
to register domain names in these domains based upon the idea that competitive
registrars would benefit consumers and businesses. ICANN was recognized as this
not-for-profit corporation by the Department of Commerce in November 1998.
ICANN's authority is based upon voluntary compliance with its consensus
policies. While these policies do not constitute law in the United States or
elsewhere, they are expected to have a significant influence on the future of
the domain name registration system.
In April 1999, ICANN selected five testbed companies to act as registrars
to register domain names in the .com, .net and .org domains and compete with
Network Solutions. These five entities were Register.com, America Online, Inc.,
France Telecom, Melbourne IT and CORE, which is a worldwide consortium of
registrars. Each registrar was required to execute a one-year accreditation
agreement with ICANN. Register.com was the first of the testbed companies to
begin directly registering domain names. The testbed registrars were the first
registrars provided with access to the Shared Registration System, which
allowed them to interface directly with Network Solutions' registry. The
testbed period ended on November 30, 1999. As of January 28, 2000, 77 companies
were accredited by ICANN to act as registrars.
On November 10, 1999, ICANN, Network Solutions and the Department of
Commerce executed a set of agreements that were intended to amend the 1993
cooperative agreement and make Network Solutions an ICANN-accredited registrar.
These agreements also provided for Network Solutions to act as the registry
until November 30, 2003. If Network Solutions separates its registry and
registrar operations by May 9, 2001 and sells the registry assets to a third
party, the term of the agreement for the purchaser of the registry operations
will be extended for an additional four years until November 30, 2007. These
agreements provide that:
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o Network Solutions is prohibited until approximately October 2000 from
entering into exclusive agreements with any third-party partners,
including web-hosting companies and ISPs. This provision is intended to
provide us and other competitive registrars with the ability to enter into
agreements with these third parties;
o the annual fee that a registrar must pay to the registry for each domain
name registered in a generic top level domain is $6 per year during the
term of the agreement;
o the registry for the .com, .net and .org domain names will no longer
limit registrations to an initial period of two years. Since January 15,
2000, the registry has accepted domain name registrations in the .com,
.net and .org domains for periods from one to ten years; and
o the InterNIC website www.internic.net, formerly controlled by Network
Solutions, will be turned over to ICANN on May 31, 2000. This website
links to a directory of domain names in the Network Solutions registry,
and now contains information regarding the introduction of competitive
registrars and includes the names of the operational, ICANN-accredited
registrars.
On December 1, 1999, ICANN's first substantive policy, the Uniform Dispute
Resolution Policy, became effective. This dispute resolution policy was created
to address the problem of cybersquatting, or registering the trademark of
another as a domain name with the intent to wrongfully profit from the goodwill
in that name created by the trademark holder. ICANN intends to create
additional policies governing the domain name registration system, and we will
be affected by any of these policies. We played a leading role in the drafting
and implementation of the Uniform Dispute Resolution Policy, and we intend to
continue to play an active role in the development of ICANN policies.
We anticipate that new top level domains, such as .firm, .web and .store,
will eventually be authorized by ICANN for introduction into the domain name
registration system. The timing of the introduction of these new top level
domains depends on a number of factors, including reaching a consensus among
the international Internet community on what the domains will be, and what type
of registry will be established to serve as the repository for such domains. If
and when these domains become available, we intend to petition ICANN for
authorization to act as a registrar for these domains.
There have been ongoing legislative developments and judicial decisions
with respect to trademark infringement claims, unfair competition claims, and
dispute resolution policies relating to the registration of domain names. To
help protect ourselves from liability in the face of these ongoing legal
developments, we have taken the following precautions:
o in our standard registration agreement, we require that each registrant
indemnify, defend and hold us harmless for any dispute arising from the
registration or use of a domain name registered in that person's name; and
o on December 1, 1999, we implemented the Uniform Domain Name Dispute
Resolution Policy as approved by ICANN.
Despite these precautions, we cannot assure you that our indemnity and dispute
resolution policies will be sufficient to protect us against claims asserted by
various third parties, including claims of trademark infringement and unfair
competition.
New laws or regulations regarding domain names and domain name registrars
may be adopted at any time. Our responses to uncertainty in the industry or new
regulations could increase our costs or prevent us from delivering our services
over the Internet, which could delay growth in demand for our services and
limit the growth of our revenues. New and existing laws may cover issues such
as:
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o pricing controls;
o the creation of additional generic top level domains and country code
domains;
o consumer protection;
o cross-border domain name registration;
o trademark, copyright and patent infringement;
o domain name dispute resolution; and
o other claims based on the nature of content of domain names and domain
name registration.
In November 1999, the Anticybersquatting Consumer Protection Act was
enacted by the United States government. This law seeks to curtail a practice
commonly known in the domain name registration industry as "cybersquatting." A
cybersquatter is generally defined in the Act as one who registers a domain
name that is identical or similar to another party's trademark, or the name of
another living person, in each case with the bad faith intent to profit from
use of the domain name. The law states that registrars may not be held liable
for registration or maintenance of a domain name for another person absent a
showing of the registrar's bad faith intent to profit from the use of the
domain name. Registrars may be held liable, however, if they do not comply
promptly with procedural provisions of the law. For example, if there is a
litigation involving a domain name, the registrar is required to deposit a
certificate representing the domain name registration with the court. To date,
there is no precedent to specify under what circumstances we may suffer
liability under this law. If we are held liable under this law, any liability
could have a material adverse effect on our business financial condition and
results of operations.
Competition
We believe that our industry experience, product and service offerings,
customer service focus, quick and easy to use registration process and broad
and efficient distribution policies enable us to compete favorably in providing
domain name registration services and ancillary products and services and in
attracting advertisers. However, our competitors may have greater name
recognition, longer operational histories and greater financial, technical and
managerial resources and may undertake extensive marketing campaigns for their
brands and services, adopt aggressive pricing policies and make more attractive
offers to potential distribution partners, advertisers and customers.
Competition in the Domain Name Registration Industry. As of January 28,
2000, there were 77 ICANN-accredited registrars. Of these, only 25 are
connected to the Shared Registration System, and the remainder are still in the
development phase with respect to offering registration services. An additional
33 companies have qualified for accreditation but have yet to sign the
agreements required by ICANN and Network Solutions. Our principal competitor in
the market for domain name registration services is Network Solutions. The
barriers for other competitors seeking to enter the market as domain name
registrars include developing the requisite technological infrastructure and
meeting ICANN's accreditation requirements. In addition to other registrars, we
face competition from companies who align themselves with accredited registrars
to offer domain name registration services, including ISPs, web-hosting
companies, telecommunications firms and Internet professional service firms.
Competition with respect to our online products and services. A key
component of our business strategy is to offer value-added products and
services that encourage customers to use our website for the development and
maintenance of their online presence. The markets for our products and services
are highly competitive. Other registrars may develop or enter into
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strategic relationships to offer products and services similar to those that we
now provide, including our email, domain-forwarding and website-hosting
features. In addition to competing with other registrars, we also compete with
many other providers of these products and services, including application
service providers and Internet professional services firms.
Competition for Advertisers. We compete for Internet advertising and
sponsorship revenues with other domain name registrars, content-based websites,
ISPs, Internet content providers, large web-based publishers, Internet search
engines and portal companies and various other companies that facilitate
Internet advertising. We also compete with traditional offline media for a
share of advertisers' total advertising budgets.
Intellectual Property and Proprietary Rights
We believe that we are well positioned in the domain name registration and
shared Internet web-hosting markets in part due to our highly recognized brand,
register.com. We regard our trademarks, copyrights, trade secrets and other
intellectual property as critical to our success. We rely on trademark and
copyright law, trade secret protection and confidentiality and/or license
agreements with our employees, customers, partners and others to protect our
intellectual property rights. Despite our precautions, third parties could
obtain and use our intellectual property without authorization. Furthermore,
the validity, enforceability and scope of protection of intellectual property
in Internet-related industries is uncertain and still evolving. The laws of
some foreign countries do not protect intellectual property to the same extent
as do the laws of the United States. Our trademark registration applications
are pending for "The First Step on the Web" and "SiteAmerica." All other
trademarks and service marks used in this prospectus are the property of their
respective owners.
We have received initial rejections from the U.S. Patent and Trademark
Office on our trademark applications for "register" and "register.com" based on
descriptiveness. In due course we will be preparing a response arguing that
these brands have become widely known through extensive use in commerce and are
valid trademarks. While we will be taking all reasonable measures to secure
trademark registrations for the "register" and "register.com" marks, we cannot
assure you that we will be able to obtain these registrations.
Effective trademark, service mark, copyright and trade secret protection
may not be available in every country in which our services are or will be made
available. We also expect to license proprietary rights such as trademarks or
copyrighted material to strategic partners in the course of planned national
and international expansion. While we will attempt to ensure in our agreements
that licensees will maintain the quality of our service, we cannot assure you
that they will not take actions that might diminish the value of our
proprietary rights or reputation and that could thereby materially harm our
business.
We also rely on certain technologies that we license from other parties.
For instance, Network Solutions has licensed us the right to use key software
products and database technology. We cannot assure you that these third-party
technology licenses will not infringe on the proprietary rights of others or
will continue to be available to us on commercially reasonable terms, if at
all. The loss of such technology could require us to obtain substitute
technology of lower quality or performance standards or at greater cost, which
could materially harm our business.
To date, we have not been notified that our technologies infringe the
proprietary rights of any third parties. There can be no assurance that others
will not claim that we have infringed their proprietary rights with respect to
past, current or future technologies. We expect that the number of infringement
claims in our market will increase as the number of services and competitors in
our industry grows. Any of those claims, whether meritorious or not, could be
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time consuming, result in costly litigation, or require us to enter into
royalty or licensing agreements. Royalty or licensing agreements might not be
available on terms we find acceptable or at all. As a result, any such claim
could materially harm our business.
Employees
As of February 1, 2000, we had approximately 132 full-time employees. None
of our employees are represented by a labor union or are subject to
collective-bargaining agreements. We believe that we maintain good
relationships with our employees.
Facilities
We currently lease approximately 20,000 square feet of space in one
location in New York, New York under a ten-year contract that expires in 2009.
We also sublease 2,700 square feet in our current location on a month-to-month
basis. We believe that our current space will meet our needs for approximately
18 months.
Legal Proceedings
We are not party to any material legal proceedings and are not aware of
any pending or threatened litigation that would materially and adversely affect
our business.
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MANAGEMENT
Our executive officers and directors
The following table sets forth our executive officers and directors, their
ages and the positions they hold:
<TABLE>
<CAPTION>
Name Age Position
- --------------------------------- ----- ---------------------------------------
<S> <C> <C>
Richard D. Forman (1) ........... 35 President, Chief Executive Officer
and Chairman of the Board of Directors
Alan G. Breitman ................ 30 Vice President of Finance and
Accounting; Treasurer
Robert D. Gardos ................ 27 Vice President of Technology
Sascha A. Mornell ............... 31 Vice President of Marketing
Jack S. Levy .................... 30 General Counsel and Secretary
Lauren M. Gaviser ............... 29 Director of Strategic Initiatives
Gerhard Karba ................... 43 Director of Development
Niles H. Cohen (1)(2) ........... 39 Director
Peter A. Forman ................. 38 Director
Mark S. Hoffman (1)(2) .......... 38 Director
Samantha McCuen (2) ............. 31 Director
Reginald Van Lee ................ 41 Director
</TABLE>
- -------------
(1) Member of compensation committee.
(2) Member of audit committee.
Richard D. Forman has been our Chief Executive Officer since March 1996
and our President since March 1998. He has served as one of our Directors since
our inception and as Chairman of the Board since May 1999. Since 1994, Mr.
Forman has also been the President of Lease On Line, Inc., a real estate
brokerage and management firm. In addition, Mr. Forman has managed real estate
in the New York City area since August 1992. Mr. Forman was formerly a
consultant with Booz Allen & Hamilton, Inc. in its New York City and Sydney,
Australia offices. Mr. Forman is the brother of Peter A. Forman, one of our
directors and co-founders. In 1987, Mr. Forman graduated from the University of
Pennsylvania's Management and Technology Program, and received his B.S. in
Economics from the Wharton School of Business and B.S. in Electrical
Engineering from the Moore School of Electrical Engineering. In 1992, Mr.
Forman received his M.S. in Real Estate from New York University.
Alan G. Breitman has served as our Vice President of Finance and
Accounting since November 1998 and was appointed our Treasurer in December
1998. From December 1998 until October 1999, Mr. Breitman served as our
Secretary. From September 1998 through October 1998, Mr. Breitman served as the
Chief Financial Officer of Metro Lights Advertising, a domestic outdoor
advertising company. From August 1997 through August 1998, Mr. Breitman was the
Manager of Financial Planning and Analysis at Allaire Corporation, a developer
of Internet development tools. From May 1997 to July 1997, Mr. Breitman was the
Manager of Financial Planning and Analysis for Datamedic, a developer of
integrated point of care computerized patient record and practice management
solutions. From May 1996 to May 1997, Mr. Breitman worked as both the
accounting manager and financial analyst for Visibility, Inc., a developer of
manufacturing accounting systems. From 1995 to 1996, Mr. Breitman was the
Manager of Internal Financial Reporting for Xtra Corp. From 1992 to 1995, Mr.
Breitman was an auditor at Coopers & Lybrand, where he worked primarily with
high technology and financial services companies. Mr. Breitman received his
B.S. in Business from Skidmore College in 1992.
Robert D. Gardos has served as our Vice President of Technology since June
1999. From June 1998 until June 1999, Mr. Gardos served as our Director of
Information Systems.
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From May 1997 to May 1998, Mr. Gardos was the Chief Financial Officer for
Touchlink, a privately held company that he co-founded to provide public
Internet kiosks. From December 1994 to April 1997, Mr. Gardos was a Senior
Consultant for Ernst & Young where he managed system selection and
implementation projects. From January 1994 to December 1994, Mr. Gardos was an
analyst for UMS Management group, a firm specializing in utility consulting.
Mr. Gardos received his B.S. in Economics from the Wharton School of Business,
with a concentration in Finance in 1993.
Sascha A. Mornell has served as our Vice President of Marketing since June
1999. From May 1998 until June 1999, Mr. Mornell served as our Director of
Online Products and Marketing. From August 1997 to March 1998, Mr. Mornell was
Manager of International Business Development and Marketing at the National
Basketball Association in New York. From August 1992 to December 1995, Mr.
Mornell was the New Product Development Manager for Dreyer's Brand Ice Cream in
Tokyo, Japan. Mr. Mornell received his B.A. in History from the University of
California at Berkeley in 1990 and received his M.B.A. from Harvard Business
School in 1997.
Jack S. Levy has served as our General Counsel and Secretary since October
1999. From September 1996 until October 1999, Mr. Levy was an associate in the
corporate department of Willkie Farr & Gallagher. Mr. Levy received his B.A. in
Government from Harvard College in 1992 and his J.D. from Columbia Law School
in 1996.
Lauren M. Gaviser has served as our Director of Strategic Initiatives
since April 1999. From August 1996 until April 1999, Ms. Gaviser was a senior
associate at Booz Allen & Hamilton, Inc., in its Communications, Media and
Technology Practice in New York and from December 1992 until May 1994 was in
the Sales and Marketing division of Alcatel Bell Telephone in Antwerp, Belgium.
Ms. Gaviser received her B.A. in Spanish and Comparative Area Studies from Duke
University in 1992 and received her M.B.A. from Columbia University in 1996.
Gerhard Karba has served as our Director of Development since October
1999. From November 1998 until September 1999, Mr. Karba was Executive Vice
President of Mik & Associates Inc., a custom software and systems integration
company. From December 1997 until October 1998, Mr. Karba was President of
Ambras Technologies, Inc., a software company that was acquired by Mik &
Associates. From 1993 to November 1997, Mr. Karba served as the President of
Paradigm Software Technologies, an enterprise software company specializing in
high-end project tracking and billing systems. Mr. Karba received his Executive
M.B.A. degree from Pace University in 1992, and his B.B.A. from Pace University
in 1986.
Niles H. Cohen has served as one of our Directors since November 1995.
Since 1994, Mr. Cohen has been the Managing Member of Capital Express, LLC, a
New Jersey-based venture capital firm that he founded. Mr. Cohen is a member of
the boards of directors of several privately held companies, including
Awards.com, Inc., 1-800 BIRTHDAY.com, Inc. and MoneyHunt Properties, Inc. Since
December 1988, Mr. Cohen has been the President of Nihco Equities, Inc., an
investment and consulting firm that he founded. Mr. Cohen received his B.S. in
Economics from the Wharton School of Business in 1982.
Peter A. Forman, our co-founder, has served as one of our Directors since
our inception in 1994. Mr. Forman served as our President from our inception in
1994 until March 1998 and as Chairman of the Board from our inception in 1994
until May 1999. Since January 1998, Mr. Forman has been a Managing Member of
Forman Capital Management, which specializes in early stage internet and
technology companies. Since February, 1999, Mr. Forman has served as President
of WellSet, a consumer and commercial products manufacturing, marketing, and
distribution company. From August 1983 until February 1999, Mr. Forman served
as the Chief Executive Officer of Ben Forman & Sons, Inc., a wholesale consumer
products manufacturer. Mr. Forman is the brother of the Company's President and
Chief Executive Officer, Richard D. Forman. Mr. Forman received his B.S. in
Economics from the Wharton School of Business in 1983.
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Mark S. Hoffman has served as one of our Directors since March 1999. Since
October 1994, he has been a Member of Palisade Capital Management, LLC, the
investment manager of Palisade Private Partnership, L.P. Mr. Hoffman is a
director of several privately held companies, including C3i, Inc., Show
Digital, Inc., Berdy Medical Systems, Inc. and comstar.net, inc. Mr. Hoffman
received his B.S. in Economics from the Wharton School of Business in 1983.
Samantha McCuen has served as one of our Directors since June 1999. She is
a Vice President of Sandler Capital Management. Ms. McCuen joined Sandler in
January 1996 and is currently responsible for analyzing, structuring and
managing Sandler's investments in Internet and technology companies in the
public and private sectors. She has been a principal of Sandler Internet
Partners, L.P. since October 1999. From 1990 to 1996, Ms. McCuen held both
equity research and investment banking positions at Morgan Stanley Dean Witter
where she specialized in Internet and PC software companies. Ms. McCuen
received her B.A. in Economics from Lehigh University in 1990.
Reginald Van Lee has served as one of our Directors since January 2000.
Mr. Van Lee joined Booz Allen & Hamilton, Inc. in 1984 and has been a Partner
there since 1993. Mr. Van Lee, who specializes in international business
strategy and management of technology-driven companies in the global
communications, media and technology industries, is currently the Managing
Partner of Booz Allen & Hamilton's New York City office. Mr. Van Lee received
his B.S. in Civil Engineering in 1979 and his M.S. in Civil Engineering in 1980
from the Massachusetts Institute of Technology. In 1984, Mr. Van Lee received
his M.B.A. from Harvard Business School.
Each of our directors was nominated and elected in accordance with our
Stockholders Agreement, as amended, and will hold office until the next annual
meeting of our stockholders. The Stockholders Agreement will terminate upon the
consummation of this offering in accordance with its terms.
The Stockholders Agreement provides that we maintain a seven-member board
of directors and that each of the parties to the agreement vote all voting
stock in favor of the following:
o Three director nominees designated by Richard D. Forman, Peter A. Forman
and Dan B. Levine, subject to their collectively owning a specified
minimum percentage of our shares and rights to acquire our shares. Richard
D. Forman, Peter A. Forman and Reggie Van Lee serve as the directors
designated by this group.
o One director nominee designated by Capital Express, LLC, subject to its
owning a specified minimum percentage of our shares and rights to acquire
our shares. Niles H. Cohen currently serves as the director designated by
Capital Express, LLC.
o One director nominee designated by Internet Web Builders, LLC, subject to
its owning a specified minimum percentage of our shares and rights to
acquire our shares. Zachary Prensky initially served as the director
designated by Internet Web Builders, LLC. Internet Web Builders, LLC does
not have a designee currently serving on the board.
o One director nominee designated by Palisade Private Partnership, LP,
subject to its owning a specified minimum percentage of our shares and
rights to acquire our shares. Mark Hoffman currently serves as the
director designated by Palisade Private Partnership, LP. Palisade Private
Partnership, LP may also designate a representative to attend board of
directors' meetings in a non-voting observer capacity.
o One director nominee designated by the holders of at least 50% of the
outstanding Series A Preferred Stock, for as long as the Series A
Preferred Stock represents at least 6% of our outstanding common stock and
rights to acquire our common stock. Samantha McCuen currently serves as
the director designated by the Series A Preferred Stock.
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In January 2000, Internet Web Builders, LLC forfeited its right under the
Stockholders Agreement to designate a board member. The board position is
currently vacant and consistent with the Stockholders Agreement, is expected to
be filled by the remaining directors in office following the consummation of
our initial public offering.
Executive Officers
Our executive officers are elected by our board of directors on an annual
basis and serve until the next annual meeting of the board or until their
successors have been duly elected and qualified.
Board Observers
In connection with Internet Web Builder, LLC's forfeiture of its right to
designate a board member, we granted Kenneth Greif, the managing member of
Internet Web Builders, LLC, the non-transferrable right to attend meetings of
the board of directors as a non-voting observer, except in limited contexts.
Mr. Greif's observer rights will terminate on the earliest of:
o 18 months after the consummation of our initial public offering;
o the closing of a merger or acquisition in which we do not survive the
transaction or our stockholders immediately prior to the transaction own
less than 50% of the surviving company's voting securities;
o the date upon which Mr. Greif no longer beneficially owns at least 5% of
our outstanding securities; or
o the date upon which Mr. Greif sends us a certified letter indicating his
intention to terminate his observer rights.
In December 1997, we borrowed an aggregate of $80,000 at an annual rate of
10% from Kenneth Greif. In connection with this transaction, we issued 11,200
shares of our common stock to Mr. Greif for no additional consideration. We
repaid this loan in January 1998.
Board Committees
Audit Committee. The audit committee reports to the board of directors
regarding the appointment of our independent public accountants, the scope and
results of our annual audits, compliance with our accounting and financial
policies and management's procedures and policies relative to the adequacy of
our internal accounting controls. The current members of the audit committee
are Mark S. Hoffman, Niles H. Cohen and Samantha McCuen.
Compensation Committee. The compensation committee of the board of
directors reviews and makes recommendations to the board regarding our
compensation policies and all forms of compensation to be provided to our
executive officers and directors. In addition, the compensation committee
reviews bonus and stock compensation arrangements for all of our other
employees. The current members of the compensation committee are Richard D.
Forman, Mark S. Hoffman and Niles H. Cohen. Prior to the consummation of this
offering, Mr. Forman will step down from the compensation committee and will be
replaced by Reginald Van Lee.
Director Compensation
We will pay directors who are not affiliated with any stockholder who
purchased shares from us prior to this offering, who we refer to as
unaffiliated directors, an annual fee of $4,000. Our other directors do not
receive compensation for their services as members of our
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board of directors. We reimburse our directors for expenses incurred in
connection with their attendance at board and committee meetings. We currently
do not provide additional compensation for committee participation or special
assignments of the board of directors.
Reginald Van Lee, who is an unaffiliated director, is entitled to receive
options to purchase 35,000 shares of our common stock with an exercise price
equal to the initial public offering price of our common stock upon his joining
our board. Subject to his continuing service as a director, 50% of these
options will vest on the first anniversary of his becoming a director and the
remaining 50% will vest on the second anniversary. Each future unaffiliated
director, upon becoming a director, will receive a grant of options to purchase
35,000 shares of our common stock with an exercise price equal to the fair
market value of our common stock on the close of business on the date of grant.
Subject to the option holder's continuing service as a director, 50% of these
options will vest upon the first anniversary of the individual's becoming a
director and 50% will vest upon the second anniversary.
No interlocking relationships currently exist between our board of
directors or compensation committee and the board of directors or compensation
committee of any other company, nor has any interlocking relationship existed
in the past.
Limitation on Directors' Liability and Indemnification
Our amended and restated 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:
o any breach of their duty of loyalty to the corporation or its
stockholders;
o acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
o any transaction from which the director derived an improper personal
benefit.
In accordance with applicable law, this 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 amended and restated certificate of incorporation and our amended and
restated bylaws provide that we will indemnify our directors and officers and
may indemnify our employees and other agents to the fullest extent permitted by
law. We believe that indemnification under our amended and restated bylaws
covers at least negligence and gross negligence on the part of indemnified
parties. Our amended and restated 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 his or her capacity as an officer,
director, employee or other agent, regardless of whether the amended and
restated bylaws would permit indemnification.
The limited liability and indemnification provisions in our amended and
restated certificate of incorporation and amended and restated bylaws may
discourage stockholders from bringing a lawsuit against our directors for
breach of their fiduciary duty and may reduce the likelihood of derivative
litigation against our directors and officers, even though a derivative action,
if successful, might otherwise benefit us and our stockholders. A stockholder's
investment in us may be adversely affected to the extent we pay the costs of
settlement or damage awards against our directors and officers under these
indemnification provisions.
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At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees in which indemnification is sought, nor
are we aware of any threatened litigation that may result in claims for
indemnification.
Employment Agreements
We have entered into employment agreements with each of Richard D. Forman,
our President and Chief Executive Officer and Jack S. Levy, our General
Counsel.
Mr. Forman's employment agreement with us became effective as of November
15, 1995 and terminates on June 30, 2000. The agreement entitles Mr. Forman to
receive a current base salary of $200,000 per year, health benefits, and
reimbursement of car expenses and perquisites up to a maximum of $20,000 per
year. In addition, Mr. Forman is entitled to exercise, at any time prior to
January 4, 2003, an option to purchase up to 1,750,000 shares of common stock,
of which:
o 525,000 shares have an exercise price of $0.17 per share;
o 350,000 shares have an exercise price of $0.46 per share;
o 350,000 shares have an exercise price of $0.86 per share; and
o 525,000 shares have an exercise price of $1.71 per share.
All of Mr. Forman's options under his employment agreement are fully
vested.
Mr. Levy's employment agreement with us became effective as of October 11,
1999. The agreement provides for a one-year term, at which time the term will
be extended for consecutive 45-day periods, unless terminated by either party.
Mr. Levy is entitled to an annual salary of at least $116,327 and received a
signing bonus of $25,000. Mr. Levy is also entitled to receive a $50,000 cash
bonus within 15 days of the closing of either our initial public offering or
our change in control, plus a $25,000 cash bonus at the one-year anniversary of
our initial public offering or the six-month anniversary of our change in
control. We have also granted Mr. Levy options to purchase up to 122,500 shares
of our common stock at an exercise price of $1.43 per share. These options vest
beginning on January 11, 2000 in 41 monthly installments of 2,916 shares and a
final monthly installment of 2,944 shares.
We also granted Mr. Levy options to purchase 52,500 shares of our common
stock. The exercise price per share for these options will equal the initial
public offering price if we complete an initial public offering before October
31, 2000 and will equal $7.14 if we complete an initial public offering on or
after October 31, 2000. These options vest on a monthly basis for a period of
42 months, with the initial vesting date being the earlier of October 31, 2000
and the closing of an initial public offering. The vesting of Mr. Levy's
options will accelerate upon the earlier of:
o our change in control, in which case vesting will accelerate to the
six-month anniversary of the closing of the transaction; or
o the termination of Mr. Levy's employ by us without cause or by him for
good reason following our change in control, in which case vesting will
accelerate to the date of his termination.
If Mr. Levy's employment is terminated by us without cause or by him for
good reason following our change in control, the vesting of any options that
would have vested through the expiration of the employment term had the
termination not occurred will be accelerated to the date of the termination.
This provision will apply to Mr. Levy's options to purchase 52,500 shares of
common stock only if an initial public offering or change in control has
occurred prior to the effective date of his termination. In addition, we would
be required to
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pay Mr. Levy the bonuses applicable to these transactions, as well as pay his
salary until the scheduled expiration of the employment agreement. If Mr.
Levy's employment is terminated due to death or for good cause, or a voluntary
resignation, he will not be entitled to any compensation from us in addition to
the payment of any accrued base salary, bonuses and benefits.
Executive Compensation
The following table sets forth the total compensation paid or accrued for
the years ended December 31, 1999 and 1998 to our Chief Executive Officer and
to each of our most highly compensated executive officers other than our Chief
Executive Officer whose salary and bonus for 1999 exceeded $100,000. We refer
to the Chief Executive Officer and these other officers as named executive
officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------ -------------
Securities
Underlying
Name and Principal Position Year Salary($) Bonus($) Options (#)
- ----------------------------------------------- ------ ----------- ---------- -------------
<S> <C> <C> <C> <C>
Richard D. Forman ............................. 1999 $162,737 $30,000 --
Chief Executive Officer and President ......... 1998 114,462 20,000 1,750,000
Alan G. Breitman (1) .......................... 1999 97,019 60,000 175,000
Vice President Finance and Treasurer .......... 1998 10,096 -- --
Sascha A. Mornell (2) ......................... 1999 102,000 50,000 17,500
Vice President Marketing ...................... 1998 47,500 -- 210,000
Robert D. Gardos (3) .......................... 1999 88,538 50,000 105,000
Vice President Technology ..................... 1998 45,923 -- 105,000
</TABLE>
(1) Alan G. Breitman started with us in November 1998.
(2) Sascha A. Mornell started with us in May 1998.
(3) Robert D. Gardos started with us in June 1998.
Option Grants in Last Fiscal Year
The following table sets forth grants of stock options for the year ended
December 31, 1999 to each of our named executive officers. The potential
realizable value is calculated based on the term of the option at its time of
grant. It is calculated assuming that the fair market value of common stock on
the date of grant appreciates at the indicated annual rate compounded annually
for the entire term of the option and that the option is exercised and sold on
the last day of its term for the appreciated stock price. These numbers are
calculated based on the requirements of the Securities and Exchange Commission
and do not reflect our estimate of future stock price growth. The percentage of
total options granted to employees in the last fiscal year is based on options
to purchase an aggregate of 1,063,510 shares of common stock granted under our
plans.
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<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------
% of Potential Realizable
Total Value at Assumed
Options Annual Rates of
Number Granted Stock Price
of Shares to Appreciation
Option Term
Underlying Employees Exercise ------------------------------------
Options in Fiscal Price Per Expiration
Name Granted Year Share Date 0% 5% 10%
- --------------------------- ------------ ----------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan G. Breitman .......... 105,000 10% 0.86 2/1/2009 $67,500 $156,514 $318,514
70,000 7% 1.43 5/1/2009 78,800 191,246 363,761
Sascha A. Mornell ......... 17,500 2% 0.86 6/1/2009 29,700 57,812 100,940
Robert D. Gardos .......... 35,000 3% 1.14 1/1/2009 2,500 29,228 70,234
35,000 3% 1.43 5/1/2009 20,000 64,023 131,562
35,000 3% 1.43 6/1/2009 39,400 95,623 181,881
</TABLE>
Aggregated Option Exercises in the Year Ended December 31, 1999 and Year-End
Option Values
The following table sets forth information concerning the options held by
each of our named executive officers at December 31, 1999. There was no public
trading market for the common stock as of December 31, 1999. Accordingly, the
values set forth below have been calculated on the basis of an assumed initial
public offering price of $16.00 per share, less the applicable exercise price
per share, multiplied by the number of shares underlying the options.
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End at Fiscal Year End ($)
------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Richard D. Forman ......... 1,750,000 -- $26,550,000 --
Alan G. Brietman .......... 39,584 135,416 591,794 $2,018,206
Sascha A. Mornell ......... 109,375 118,125 1,693,750 1,826,250
Robert D. Gardos .......... 74,583 135,417 1,139,278 2,030,722
</TABLE>
Stock Option Plans
We adopted our stock option plans for the purpose of promoting our
long-term growth and profitability by providing key persons the incentive to
improve stockholder value and to contribute to our growth and success, as well
as to enable us to attract and retain talented and skilled persons for
positions of substantial responsibility. We have used stock options as a
component of compensation for our officers and key employees.
1997 Stock Option Plan.
Our predecessor company, Forman Interactive Corp., adopted our 1997 Stock
Option Plan in December 1997. We assumed the 1997 plan in our merger with
Forman Interactive. A total of 1,750,000 shares of common stock have been
authorized for issuance under the plan. As of December 31, 1999, options to
purchase an aggregate of 1,726,935 shares of common stock were outstanding
under the plan, and an aggregate of 23,065 shares of common stock are
authorized but have not yet been granted as awards under the plan. The number
and price of shares covered by outstanding stock options and the number of
shares authorized under the plan will be proportionately adjusted, as
determined by the board, to take into account any stock split, reverse stock
split, stock dividend, combination, recapitalization or similar event.
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Our officers, employees, non-employee directors and consultants are
eligible to participate in the plan. As plan administrator, our board of
directors has the sole discretion to determine which eligible individuals may
receive awards, the type of awards to be made and the terms and conditions of
each award.
If we merge with another company and do not survive the merger, or we sell
substantially all of our common stock to another person, or enter into any
similar transaction, all outstanding options must be assumed by the surviving
company, unless the board determines in its sole discretion to terminate all
outstanding options effective at the closing of the transaction by delivering a
notice of termination to each optionholder at least 20 days prior to the
closing. Each optionholder would, however, have the right to exercise the
vested portion of the option during the period from the delivery of the notice
until the closing.
No options may be granted under the plan after December 2007, but options
granted prior to that date may continue to be exercised until their stated
terms.
1999 Stock Option Plan.
In April 1999, our board of directors adopted our 1999 Stock Option Plan,
which was approved by our stockholders in January 2000. A total of 2,275,000
shares of common stock have been authorized for issuance under the plan, and no
more than 1,750,000 shares may be issued under the plan to any one individual.
As of December 31, 1999, no options to purchase shares of common stock were
outstanding under the plan. The number and price of shares covered by
outstanding stock options and the number of shares authorized under the plan
will be proportionately adjusted, as determined by the board, to take into
account any stock split, reverse stock split, stock dividend, combination,
recapitalization or similar event.
Our directors, officers, employees and consultants and other advisors are
eligible to participate in the plan. As plan administrator, the compensation
committee of our board of directors has the sole discretion to determine which
eligible individuals may receive awards, the type of awards to be made and the
terms and conditions of each award. Unless otherwise fixed by the plan
administrator, each option shall expire ten years from the date of grant. No
options may be granted under the plan after April 2009, but options granted
prior to that date may continue to be exercised until their stated terms.
2000 Stock Incentive Plan.
In January 2000, our board of directors adopted and our stockholders
approved our 2000 Stock Incentive Plan. Our 2000 Stock Incentive Plan is
intended to serve as the successor equity incentive program to our 1997 Stock
Option Plan and our 1999 Stock Option Plan. Outstanding options under the
predecessor plans will be incorporated into the 2000 Stock Incentive Plan upon
the consummation of this offering, and the incorporated options will continue
to be governed by their existing terms.
We have authorized the issuance of up to 7,350,000 shares of common stock
under the 2000 Stock Incentive Plan. This share reserve consists of the shares
issuable under the predecessor plans on the effective date of the 2000 Stock
Incentive Plan plus an additional increase of 3,500,000 shares. The share
reserve will automatically be increased on the first trading day of January of
each calendar year, beginning in January 2001, by a number of shares equal to
2% of the total number of shares of common stock outstanding on the last
trading day of the prior calendar year, but no such annual increase will exceed
1,750,000 shares. In no event may any one participant receive option grants or
direct stock issuances for more than 1,750,000 shares in the aggregate per
calendar year.
Except as otherwise noted below, the outstanding options under the
predecessor plans contain substantially the same terms and conditions
summarized below for the discretionary option grant program under the 2000
Stock Incentive Plan. The 2000 Stock Incentive Plan has five separate programs:
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o the discretionary option grant program under which eligible individuals
in our employ or service (including officers, non-employee board members
and consultants) may be granted options to purchase shares of our common
stock;
o the stock issuance program under which such individuals may be issued
shares of common stock directly, through the purchase of such shares or as
a bonus tied to the performance of services;
o the salary investment option grant program under which executive officers
and other highly compensated employees may elect to apply a portion of
their base salary to the acquisition of special below-market stock option
grants;
o the automatic option grant program under which option grants will
automatically be made at periodic intervals to eligible non-employee board
members; and
o the director fee option grant program under which non-employee board
members may elect to apply a portion of their retainer fee to the
acquisition of special below-market stock option grants.
The discretionary option grant and stock issuance programs will be
administered by our compensation committee. This committee will determine which
eligible individuals are to receive option grants or stock issuances, the time
or times when the option grants or stock issuances will be made, the number of
shares subject to each grant or issuance, exercise or purchase price for each
grant or issuance (which may be less than, equal to or greater than the fair
market value of the shares), the status of any granted option as either an
incentive stock option or a non-statutory stock option under the federal tax
laws, the vesting schedule to be in effect for the option grant or stock
issuance and the maximum term for which any granted option is to remain
outstanding. The committee will also select the executive officers and other
highly compensated employees who may participate in the salary investment
option grant program in the event that the program is activated for one or more
calendar years. Neither the compensation committee nor the board will exercise
any administrative discretion with respect to option grants made under the
salary investment option grant program or under the automatic option grant
program or director fee option grant program for the non-employee board
members.
The exercise price for the options may be paid in cash or in shares of our
common stock valued at fair market value on the exercise date. The option may
also be exercised through a same-day sale program without any cash outlay by
the optionee. In addition, the compensation committee may allow a participant
to pay the option exercise price or direct issue price and any associated
withholding taxes incurred in connection with the acquisition of shares with a
full-recourse, interest-bearing promissory note.
If we are acquired, each outstanding option under the discretionary option
grant program that is not to be assumed by the successor corporation or
otherwise continued will automatically accelerate in full, and all unvested
shares under the discretionary option grant and stock issuance programs will
immediately vest, except to the extent the repurchase rights with respect to
those shares are to be assigned to the successor corporation or otherwise
continued in effect. The compensation committee may grant options and issue
shares that will accelerate (1) in connection with an acquisition even if the
options are assumed and repurchase rights are assigned, (2) in connection with
a hostile change in control (effected through a successful tender offer for
more than 50% of our outstanding voting stock or by proxy contest for the
election of board members) or (3) upon a termination of the individual's
service following a change in control or hostile takeover.
If we are acquired, options currently outstanding under the 1997 and 1999
plans may be assumed by the successor corporation or the options may terminate.
The compensation committee may provide for acceleration of any options that
terminate in connection with the acquisition. These options are not by their
terms subject to acceleration in connection with any other change in control or
hostile takeover.
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Stock appreciation rights may be issued under the discretionary option
grant program that will permit holders to elect to surrender their outstanding
options for an appreciation distribution from us equal to the fair market value
of the vested shares subject to the surrendered option less the aggregate
exercise price payable for the shares. This appreciation distribution may be
made in cash or in shares of common stock. There are currently no outstanding
stock appreciation rights under the predecessor plans.
The compensation committee has the authority to cancel outstanding options
under the discretionary option grant program, including options incorporated
from the predecessor plans, in return for the grant of new options for option
shares with an exercise price per share based upon the fair market value of the
common stock on the new grant date.
If the compensation committee elects to activate the salary investment
option grant program for one or more calendar years, each of our executive
officers and other highly compensated employee selected for participation may
elect to reduce his or her base salary for that calendar year by a specified
dollar amount not less than $10,000 nor more than $50,000. In return, the
individual will automatically be granted, on the first trading day in the
calendar year for which the salary reduction is to be in effect, a
non-statutory option to purchase that number of shares of common stock
determined by dividing the salary reduction amount by two-thirds of the fair
market value per share of our common stock on the grant date. The option
exercise price will be equal to one-third of the fair market value of the
option shares on the grant date. As a result, the fair market value of the
option shares on the grant date less the exercise price payable for those
shares will be equal to the salary reduction amount. The option will become
exercisable in a series of 12 equal monthly installments over the calendar year
for which the salary reduction is to be in effect and will be subject to full
and immediate vesting in the event of our acquisition or change in control.
Under the automatic option grant program, each individual who first joins
the board on or after January 26, 2000 as a non-employee board member will
automatically be granted an option for 35,000 shares of our common stock at the
time of his or her commencement of board service, unless the individual has
previously been in our employ. In addition, each individual who continues to
serve as a non-employee board member after an annual stockholders meeting will
receive an option grant to purchase 5,250 shares of common stock on the date of
the annual stockholders meeting beginning with the first annual stockholders
meeting held after the initial 35,000-share grant under the automatic option
grant program is fully vested. Each automatic grant will have an exercise price
equal to the fair market value per share of our common stock on the grant date
and will have a maximum term of 10 years, subject to earlier termination
following the optionee's cessation of board service. Each option will be
immediately exercisable, subject to our right to repurchase any unvested
shares, at the original exercise price, at the time of the board member's
cessation of service. Each 35,000-share option grant will vest, and the
repurchase right will lapse, in a series of two equal successive annual
installments upon the optionee's completion of each year of board service over
the two-year period measured from the grant date. Each 5,250-share option grant
will vest, and the repurchase right will lapse, upon the optionee's completion
of one year of board service measured from the grant date. However, each such
outstanding option will immediately vest upon a change in control, a hostile
takeover or the death or disability of the optionee while serving as a board
member.
If the director fee option grant program is put into effect in the future,
then each non-employee board member may elect to apply all or a portion of any
cash retainer fee for the year to the acquisition of a below-market option
grant. The option grant will automatically be made on the first trading day in
January in the year for which the non-employee board member would otherwise be
paid the cash retainer fee in the absence of his or her election. The option
will have an exercise price per share equal to one-third of the fair market
value of the option shares on the grant date, and the number of shares subject
to the option will be
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determined by dividing the amount of the retainer fee applied to the program by
two-thirds of the fair market value per share of our common stock on the grant
date. As a result, the fair market value of the option shares on the grant date
less the exercise price payable for those shares will be equal to the portion
of the retainer fee applied to that option. The option will become exercisable
in a series of 12 equal monthly installments over the calendar year for which
the election is in effect. However, the option will become immediately
exercisable for all the option shares upon the death or disability of the
optionee while serving as a board member.
Limited stock appreciation rights will automatically be included as part
of each grant made under the automatic option grant and salary investment
option grant programs and may be granted to one or more officers as part of
their option grants under the discretionary option grant program. Options with
such a limited stock appreciation right may be surrendered to us upon the
successful completion of a hostile tender offer for more than 50% of our
outstanding voting stock. In return for the surrendered option, the optionee
will be entitled to a cash distribution from us in an amount per surrendered
option share equal to the highest price per share of common stock paid in
connection with the tender offer less the exercise price payable for such
share.
The board may amend or modify the 2000 Stock Incentive Plan at any time,
subject to any required stockholder approval. The 2000 Stock Incentive Plan
will terminate no later than January 25, 2010.
Employee Stock Purchase Plan.
Our Employee Stock Purchase Plan was adopted by the board and approved by
the stockholders on January 26, 2000. The plan will become effective
immediately upon the execution of the underwriting agreement for this offering.
The plan is designed to allow our eligible employees and participating
subsidiaries, if any, to purchase shares of our common stock, at semi-annual
intervals, through their periodic payroll deductions. A total of 350,000 shares
of our common stock will initially be authorized for issuance under the plan.
The share reserve will automatically increase on the first trading day of
January each year beginning in January 2001, by 0.25% of the total shares of
common stock outstanding on the last trading day of the prior calendar year,
but no such annual increase will exceed 140,000 shares. In no event may any
participant purchase more than 700 shares, nor may all participants in the
aggregate purchase more than 122,500 shares on any one semi-annual purchase
date.
The plan will have a series of successive offering periods, each with a
maximum duration of 24 months, except that the initial offering period will
begin on the date that the underwriting agreement is executed in connection
with this offering and will end on the last business day in April 2002. The
next offering period will begin on the first business day in May 2002, and
subsequent offering periods will be set by the compensation committee. Shares
will be purchased for the participants semi-annually during the offering
period. The first purchase date will occur on October 31, 2000. If the fair
market value of our common stock on any semi-annual purchase date is less than
the fair market value on the first day of the offering period, then the current
offering period will automatically end and a new offering period will begin,
based on the lower fair market value.
Individuals who are eligible employees on the start date of any offering
period may enter the plan on that start date or on any subsequent semi-annual
entry date. Individuals who become eligible employees after the start date of
the offering period may join the plan on any subsequent semi-annual entry date
within that period.
A participant may contribute up to 10% of his or her cash compensation
through payroll deductions and the accumulated payroll deductions will be
applied to the purchase of shares
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<PAGE>
on the participant's behalf on each semi-annual purchase date. The purchase
price per share will be 85% of the lower of the fair market value of our common
stock on the participant's entry date into the offering period or the fair
market value on the semi-annual purchase date.
Generally, the board may at any time amend or modify the plan. The plan
will terminate no later than the last business day in April 2010.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Equity Issuances and Financings
In August 1996, we borrowed an aggregate of $100,000 from our co-founders,
Richard D. Forman, our President, Chief Executive Officer and Chairman of our
board of directors, Peter A. Forman, one of our directors, and Dan B. Levine, a
director at the time of the transaction, to fund our operations. In connection
with this transaction, we issued warrants to purchase shares of our common
stock at an exercise price of $0.24 per share as follows:
Value of
Underlying Shares
Common Stock Net of Exercise Price
Name of Investor Underlying Warrants at $16.00 per share
- --------------------------- --------------------- ----------------------
Richard D. Forman ......... 156,244 $2,462,405
Peter A. Forman ........... 156,244 2,462,405
Dan B. Levine ............. 99,278 1,564,621
In January 1998, each exercised in full his warrants and used the amount
due from us under the loan to pay the exercise price.
In September 1996, pursuant to a letter agreement among Capital Express,
LLC, Peter A. Forman, Richard D. Forman and Dan B. Levine, and in consideration
for personally guaranteeing a commercial loan to us in the amount of $162,000
from Citibank, N.A., we issued to each of Richard D. Forman and Peter A. Forman
warrants to purchase 472,500
shares of our common stock at an exercise price of $0.17 per share. In January
1998, each forfeited accrued but unpaid compensation in order to effect a
cashless conversion of these warrants. The aggregate value of these shares
based on an assumed initial public offering price of $16.00 per share would be
$15,120,000.
Also, in January 1998, we sold 2,800,000 shares of our common stock at a
price of $0.36 per share to Internet Web Builders, LLC for a purchase price of
$1.0 million. The aggregate value of these shares based on an assumed initial
public offering price of $16.00 per share would be $44,800,000. Concurrently
with the closing of this transaction, we issued warrants to purchase up to an
aggregate of 2,450,001 shares of our common stock based upon our reaching
specified revenue targets at an exercise price of $0.36 per share. In June
1999, we modified the terms of the warrants to remove the revenue targets, to
fix the number of shares underlying the warrants at 2,450,001 and to increase
the exercise price to $0.97 per share. These warrants were issued on a pro rata
basis to the stockholders immediately prior to the Internet Web Builders
investment as follows:
<TABLE>
<CAPTION>
Value of
Underlying Shares
Common Stock Net of Exercise Price
Name of Investor Underlying Warrants at $16.00 per share
- ------------------------------ --------------------- ----------------------
<S> <C> <C>
Richard D. Forman ............ 699,717 $10,516,747
Peter A. Forman .............. 548,247 8,240,152
Dan B. Levine ................ 283,798 4,265,484
Capital Express, LLC ......... 918,239 13,801,132
</TABLE>
As payment of a finder's fee in connection with the Internet Web Builders
investment, we issued to each of Zachary Prensky, our then director, and Niles
Cohen, our current director, warrants to purchase 350,000 shares of our common
stock, at exercise prices of $0.36 for 50% of the shares and $0.86 for the
remaining shares. The aggregate value of the shares underlying these warrants,
net of the exercise price, based on an assumed initial public offering price of
$16.00 per share, would be $10,773,000. At the time of the transactions,
Zachary Prensky was both one of our directors and the managing member of
Internet Web Builders. In addition, Niles Cohen is, and at the time of the
transactions was, the managing member of Capital Express, LLC.
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<PAGE>
In May 1998, we sold 3,640,000 shares of our common stock at a purchase
price of $0.36 per share. The aggregate value of these shares based on an
assumed initial public offering price of $16.00 per share would be $58,240,000.
Of these, our directors, executive officers, stockholders beneficially owning
5% or more in the aggregate of our common stock and Melvin Forman, an immediate
family member of two of our directors, purchased shares as follows:
Value of Shares
Name of Investor Common Stock at $16.00 per share
- ------------------------------- -------------- --------------------
Richard D. Forman ............. 308,000 $ 4,928,000
Peter A. Forman ............... 308,000 4,928,000
Capital Express, LLC .......... 140,000 2,240,000
Internet Web Builders ......... 1,764,000 28,224,000
Melvin Forman ................. 280,000 4,480,000
Concurrently with the closing of this transaction, as payment of a
finder's fee, we issued to each of Zachary Prensky and Niles Cohen warrants to
purchase 221,669 shares of our common stock, at exercise prices of $0.36 for
50% of the shares and $0.86 for the remaining shares. The aggregate value of
the shares underlying these warrants, net of the exercise price, based on an
assumed initial public offering price of $16.00 per share, would be $6,822,972.
In March 1999, we issued 1,499,999 shares of our Exchangeable Preferred
Stock to Palisade Private Partnership, L.P. at a purchase price of $2.00 per
share. These shares were automatically converted to common stock on August 15,
1999, in accordance with their terms. The value of these shares based on an
assumed initial public offering price of $16.00 per share would be $23,999,984.
In addition, we entered into a service agreement with Palisade Private
Partnership, LP, whereby Palisade agreed to provide us six months of financial
and strategic advisory services in exchange for a warrant to purchase 420,000
shares of our common stock at a price of $2.14 per share. The aggregate value
of the shares underlying these warrants, net of the exercise price, based on an
assumed initial public offering price
of $16.00 per share, would be $5,821,200. Mr. Hoffman, one of our current
directors,
is a member of Palisade Private Holdings, LLC, the General Partner of Palisade
Private Partnership L.P.
In May 1999, we sold 2,041,666 shares of our common stock to Staples, Inc.
at a price of $3.43 per share. The value of these shares based on an assumed
initial public offering price of $16.00 per share would be $32,666,656. In
connection with the transaction, we issued to Staples warrants to purchase up
to 700,000 shares of our common stock at an exercise price of $0.0029. The
aggregate value of the shares underlying these warrants, net of the exercise
price, based on an assumed initial public offering price of $16.00 per share,
would be $11,197,970. Also in May 1999, we entered into a marketing agreement
with Staples. The agreement gives us the exclusive right to market our domain
name registration services on all of Staples' branded properties, including
Staples.com's website and the Staples retail stores. Further, the agreement
gives Staples the exclusive right to market its office supplies on our website.
From June 1999 through July 1999, we sold 4,694,333 shares of our Series A
Convertible Preferred Stock at a purchase price of $3.43 per share. The value
of these shares based on an assumed initial public offering price of $16.00 per
share would be $75,109,328. In connection with these transaction, we issued
warrants to purchase 938,888 shares of our common stock, each at an exercise
price of $3.43 per share. The aggregate value of the shares underlying these
warrants, net of the exercise price, based on an assumed initial public
offering price of $16.00 per share, would be $11,801,822. Of these, our
directors, officers and stockholders beneficially owning 5% or more in the
aggregate of our common stock purchased shares and were issued warrants as
follows:
65
<PAGE>
<TABLE>
<CAPTION>
Aggregate Value
of Securities
Series A Convertible Common Stock Net of Exercise Price
Name of Investor Preferred Stock Underlying Warrants at $16.00 per share
- ----------------------------------------- ---------------------- --------------------- ----------------------
<S> <C> <C> <C>
Richard D. Forman ....................... 1,460 291 $ 27,018
Peter A. Forman ......................... 4,893 980 90,607
Dan B. Levine ........................... 459 95 8,538
Alan G. Breitman ........................ 15,585 2,919 286,052
Concentric Network Corporation .......... 1,458,335 291,669 26,999,639
Internet Web Builders, LLC .............. 6,934 1,386 128,366
Sandler Capital IV FTE Partners L.P. 381,500 76,300 7,063,091
Sandler Capital Management .............. 145,835 29,169 2,700,014
Sandler Capital IV Partners L.P. ........ 931,000 186,200 17,236,534
Staples, Inc. ........................... 120,659 24,136 2,233,934
</TABLE>
Samantha McCuen, one of our current directors, is a Vice President of Sandler
Capital Management and a principal of Sandler Internet Partners L.P. At the
time of the Series A Convertible Preferred Stock financing, Zachary Prensky was
one of our directors and a managing member of Internet Web Builders, LLC.
Legg Mason Wood Walker, Incorporated earned an advisory fee in connection
with the sale of our Exchangeable Preferred Stock, our common stock to Staples
and our Series A Convertible Preferred Stock, consisting of $1.1 million in
cash and warrants to purchase 494,449 shares of our common stock at an exercise
price of $4.08 per share. The aggregate value of the shares underlying these
warrants, net of the exercise price, based on an assumed initial public
offering price of $16.00 per share, would be $5,893,832. In addition, we
granted Legg Mason piggyback registration rights with respect to the common
stock issuable upon exercise of their warrants. We also agreed that Legg Mason
could be included as a managing underwriter in connection with our initial
public offering.
In June 1999, we entered into a marketing and distribution agreement with
Concentric Network Corporation. The agreement makes us the exclusive provider
of domain name registration services in generic top level domains for
Concentric's branded web-hosting and electronic services. The agreement also
provides that Concentric will be one of up to three web-hosting or electronic
commerce service providers on our website. We pay Concentric $41,666.67 per
month under the agreement for co-branded marketing programs. In addition,
Concentric has agreed to purchase advertising space on our website for seven
months commencing March 2000 at a rate of $800,000 per month, plus an
additional $100,000 for the period from September to December 2000.
In connection with the sale of our Series A Convertible Preferred Stock,
we entered into a Registration Rights Agreement with Dan B. Levine, Peter A.
Forman, Richard D. Forman, Capital Express, L.L.C., Internet Web Builders,
L.L.C., Palisade Private Partnership, L.P., Staples, Inc. and the purchasers of
our Series A Preferred Stock. This Registration Rights Agreement amends and
restates the registration rights agreement that we entered into in connection
with the sale of our Exchangeable Preferred Stock and our sale of common stock
to Staples. For a description of the Registration Rights Agreement, please see
"Description of Capital Stock--
Registration Rights Agreement."
Also in connection with the sale of our Series A Convertible Preferred
Stock, we entered into a Stockholders Agreement with the parties to our
Registration Rights Agreement. This Stockholders Agreement will terminate upon
the occurrence of a number of specified conditions, including the consummation
of this offering. Our Stockholders Agreement amends and restates the
stockholders agreement that we entered into in connection with the sale of our
Exchangeable Preferred Stock and our sale of common stock to Staples. Under the
current Stockholders Agreement, the parties agreed to restrictions on the
transferability of their shares in number of specified circumstances, including
rights of first refusal, tag along rights and drag along rights. In addition,
the Stockholders Agreement, which will terminate upon the
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<PAGE>
consummation of our initial public offering, provides that we must obtain
Staples' written consent prior to entering into a merger, consolidation or sale
of all or substantially all of our assets unless the merger consideration
equals at least $3.43 per share of common stock, with adjustments for stock
splits, dividends and similar events.
The Stockholders Agreement also requires the stockholders to vote all of
their voting stock, subject among other things to minimum stock holding
requirements, in favor of
o three directors designated by Richard D. Forman, Peter A. Forman and Dan
B. Levine;
o one director designated by Capital Express, LLC;
o one director designated by Internet Web Builders, LLC;
o one director designated by Palisade Private Partnership, L.P; and
o one director designated by the holders of at least 50% of the outstanding
Series A Preferred Stock.
In February 2000, Internet Web Builders, LLC agreed to forfeit its right
to designate a board member. In connection with this agreement, we granted
Kenneth Greif, the managing member of Internet Web Builders, LLC, the right to
attend meetings of the board of directors as a non-voting observer, except in
limited contexts. Mr. Greif's observer right is non-transferrable and will
expire upon the earliest of:
o 18 months after the consummation of our initial public offering;
o the closing of a merger or acquisition in which we do not survive the
transaction or our stockholders immediately prior to the transaction own
less than 50% of the surviving company's voting securities;
o the date upon which Mr. Greif no longer beneficially owns at least 5% of
our outstanding securities; or
o the date upon which Mr. Greif sends us a certified letter indicating his
intention to terminate his observer rights.
In December 1997, we borrowed an aggregate of $80,000 at an annual rate of
10% from Kenneth Greif, the managing member of Internet Web Builders, LLC. In
connection with this transaction, we issued 11,200 shares of our common stock
to Mr. Greif for no additional consideration. The value of these shares based
on an assumed initial public offering price of $16.00 per share would be
$179,200. We repaid this loan in January 1998.
In February 2000, Capital Express, LLC entered into an agreement to sell
to Staples, Inc. warrants to purchase 918,239 shares of our common stock with
an exercise price of $0.97 per share. The transaction will be consummated on
the day after the date on which the registration statement for this offering
becomes effective. The purchase price per warrant will equal the initial public
offering price per share of our common stock less the exercise price. Staples,
Inc. has entered into a lock-up and voting agreement with us, which generally
requires Staples not to transfer or otherwise dispose of any of our securities
for a period of one year following the date of our initial public offering,
except under limited circumstances and, for so long as it owns more than 5% of
our outstanding voting securities, not to vote against any matter put before
our stockholders where at least holders of a majority of our voting securities
(excluding Staples, Inc.) have voted in favor of the matter, with limited
exceptions.
Other Transactions
From inception until May 1998, we utilized office space and received
administrative services from Ben Forman & Sons, Inc. Melvin Forman, an
executive officer of Ben Forman & Sons, is the father of Richard D. Forman and
Peter A. Forman. During 1998, Peter A. Forman served as an executive officer of
Ben Forman & Sons.
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<PAGE>
We pay $500 per month to one of Lease On Line, Inc.'s employees for
facilities management services provided to us. In addition, we provide Lease On
Line the use of approximately 200 square feet of our office space and various
office services without charge. Richard D. Forman is the President and
principal owner of Lease On Line.
We have entered into employment agreements with Richard D. Forman and Jack
S. Levy. For a detailed description of these agreements, please see
"Management--Employment Agreements."
We believe that all of the transactions set forth in this section were
made on terms no less favorable to us than could have been obtained from
unaffiliated third parties. We intend that all future transactions between us
and our officers, directors, principal stockholders and their affiliates will
be approved by a majority of the independent and disinterested directors on our
board of directors and will be on terms no less favorable to us than could be
obtained from unaffiliated third parties.
Board of Advisors
We have established a Board of Advisors to assist with the planning of our
strategic growth and development. The Board of Advisors currently consists of
Robert H. Lessin, Co-Chief Executive Officer of Wit Capital Corporation, Stuart
D. Levi, a partner in the firm of Skadden, Arps, Slate, Meagher & Flom LLP,
Peter J. Varvara, the President and Chief Executive Officer of Customer
Strategies Worldwide, and Steve W. Klebe, Vice President of Payment Alliances
Cybersource. Members of the Board of Advisors do not receive a stated salary
for their services as members. From time to time, the Board of Directors has
granted warrants to purchase common stock as compensation to the members of the
Board of Advisors. As of December 31, 1999, we have granted warrants to
purchase an aggregate of 31,500 shares to the members of the Board of Advisors,
at exercise prices ranging from $0.43 to $2.86 per share.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of January 31, 2000, and as adjusted to
reflect the sale of the shares of common stock offered hereby, by each person
or group of affiliated persons whom we know to beneficially own 5% or more of
our common stock, each director, each named executive officer, all of our
directors and executive officers as a group and each selling stockholder.
Unless otherwise indicated, the address of each officer, director and principal
stockholder listed below is c/o Register.com, Inc., 575 Eighth Avenue, 11th
Floor, New York, New York 10018.
As of January 31, 2000, we had 25,761,130 shares of common stock
outstanding, assuming the conversion of all outstanding shares of Series A
Convertible Preferred Stock. The following table gives effect to the shares of
common stock issuable within 60 days of January 31, 2000 upon the exercise of
all options and other rights beneficially owned by the indicated stockholders
on that date. Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission and includes voting or investment
power with respect to securities. To our knowledge, except as set forth in the
footnotes to the following table, each stockholder identified in the table
possesses sole voting and investment power with respect to all shares of common
stock shown as being beneficially owned by the stockholder.
<TABLE>
<CAPTION>
Shares Beneficially Percentage
Owned Before of Shares
the Offering
----------------------- Beneficially Owned
Number Percent After the Offering
------------ --------- --------------------
<S> <C> <C> <C>
Executive Officers and
Directors
Richard D. Forman (1) ............ 6,009,391 21.3% 18.1%
Peter A. Forman (2) .............. 3,774,149 14.3 12.1
Mark S. Hoffman (3) .............. 1,919,999 7.3 6.2
Niles H. Cohen (4)(5) ............ 5,154,358 19.2 13.7
Samantha McCuen (6) .............. 1,750,004 6.7 5.1
Reginald Van Lee ................. -- -- --
All directors and executive
officers as a group (12
persons) (5)(6) ................. 18,923,115 61.3 51.0
Principal Stockholders
Kenneth Greif (7)(8) ............. 5,263,385 19.9 16.8
Capital Express, LLC (5)(9) ...... 4,932,689 18.5 13.1
Internet Web Builders,
LLC (7)(8)(10) .................. 4,572,320 17.7 14.8
Staples, Inc. (5)(11) ............ 2,886,461 10.9 11.7
Palisade Private Partnership
LP (12) ......................... 1,919,999 7.3 6.2
Concentric Network
Corporation (5)(13) ............. 1,750,004 6.7 5.6
Sandler Capital Entities (14)..... 1,750,004 6.7 5.1
Other Selling
Stockholders
Hikari Tsushin Inc. .............. 700,004 2.7 2.3
Alan N. Locker (16) .............. 280,000 1.1 0.9
Dawn Patrick (17)................. 175,000 0.7 0.6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially
Owned After the
Offering Assuming
Number of Shares Over-Allotment Option
is Exercised in Full
Subject to ------------------------
Over-Allotment Option Number Percent
----------------------- ------------ ----------
<S> <C> <C> <C>
Executive Officers and
Directors
Richard D. Forman (1) ............ 300,470 5,708,921 17.1%
Peter A. Forman (2) .............. -- 3,774,149 12.0
Mark S. Hoffman (3) .............. 96,000 1,823,999 5.8
Niles H. Cohen (4)(5) ............ -- 4,236,119 13.6
Samantha McCuen (6) .............. -- 1,575,000 5.0
Reginald Van Lee ................. -- -- --
All directors and executive
officers as a group (12
persons) (5)(6) ................. 396,470 18,526,645 49.6
Principal Stockholders
Kenneth Greif (7)(8) ............. -- 5,271,705 16.7
Capital Express, LLC (5)(9) ...... -- 4,014,450 13.0
Internet Web Builders,
LLC (7)(8)(10) .................. -- 4,564,000 14.7
Staples, Inc. (5)(11) ............ -- 3,804,700 11.7
Palisade Private Partnership
LP (12) ......................... 96,000 1,823,999 5.8
Concentric Network
Corporation (5)(13) ............. 87,501 1,662,503 5.3
Sandler Capital Entities (14)..... -- 1,575,000 5.0
Other Selling
Stockholders
Hikari Tsushin Inc. (15).......... 35,000 665,004 2.1
Alan N. Locker (16) .............. 14,000 266,000 0.9
Dawn Patrick (17)................. 8,750 166,250 0.5
</TABLE>
- -------------
(1) Includes 3,521,583 shares of common stock held by RDF Ventures LLC, 37,800
shares of common stock held by the RDF 1999 Family Trust, warrants to
purchase 699,717 shares of common stock at an exercise price of $0.97 per
share, warrants to purchase 291 shares of common stock at an exercise
price of $3.43 per share and currently exercisable options to purchase
1,750,000 shares of common stock at a weighted average price of $0.83 per
share.
(2) Includes 350,000 shares of common stock held by Forman Capital Partners I,
LP, warrants to purchase 548,247 shares of common stock at an exercise
price of $0.97 per share and warrants to purchase 980 shares of common
stock at an exercise price of $3.43 per share.
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<PAGE>
(3) Includes 1,499,999 shares of common stock owned by Palisade Private
Partnership LP and a warrant to purchase 420,000 shares of common stock at
an exercise price of $2.14 per share. Mr. Hoffman is a member of Palisade
Private Holdings, LLC, the General Partner of Palisade Private Partnership
LP. Mr. Hoffman shares voting and investment power with respect to all
shares beneficially owned by Palisade Private Partnership LP.
(4) Includes warrants to purchase 110,835 shares of common stock at an exercise
price of $0.36 per share and warrants to purchase 110,835 shares of common
stock at an exercise price of $0.86 per share. Also includes 4,014,451
shares of common stock owned by Capital Express, LLC and warrants to
purchase 918,239 shares of common stock at an exercise price of $0.97 per
share held by Capital Express LLC. Mr. Cohen is the managing member of
Capital Express, LLC. Mr. Cohen shares voting and investment power with
respect to all shares beneficially owned by Capital Express, LLC.
(5) Post-offering columns reflect the sale by Capital Express, LLC to Staples,
Inc. of warrants to purchase 918,239 shares of common stock, expected to
occur on the day after the registration statement relating to our initial
public offering becomes effective.
(6) Includes 931,000 shares of common stock and warrants to purchase 186,200
shares of common stock at an exercise price of $3.43 per share owned by
Sandler Capital IV Partners, LP; 381,500 shares of common stock and
warrants to purchase 76,300 shares of common stock at an exercise price of
$3.43 per share owned by Sandler Capital IV FTE Partners, LP and 145,835
shares of common stock and a warrant to purchase 29,169 shares of common
stock at an exercise price of $3.43 per share owned by Sandler Capital
Management. The post-offering columns also reflect the sale on February 3,
2000 by Sandler Capital Management to Wheatley Partners II of 145,835
shares of common stock and warrants to purchase 29,169 shares of common
stock. Ms. McCuen is a Vice President of Sandler Capital Management and may
be deemed to share voting and investment power with respect to all shares
beneficially owned by the Sandler Capital Entities. Ms. McCuen disclaims
beneficial ownership of such shares except to the extent of her pecuniary
interest in these entities.
(7) The post-offering columns reflect the distribution on February 3, 2000 by
Internet Web Builders, LLC to Kenneth Greif of 6,934 shares of common stock
and warrants to purchase 1,386 shares of common stock.
(8) Includes warrants to purchase 277,085 shares of common stock at an
exercise price of $0.36 per share, 249,085 shares of common stock at an
exercise price of $0.86 per share and 153,696 shares of common stock at an
exercise price of $0.97 per share. Mr. Greif disclaims beneficial
ownership of an aggregate of 218,750 shares of common stock underlying
these warrants, which he has informed us he holds on behalf of a group of
business associates and family members. Also includes 4,570,934 shares of
common stock and warrants to purchase 1,386 shares of common stock at an
exercise price of $3.43 per share owned by Internet Web Builders, LLC. Mr.
Greif is the managing member and majority owner of Internet Web Builders,
LLC and shares voting and investment power with respect to all shares
beneficially owned by Internet Web Builders, LLC. Mr. Greif's address is
c/o Internet Web Builders, LLC, 1270 Avenue of the Americas, Suite 1905,
New York, New York 10019.
(9) Includes warrants to purchase 918,239 shares of common stock at an
exercise price of $0.97 per share. The address of Capital Express, LLC is
1100 Valleybrook Avenue, Lyndhurst, New Jersey 07071.
(10) Includes warrants to purchase 1,386 shares of common stock at an exercise
price of $3.43 per share. The address of Internet Web Builders, LLC is
1270 Avenue of the Americas, Suite 1905, New York, New York 10019.
(11) Includes warrants to purchase 700,000 shares of common stock at an
exercise price of $.0029 per share and 24,136 shares of common stock at an
exercise price of $3.43 per share. The address of Staples, Inc. is 500
Staples Drive, Framingham, Massachusetts 01702.
(12) Includes warrants to purchase 420,000 shares of common stock at an
exercise price of $2.14 per share. The address of Palisade Private
Partnership LP is One Bridge Plaza, Fort Lee, New Jersey 07024.
(13) Includes warrants to purchase 291,669 shares of common stock at an
exercise price of $3.43 per share. The address of Concentric Network
Corporation is 1400 Parkmoor Avenue, San Jose, California 95126.
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(14) Includes 931,000 shares of common stock and warrants to purchase 186,200
shares of common stock at an exercise price of $3.43 per share owned by
Sandler Capital IV Partners, LP; 381,500 shares of common stock and
warrants to purchase 76,300 shares of common stock at an exercise price of
$3.43 per share owned by Sandler Capital IV FTE Partners, LP and 145,835
shares of common stock and warrants to purchase 29,169 shares of common
stock at an exercise price of $3.43 per share owned by Sandler Capital
Management. The post-offering columns also reflect the sale on February 3,
2000 by Sandler Capital Management to Wheatley Partners II of 145,835
shares of common stock and warrants to purchase 29,169 shares of common
stock. The address of the Sandler Capital Entities is 767 Fifth Avenue,
45th Floor, New York, New York 10153.
(15) The address of Hikari Tsushin Inc. is 1285 Avenue of the Americas,
35th Floor, New York, New York 10019.
(16) Includes 13,650 shares of common stock equally divided among three trusts,
one for the benefit of Katherine R. Locker, a second for the benefit of
Sarah H. Locker and the third for the benefit of Jonathan C. Locker. The
address of Alan N. Locker is 630 Fifth Avenue, New York, New York, 10111.
(17) The address of Dawn Patrick is 1237 Knickerbocker Avenue, Mamaroneck,
New York 10543.
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DESCRIPTION OF CAPITAL STOCK
General
The following description of our common stock and preferred stock and the
relevant provisions of our amended and restated certificate of incorporation
and amended and restated bylaws as will be in effect upon the closing of this
offering are summaries and are qualified by reference to these documents. Forms
have been filed with the Securities and Exchange Commission as exhibits to our
registration statement, of which this prospectus forms a part.
Upon the closing of this offering, our authorized capital stock will
consist of 200,000,000 shares of common stock, par value $0.0001 per share, and
5,000,000 shares of preferred stock, par value $0.0001 per share.
Common Stock
As of December 31, 1999, there were 25,759,380 shares of common stock
outstanding held of record by stockholders, after giving effect to the
conversion of our outstanding preferred stock. Holders of common stock are
entitled to one vote for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights. Accordingly, holders of
a majority of the shares of common stock entitled to vote in any election of
directors may elect all of the directors standing for election. Holders of
common stock are entitled to receive ratably those dividends, if any, as the
board of directors may declare out of funds legally available therefor, subject
to any preferential dividend rights of any outstanding preferred stock. If we
liquidate, dissolve or wind up the company, the holders of our common stock
will be entitled to receive ratably our net assets available after the payment
of all debts and liabilities and after the prior rights of any outstanding
preferred stock have been satisfied. Holders of the common stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of common stock are, and the shares that we are offering will be, when
issued, after payment of consideration, fully paid and nonassessable. The
rights, preferences and privileges of holders of common stock are subject to,
and may be adversely affected by, the rights of the holders of preferred stock
that we may designate and issue in the future.
Preferred Stock
As of the date of this prospectus, there were no outstanding shares of
preferred stock, other than the 4,694,333 shares of Series A Convertible
Preferred Stock, all of which will be converted into common stock upon the
consummation of the offering. Following the conversion of all outstanding
shares of Series A Preferred Stock upon the consummation of this offering, no
shares of preferred stock will be outstanding. Upon the consummation of this
offering, the board of directors will be authorized, without further
stockholder approval, to issue from time to time up to an aggregate of
5,000,000 shares of preferred stock in one or more series and to fix or alter
the designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each series thereof, including the dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
including sinking fund provisions, redemption price or prices, liquidation
preferences and the number of shares constituting any series or designation of
series. We have no present plans to issue any shares of preferred stock.
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Warrants
As of December 31, 1999, there were warrants outstanding to purchase a
total of 6,155,675 shares of common stock, including:
Shares Issuable Exercise Price
Upon Exercise Per Share Expiration Date
- ----------------- --------------- ----------------
350,000 $ 0.36 January 2003
350,000 0.86 January 2003
2,397,501 0.97 June 2005
221,669 0.36 May 2003
221,669 0.86 May 2003
3,500 0.43 September 2008
29,999 0.57 February 2009
5,250 0.57 March 2009
420,000 2.14 February 2004
185,490 4.08 March 2004
700,000 0.0029 May 2002
5,250 1.43 May 2009
308,959 4.08 May 2004
5,250 1.57 June 2009
938,888 3.43 June 2004
12,250 2.86 November 2009
The warrants are subject to customary adjustments for stock splits,
mergers, reclassification and similar transactions.
Options
Options to purchase a total of 7,350,000 shares of common stock may be
granted under our stock option plans. As of December 31, 1999, there were
outstanding options to purchase a total of 1,492,435 shares of common stock. In
addition, as of December 31, 1999, there were outstanding non-plan options to
purchase 1,785,000 shares of common stocks. Since we intend to file a
registration statement on Form S-8 as soon as practicable following the closing
of this offering, any shares issued upon exercise of these options will be
immediately available for sale in the public market, subject to the terms of
lock-up agreements entered into with the underwriters.
Registration Rights
Under the terms of our registration rights agreement, dated as of June 30,
1999, and other existing registration rights after the consummation of this
offering, the holders of 29,894,846 shares of common stock and shares of common
stock issuable upon the exercise of outstanding options and warrants will be
entitled to have us register their shares under the Securities Act. These
holders will be entitled to exercise a total of up to six demands for the
registration of their shares and securities under the Securities Act, subject
to certain limitations. The registration rights agreement also entitles these
holders to piggyback registration rights with respect to the registration of
their shares under the Securities Act, subject to various limitations. Although
the Company has permitted the selling stockholders to include shares of common
stock in this offering in connection with the underwriters' over-allotment
option, piggyback registration rights to include shares in this offering have
been waived.
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The registration rights are subject to specified conditions and
limitations, among them the right of the underwriters of an offering to limit
the number of shares of common stock held by security holders with registration
rights to be included in a registration. In addition, we have a right,
exercisable only once in any 12-month period, to defer or delay the
registration process for a period of up to 90 days if our board of directors
determines that registration would not be in our best interests at that time.
We also have the right not to effect a demand registration within 180 days
after the effective date of any prior underwritten registration of our common
stock. We are generally required to bear all of the expenses of these
registrations, except underwriting discounts and selling commissions. If we
register any of these shares, these shares would become freely tradable without
restriction under the Securities Act immediately upon effectiveness of the
registration.
Anti-Takeover Effects of Provisions of Delaware Law and Our Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws
Delaware Law. We are subject to the provisions of Section 203 of the
Delaware General Corporation Law. Subject to some exceptions, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the interested stockholder attained that status with the
approval of the board of directors or unless the business combination is
approved in a prescribed manner. Generally, "business combinations" mean
mergers, asset sales and other transactions resulting in a financial benefit to
the interested stockholder. Subject to various 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 mergers or other attempts to effect a change in
control and, accordingly, may discourage attempts to acquire us.
Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws. Various provisions of our amended and restated certificate of
incorporation and our amended and restated bylaws, which provisions will be in
effect upon the consummation of this offering, are summarized in the following
paragraphs. These provisions may be deemed to have an anti-takeover effect and
may delay, defer or prevent a tender offer or takeover attempt that a
stockholder might consider in its best interest, including those attempts that
might result in a premium over the market price for the shares held by
stockholders.
Board Vacancies and Removals. Our amended and restated certificate of
incorporation authorizes the board of directors to fill vacant directorships or
increase the size of the board of directors, which may delay a stockholder from
removing incumbent directors and simultaneously gaining control of the board of
directors by filling the vacancies created by the removal with its own
nominees. The amended and restated certificate of incorporation also provides
that directors may be removed by stockholders only for cause and only by the
affirmative vote of holders of two-thirds of the outstanding shares of voting
stock.
Stockholder Action; Special Meeting of Stockholders. Our amended and
restated bylaws provide that stockholders may not act by written consent. The
amended and restated bylaws
further provide that special meetings of our stockholders may be called only by
a majority of the board of directors, the Chairman or the President.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations.
Our amended and restated 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 to us in writing. To be timely, a stockholder's notice must be
received at our principal executive offices not less than 90 days nor more than
120 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders. In the event that the annual meeting is called for a
date that is not within 30 days before or 70 days after the anniversary date,
in order to be timely, notice from the stockholder must be received:
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o not earlier than 120 days prior to the annual meeting of stockholders;
and
o not later than 90 days prior to the annual meeting of stockholders or the
tenth day following the date on which notice of the annual meeting was
made public.
In the case of a special meeting of stockholders called for the purpose of
electing directors, notice by the stockholder, in order to be timely, must be
received:
o not earlier than 120 days prior to the special meeting; and
o not later than 90 days prior to the special meeting or the close of
business on the tenth day following the day on which public disclosure of
the date of the special meeting was made.
Our amended and restated 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 or special meeting of
stockholders or from making nominations for directors at an annual or special
meeting of stockholders.
Authorized But Unissued Shares. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to various limitations imposed by the Nasdaq
National Market. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions, as part of a poison pill defense and employee
benefit plans. The existence of authorized but unissued shares of common stock
and preferred stock could make more difficult or discourage an attempt to
obtain control over us by means of a proxy contest, tender offer, merger or
otherwise.
Supermajority Vote to Amend Our Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws. The Delaware General Corporation
Law provides generally that the affirmative vote of a majority of the shares
entitled to vote on any matter is required to amend a corporation's certificate
of incorporation or bylaws, unless a corporation's certificate of incorporation
or bylaws, as the case may be, requires a greater percentage. Our amended and
restated certificate of incorporation will impose a two-thirds supermajority
vote requirement in connection with various corporate governance actions and
the amendment of various provisions of our amended and restated certificate of
incorporation, including those provisions relating to special meetings of
stockholders. In addition, a two-thirds supermajority vote of stockholders will
be required to amend our amended and restated bylaws.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock
Transfer and Trust Company.
Listing
We have applied to have our common stock approved for quotation on The
Nasdaq National Market under the trading symbol "RCOM."
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SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market
could adversely affect prevailing market prices of our common stock. Upon the
consummation of this offering, we will have outstanding an aggregate of
30,761,132 shares of our common stock, based on the number of shares
outstanding at January 31, 2000 and assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options and warrants. Of
these shares, all shares sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act unless these
shares are purchased by "affiliates" as that term is defined in Rule 144 under
the Securities Act. This leaves shares eligible for sale in the public market
as follows:
<TABLE>
<CAPTION>
Number of
Shares Date
- ------------------ --------------------------------------------------------------
<S> <C>
5,000,000 After the date of this prospectus, freely tradeable shares
sold in this offering.
26,880 After 90 days from the date of this prospectus, shares eli-
gible for resale under Rule 144 (subject in some cases to
volume restrictions).
23,395,177 After 180 days from the date of this prospectus, the 180-
day lock-up will be released and these shares will be eli-
gible for sale in the public market under Rule 144 (subject
in some cases to volume restrictions), Rule 144(k) or Rule
701.
2,162,325 After one year from the date of the effectiveness of the reg-
istration statement relating to our initial public offering,
these shares, which are held by Staples, will be eligible for
sale in the public market under Rule 144 (subject to vol-
ume restrictions).
</TABLE>
The remaining 176,750 shares of common stock held by existing stockholders
are "restricted securities" as defined in Rule 144. Restricted securities may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144 or 701 under the Securities Act,
which rules are summarized below.
Lock-up Agreements
All of our directors and executive officers and stockholders beneficially
owning at least 95% of our common stock prior to the offering have signed
lock-up agreements with the underwriters, which generally require them not to
transfer or otherwise dispose of, directly or indirectly, any shares of our
common stock or any securities convertible into or exercisable or exchangeable
for shares of our common stock for 180 days after the date of this prospectus,
except under limited circumstances. See "Underwriting--Lock-up." In addition,
Staples, Inc. has executed a lock-up with us, which generally requires it not
to transfer or otherwise dispose of, directly or indirectly, any shares of our
common stock or any securities convertible into or exchangeable for shares of
our common stock, other than to an affiliate of Staples, without our prior
written consent, prior to the first anniversary of the effectiveness of the
registration statement relating to our initial public offering.
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 shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the number of shares of common stock then outstanding, which will equal
approximately 307,611 shares immediately after the offering, or the average
weekly trading volume of the common stock on the Nasdaq National Market during
the four
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calendar weeks preceding the filing of a notice on Form 144 with respect to the
sale. Sales under Rule 144 are also subject to manner-of-sale provisions,
notice requirements and the availability of current public information about
us.
Rule 144(k)
Under Rule 144(k), a person who is not one of our affiliates at any time
during the 90 days preceding a sale and who has beneficially owned the shares
proposed to be sold for at least two years, including the holding period of any
prior owner other than an affiliate, is entitled to sell shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144. Therefore, unless otherwise restricted, "144(k)
shares" could be sold immediately upon consummation of this offering.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock plan or other written agreement is
eligible to resell such shares 90 days after the effective date of this
offering in reliance on Rule 144, but without compliance with certain
restrictions, including the holding period, contained in Rule 144.
Registration Rights
After this offering, the holders of 29,894,846 shares of common stock and
shares of common stock issuable upon the exercise of outstanding options and
warrants will be entitled to rights with respect to the registration of those
shares under the Securities Act. See "Description of Capital
Stock--Registration Rights." After registration and resale under a registration
statement, these shares of our common stock become freely tradeable without
restriction under the Securities Act. These sales could have a material adverse
effect on the trading price of our common stock.
Form S-8
We intend to file a registration statement on Form S-8 under the
Securities Act covering 11,243,435 shares of common stock reserved for issuance
under our stock option plans and employee stock purchase plan and the shares
reserved for issuance upon exercise of outstanding non-plan options and some of
our warrants. We expect this registration statement to be filed and to become
effective as soon as practicable after the effective date of this offering.
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UNDERWRITING
We intend to offer our common stock through a number of underwriters.
Deutsche Bank Securities Inc., Thomas Weisel Partners LLC, Legg Mason Wood
Walker, Incorporated and SoundView Technology Group, Inc. are acting as
representatives of each of the underwriters named below. Subject to the terms
and conditions set forth in an underwriting agreement among us and the
underwriters, we have agreed to sell to the underwriters, and each of the
underwriters severally and not jointly has agreed to purchase from us, the
number of shares of common stock set forth opposite its name below.
Number of
Underwriter Shares
- -------------------------------------------------- ----------
Deutsche Bank Securities Inc. ................
Thomas Weisel Partners LLC ...................
Legg Mason Wood Walker, Incorporated .........
SoundView Technology Group, Inc. .............
----------
Total ......................................
In the underwriting agreement, the several underwriters have agreed,
subject to the terms and conditions set forth in the underwriting agreement, to
purchase all of the shares of common stock being sold under the terms of the
underwriting agreement if any of the shares of common stock being sold under
the terms of the underwriting agreement are purchased. In the event of a
default by an underwriter, the underwriting agreement provides that the
underwriting commitments of the nondefaulting underwriters may be increased or
the underwriting agreement may be terminated depending upon the amount of
shares of common stock that the defaulting underwriter was to have purchased. .
We have agreed to indemnify the underwriters against liabilities,
including liabilities under the Securities Act, liabilities arising from
breaches of representations and warranties contained in the underwriting
agreement, and liabilities incurred in connection with the directed share
program referred to below, or to contribute to payments the underwriters may be
required to make in respect of those liabilities.
The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to:
o the representations and warranties made by us to the underwriters being
true;
o there being no change in the financial markets; and
o our delivering customary closing documents to the underwriters, including
opinions of counsel.
The underwriters reserve the right to withdraw, cancel or modify such
offer and to reject orders in whole or in part.
Thomas Weisel Partners LLC, one of the representatives of the
underwriters, was organized and registered as a broker-dealer in December 1998.
Since December 1998, Thomas Weisel Partners LLC has been named as a lead or
co-manager on 115 filed public offerings of equity securities, of which 82 have
been completed, and has acted as a syndicate member in an additional 56 public
offerings of equity securities. Thomas Weisel Partners LLC does not
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have any material relationship with us or any of our officers, directors or
other controlling persons, except with respect to its contractual relationship
with us under the underwriting agreement entered into in connection with this
offering.
Robert H. Lessin, Co-Chief Executive Officer of Wit SoundView's affiliate,
Wit Capital Corporation serves as a member of our Board of Advisors and
received warrants to purchase 5,250 shares of our common stock as consideration
for his services. In addition to his option and warrant holdings, Mr. Lessin
owned 746,666 shares of our common stock at December 15, 1999. Except for its
participation as a manager in this offering and Mr. Lessin's relationship with
us, Wit Capital Corporation has no relationship with us or any of our founders
or significant stockholders.
A prospectus in electronic format is being made available on an Internet
website maintained by Wit SoundView's affiliate, Wit Capital Corporation. In
addition, other dealers purchasing shares from Wit SoundView in this offering
have agreed to make a prospectus in electronic format available on websites
maintained by each of these dealers. Other than the prospectus in electronic
form, the information on Wit Capital Corporation's website and any information
contained on any other website maintained by Wit Capital Corporation is not
part of this prospectus or the registration statement of which this prospectus
forms a part, has not been approved or endorsed by us or any underwriter in its
capacity as underwriter and should not be relied upon by investors.
Legg Mason Wood Walker, Incorporated acted as our financial advisor in
connection with the private placement of our Exchangeable Preferred Stock that
occurred in March 1999, our common stock that occurred in May 1999, and our
Series A Convertible Preferred Stock that occurred in June and July of 1999,
for which we received aggregate net proceeds of $25.7 million. We paid an
advisory fee to Legg Mason Wood Walker, Incorporated for its services,
consisting of $1.1 million in cash and warrants to purchase 494,449 shares of
our common stock at a price of $4.08 per share and gave them piggyback
registration rights with respect to the common stock issuable upon exercise of
their warrants. At present, none of these warrants have been exercised. We also
agreed that Legg Mason could be included as a managing underwriter in
connection with our initial public offering.
Commissions and Discounts
The representatives have advised us that the underwriters propose
initially to offer the shares of common stock to the public at the initial
public offering price set forth on the cover page of this prospectus, and to
certain dealers at such price less a concession not in excess of $ per
share of common stock. The underwriting discount is equal to the initial public
offering price per share less the amount paid to us per share and is intended
to be 7% of the initial public offering price. The underwriters may allow, and
such dealers may reallow, a discount not in excess of $ per share of common
stock on sales to other dealers. After the initial public offering, the public
offering price, concession and discount may change.
The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. Other than the per share information, this information
is presented assuming either no exercise or full exercise by the underwriters
of the over-allotment option.
<TABLE>
<CAPTION>
Per Share Without Option With Option
----------- ---------------- ------------
<S> <C> <C> <C>
Public offering price ............ $ $ $
Underwriting discount ............ $ $ $
Proceeds, before expenses,
to Register.com, Inc. .......... $ $ $
</TABLE>
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The expenses of the offering, exclusive of the underwriting discount, are
estimated at $1.2 million and are payable by us.
Over-allotment Option
We and the selling stockholders have granted an option to the
underwriters, exercisable for 30 days after the date of this prospectus, to
purchase up to an aggregate of 750,000 additional shares of our common stock at
the public offering price set forth on the cover page of this prospectus, less
the underwriting discount. The underwriters may exercise this option solely to
cover over-allotments, if any, made on the sale of our common stock offered
hereby. To the extent that the underwriters exercise this option, each
underwriter will be obligated, subject to the conditions stated above, to
purchase a number of additional shares of our common stock proportionate to
such underwriter's initial amount reflected in the first paragraph of this
section.
Reserved Shares
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to approximately 7.5% of the shares offered hereby to
be sold to some of our directors, officers, employees, business associates and
family members of these persons. The number of shares of our common stock
available for sale to the general public will be reduced to the extent that
those persons purchase the reserved shares. Any reserved shares which are not
orally confirmed for purchase within one day of the pricing of the offering
will be offered by the underwriters to the general public on the same terms as
the other shares offered by this prospectus.
Reserved shares purchased by persons or entities subject to the 180-day
lock-up referred to below will also be locked up for 180 days. Reserved shares
will not otherwise be locked up unless they are purchased by our employees or
directors, in which case they will be locked up for 90 days pursuant to the
requirements of the National Association of Securities Dealers.
Lock-up
We and our executive officers and directors and stockholders beneficially
owning at least 95% in the aggregate of our common stock prior to the offering,
including all principal stockholders, have agreed that subject to limited
exceptions, without the prior written consent of Deutsche Bank Securities Inc.
for a period of 180 days after the date of this prospectus, will not directly
or indirectly:
o offer, sell or otherwise dispose of or transfer any shares of our common
stock or securities convertible into or exchangeable or exercisable for
our common stock, or file a registration statement under the Securities
Act with respect to any shares of our common stock; or
o enter into any swap or other agreement that transfers the economic
benefit of ownership of our common stock.
Nasdaq National Market Quotation
We have applied to have our common stock approved for quotation on The
Nasdaq National Market under the symbol "RCOM."
Before this offering, there has been no public market for our common
stock. The initial public offering price will be determined through
negotiations among us and the representatives. The primary factors to be
considered in determining the initial public offering price will include:
o prevailing market conditions;
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o the valuation multiples of publicly traded companies that the
representatives believe are comparable to us;
o our recent historical financial information;
o our prospects; and
o an assessment of our management.
There can be no assurance that an active trading market will develop for
our common stock or that our common stock will trade in the public market
subsequent to the offering at or above the initial public offering price.
The underwriters do not expect sales of our common stock to any accounts
over which they exercise discretionary authority to exceed 5% of the number of
shares offered in this offering.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of our common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters to
bid for and purchase our common stock. As an exception to these rules, the
representatives are permitted to engage in transactions that stabilize the
price of our common stock. Such transactions consist of bids or purchases for
the purpose of pegging, fixing or maintaining the price of our common stock.
If the underwriters create a short position in our common stock in
connection with the offering, that is, if they sell more shares of our common
stock than are set forth on the cover page of this prospectus, the
representatives may reduce that short position by purchasing our common stock
in the open market. The representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above.
The representatives may also impose a penalty bid on underwriters. This
means that if the representatives purchase shares of our common stock in the
open market to reduce the underwriters' short position or to stabilize the
price of our common stock, they may reclaim the amount of the selling
concession from the underwriters and selling group members who sold those
shares.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of our common stock to the extent that
it discourages resales of our common stock.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the
representatives will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
LEGAL MATTERS
The validity of the common stock that we are offering will be passed upon
for us by Brobeck, Phleger & Harrison LLP, New York, New York. Certain legal
matters in connection with the offering will be passed upon for the
underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
Skadden, Arps, Slate, Meagher & Flom LLP has from time to time represented, and
may continue to represent, us in connection with certain legal matters. Stuart
D. Levi, a partner in the firm of Skadden, Arps, Slate, Meagher & Flom LLP,
serves as a member of our Board of Advisors and as of December 31, 1999 held
warrants to purchase 5,250 shares of common stock.
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EXPERTS
The financial statements as of December 31, 1998 and 1999, and for each of
the three years in the period ended December 31, 1999, included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits, schedules and amendments filed with
the registration statement, under the Securities Act with respect to the common
stock to be sold in this offering. This prospectus does not contain all of the
information set forth in this registration statement. For further information
about us and the shares of common stock to be sold in the offering, please
refer to the registration statement. For additional information, please refer
to the exhibits that have been filed with our registration statement on Form
S-1.
You may read and copy all or any portion of the registration statement or
any other information that we file at the Securities and Exchange Commission's
public reference room at 450 Fifth Street, N.W., Washington, D.C., 20549. You
can request copies of these documents upon payment of a duplicating fee, by
writing to the Securities and Exchange Commission. Please call the Securities
and Exchange Commission at 1-800-SEC-0330 for further information about the
public reference rooms. Our Securities and Exchange Commission filings,
including the registration statement, will also be available on the Securities
and Exchange Commission's website (http://www.sec.gov).
As a result of the offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended, and,
in accordance with these requirements, will file periodic reports, proxy
statements and other information with the Securities and Exchange Commission.
We intend to provide our stockholders annual reports containing financial
statements audited by our independent auditors and to make available quarterly
reports containing unaudited financial data for the first three quarters of
each fiscal year.
82
<PAGE>
Register.com, Inc.
Index to Financial Statements
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Report of Independent Accountants ................................................... F-2
Financial Statements
Balance Sheets at December 31, 1998 and 1999 ...................................... F-3
Statements of Operations for the years ended December 31, 1997, 1998 and 1999 ..... F-4
Statements of Stockholders' (Deficit) Equity for the years ended December 31, 1997,
1998 and 1999 .................................................................... F-5
Statements of Cash Flows for the years ended December 31, 1997, 1998 and 1999 ..... F-6
Notes to Financial Statements ..................................................... F-7
</TABLE>
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors and
Stockholders of Register.com, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, stockholders' (deficit) equity and cash flows present fairly, in
all material respects, the financial position of Register.com, Inc. at December
31, 1998 and 1999, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1999 in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
January 31, 2000
F-2
<PAGE>
Register.com, Inc.
Balance Sheet
<TABLE>
<CAPTION>
Pro Forma
December 31,
--------------------------------- December 31,
1998 1999 1999
-------------- ---------------- ---------------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents ........................................ $ 1,284,648 $ 40,944,122 $ 40,944,122
Short-term investments ........................................... -- 4,723,050 4,723,050
Accounts receivable, less allowance of $65,947 and $314,516,
respectively ................................................... 67,509 2,516,186 2,516,186
Prepaid domain name registry fees ................................ -- 4,954,730 4,954,730
Deferred tax asset ............................................... -- 8,578,045 8,578,045
Deferred offering costs .......................................... -- 390,000 390,000
Other current assets ............................................. 3,925 195,196 195,196
------------ ------------- -------------
Total current assets .......................................... 1,356,082 62,301,329 62,301,329
Fixed assets, net ................................................. 224,300 2,458,386 2,458,386
Prepaid domain name registry fees, net of current portion ......... -- 3,576,331 3,576,331
Other assets ...................................................... 30,643 -- --
------------ ------------- -------------
Total assets .................................................. $ 1,611,025 $ 68,336,046 $ 68,336,046
============ ============= =============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses ............................ $ 610,474 $ 8,513,079 $ 8,513,079
Income taxes payable ............................................. -- 5,608,198 5,608,198
Deferred revenue, net ............................................ 113,527 18,193,871 18,193,871
Capital lease obligations, current portion ....................... 10,425 5,967 5,967
Notes payable .................................................... 52,040 -- --
Other current liabilities ........................................ -- 166,857 166,857
------------ ------------- -------------
Total current liabilities ..................................... 786,466 32,487,972 32,487,972
------------ ------------- -------------
Deferred revenue, net of current portion .......................... -- 13,907,361 13,907,361
Capital lease obligations, net of current portion ................. 1,779 27,858 27,858
------------ ------------- -------------
Total liabilities ............................................. 788,245 46,423,191 46,423,191
------------ ------------- -------------
Commitments and contingencies
Stockholders' equity
Preferred stock -- $.0001 par value, 5,000,000 shares authorized;
Series A convertible preferred; none issued and outstanding at
December 31, 1997 and 1998, 4,694,333 issued and outstanding
at December 31, 1999 and none issued and outstanding pro
forma (liquidation preference of $16,094,844) .................. -- 469 --
Common stock -- $.0001 par value, 60,000,000 shares authorized;
17,295,882, and 21,065,047 shares issued and outstanding at
December 31, 1998 and 1999, respectively, 25,759,380 issued
and outstanding pro forma ...................................... 1,729 2,106 2,575
Additional paid-in capital ....................................... 4,301,871 36,709,821 36,709,821
Unearned compensation ............................................ (105,967) (2,647,770) (2,647,770)
Accumulated deficit .............................................. (3,374,853) (12,151,771) (12,151,771)
------------ ------------- -------------
Total stockholders' equity .................................... 822,780 21,912,855 21,912,855
------------ ------------- -------------
Total liabilities and stockholders' equity .................... $ 1,611,025 $ 68,336,046 $ 68,336,046
============ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Register.com, Inc.
Statement of Operations
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
<S> <C> <C> <C>
1997 1998 1999
---- ---- ----
Net revenues .............................................. $ 713,263 $ 1,319,359 $ 9,644,552
Cost of revenues .......................................... 191,539 461,152 3,082,499
---------- ------------ ------------
Gross profit ........................................... 521,724 858,207 6,562,053
---------- ------------ ------------
Operating costs and expenses
Sales and marketing ...................................... 366,975 863,720 7,149,693
Research and development ................................. 71,471 276,687 1,767,158
General and administrative (exclusive of non-cash
compensation) .......................................... 263,017 795,425 2,380,190
Non-cash compensation .................................... -- 149,682 4,929,200
---------- ------------ ------------
Total operating cost and expenses ...................... 701,463 2,085,514 16,226,241
---------- ------------ ------------
Loss from operations ...................................... (179,739) (1,227,307) (9,664,188)
Other income (expenses), net .............................. (25,787) 66,559 887,270
---------- ------------ ------------
Net loss ............................................... $ (205,526) $ (1,160,748) $ (8,776,918)
========== ============ ============
Basic and diluted net loss per share ................... $ (.02) $ (.07) $ (.46)
========== ============ ============
Weighted average common shares used in basic
and diluted net loss per share ........................ 8,884,709 15,697,013 19,117,027
========== ============ ============
Pro forma basic and diluted net loss per share
(unaudited) .............................................. $ (.40)
============
Weighted average common shares used in pro forma
basic and diluted net loss per share (unaudited) ......... 22,112,252
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Register.com, Inc.
Statement of Stockholders' (Deficit) Equity
<TABLE>
<CAPTION>
Exchangeable Series A Convertible
Preferred Stock Preferred Stock Common Stock
-------------------------- ---------------------- ----------------------
Shares Amount Shares Amount Shares Amount
--------------- --------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1997 .................... -- $ -- -- $ -- 8,884,218 $ 888
Issuance of common
stock in
connection with
notes payable .......... -- -- -- -- 11,200 1
Net loss ................ -- -- -- -- -- --
-- ------- -- ----- --------- ------
Balance at December
31, 1997 ................ -- -- -- -- 8,895,418 889
Issuance of common
stock in exchange
for accrued
compensation ........... -- -- -- -- 945,000 95
Exercise of warrants
issued in
connection with
stockholder loans ...... -- -- -- -- 411,766 41
Conversion of
stockholder note
payable ................ -- -- -- -- 123,529 12
Sale of common
stock .................. -- -- -- -- 6,906,666 691
Issuance of common
stock in exchange
for services ........... -- -- -- -- 13,503 1
Issuance of common
stock warrants for
services ............... -- -- -- -- -- --
Issuance of
compensatory
stock options .......... -- -- -- -- -- --
Amortization of
unearned
compensation ........... -- -- -- -- -- --
Net loss ................ -- -- -- -- -- --
-- ------- -- ----- --------- ------
Balance at December
31, 1998 ................ -- -- -- -- 17,295,882 1,729
Sale of exchangeable
preferred stock ........ 1,499,999 150 -- -- -- --
Sale and issuance of
common stock and
warrants ............... -- -- -- -- 2,041,666 204
Sale and issuance of
series A
convertible
preferred stock and
warrants ............... -- -- 4,694,333 469 -- --
Conversion of
exchangeable
preferred stock to
common stock ........... (1,499,999) (150) -- -- 1,499,999 150
Issuance of common
stock warrants for
services ............... -- -- -- -- -- --
Issuance of
compensatory
stock options .......... -- -- -- -- -- --
Amortization of
unearned
compensation ........... -- -- -- -- -- --
Modification of
common stock
warrants ............... -- -- -- -- -- --
Exercise of employee
stock options .......... -- -- -- -- 175,000 18
Exercise of warrants..... -- -- -- -- 52,500 5
Net loss ................ -- -- -- -- -- --
---------- ------- --------- ----- ---------- ------
Balance at December
31, 1999 ................ -- $ -- 4,694,333 $ 469 21,065,047 $2,106
========== ======= ========= ===== ========== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Additional
Paid-in Unearned Accumulated
Capital Compensation Deficit Total
-------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Balance at January 1,
1997 .................... $ 1,146,546 $ -- $ (2,008,579) $ (861,145)
Issuance of common
stock in
connection with
notes payable .......... 3,999 -- -- 4,000
Net loss ................ -- -- (205,526) (205,526)
------------ ------------- -------------- ------------
Balance at December
31, 1997 ................ 1,150,545 -- (2,214,105) (1,062,671)
Issuance of common
stock in exchange
for accrued
compensation ........... 261,571 -- -- 261,666
Exercise of warrants
issued in
connection with
stockholder loans ...... 99,959 -- -- 100,000
Conversion of
stockholder note
payable ................ 44,107 -- -- 44,119
Sale of common
stock .................. 2,490,041 -- -- 2,490,732
Issuance of common
stock in exchange
for services ........... 5,786 -- -- 5,787
Issuance of common
stock warrants for
services ............... 28,887 -- -- 28,887
Issuance of
compensatory
stock options .......... 220,975 (123,475) -- 97,500
Amortization of
unearned
compensation ........... -- 17,508 -- 17,508
Net loss ................ -- -- (1,160,748) (1,160,748)
------------ ------------- -------------- ------------
Balance at December
31, 1998 ................ 4,301,871 (105,967) (3,374,853) 822,780
Sale of exchangeable
preferred stock ........ 2,840,625 -- -- 2,840,775
Sale and issuance of
common stock and
warrants ............... 6,693,293 -- -- 6,693,497
Sale and issuance of
series A
convertible
preferred stock and
warrants ............... 15,289,552 -- -- 15,290,021
Conversion of
exchangeable
preferred stock to
common stock ........... -- -- -- --
Issuance of common
stock warrants for
services ............... 721,858 -- -- 721,858
Issuance of
compensatory
stock options .......... 2,871,145 (2,871,145) -- --
Amortization of
unearned
compensation ........... -- 329,342 -- 329,342
Modification of
common stock
warrants ............... 3,878,000 -- -- 3,878,000
Exercise of employee
stock options .......... 62,482 -- -- 62,500
Exercise of warrants..... 50,995 -- -- 51,000
Net loss ................ -- -- (8,776,918) (8,776,918)
------------ ------------- -------------- ------------
Balance at December
31, 1999 ................ $ 36,709,821 $ (2,647,770) $ (12,151,771) $ 21,912,855
============ ============= ============== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Register.com, Inc.
Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1997 1998 1999
--------------- ----------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss .......................................... $ (205,526) $ (1,160,748) $ (8,776,918)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities
Deferred revenues .............................. (20,568) 81,489 31,987,705
Depreciation and amortization .................. 41,182 121,474 347,860
Compensatory stock options and
warrants expense ............................. 4,000 163,797 4,929,200
Deferred income taxes .......................... -- -- (8,578,045)
Changes in assets and liabilities affecting
operating cash flows
Accounts receivable ............................. (5,348) (54,605) (2,448,677)
Prepaid domain name registry fees ............... -- -- (8,531,061)
Other current assets ............................ (17,239) 22,404 (191,271)
Other assets .................................... -- (28,375) 30,643
Accounts payable and accrued expenses 80,711 161,747 2,764,386
Accrued registry fees ........................... -- -- 3,175,982
Accrued advertising ............................. -- -- 1,962,235
Income taxes payable ............................ -- -- 5,608,198
Other current liabilities ....................... -- -- 166,857
----------- ------------- ------------
Net cash provided by (used in)
operating activities ......................... (122,788) (692,817) 22,447,094
----------- ------------- ------------
Cash flows from investing activities
Purchases of fixed assets ......................... (15,578) (267,330) (2,543,715)
Deferred offering costs ........................... -- -- (390,000)
Purchases of investments .......................... -- -- (4,723,050)
----------- ------------- ------------
Net cash used in investing activities .......... (15,578) (267,330) (7,656,765)
----------- ------------- ------------
Cash flows from financing activities
Proceeds from notes payable ....................... 358,040 -- --
Repayment of notes payable ........................ (162,000) (286,000) (52,040)
Net proceeds from issuance of common
stock and warrants .............................. -- 2,490,732 6,806,999
Net proceeds from issuance of preferred
stock and warrants .............................. -- -- 18,130,796
Principal payments on capital lease
obligations ..................................... (17,903) (20,782) (16,610)
----------- ------------- ------------
Net cash provided by financing
activities ................................... 178,137 2,183,950 24,869,145
----------- ------------- ------------
Net increase in cash and cash equivalents .......... 39,771 1,223,803 39,659,474
Cash and cash equivalents at beginning of
period ............................................ 21,074 60,845 1,284,648
----------- ------------- ------------
Cash and cash equivalents at end of period ......... $ 60,845 $ 1,284,648 $ 40,944,122
=========== ============= ============
Supplemental disclosure of cash flow
information
Cash paid for interest ............................ $ 21,912 $ 14,510 $ 6,008
Cash paid for income taxes ........................ $ -- $ -- $ 2,969,847
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
Register.com, Inc.
Notes to Financial Statements
1. Nature of Business And Organization
Nature of Business
Register.com, Inc. (the "Company" or "Register.com") provides Internet
domain name registration and other online services such as web-hosting, email,
domain name forwarding and advertising. The Company has also marketed software
for creation of Internet websites.
In April 1999, the Company was selected as one of the initial five testbed
registrars by the Internet Corporation for Assigned Names and Numbers
("ICANN"), an independent non-profit organization selected by the Department of
Commerce to manage and oversee the system for generic top level domain name
registration. In June 1999, the Company commenced online registration as an
ICANN- accredited registrar of .com, .net and .org domains.
In December 1999, the Company's Board of Directors authorized management
to file a registration statement with the Securities and Exchange Commission to
permit the Company to sell shares of its common stock to the public.
Organization
The Company originally operated as Forman Interactive Corp. ("Forman"), a
New York Corporation that was formed in November 1994. Pursuant to a Merger
Agreement dated June 25, 1999 by and among Register.com, a Delaware Corporation
formed in May 1999 specifically for the purpose of this merger, and Forman, the
stockholders of Forman exchanged their shares for an equivalent number of
shares of Register.com. References herein to the operations and historical
financial information of the "Company" prior to the date of the merger refer to
the operations and historical financial information of Forman.
Stock Split
In January 2000, the Company effected a 3.5 to 1 stock split. All common
and preferred shares, options, warrants and related per-share data reflected in
the accompanying financial statements and notes thereto have been adjusted to
give retroactive effect to the stock split.
2. Summary of Significant Accounting Policies
Cash equivalents
The Company considers all highly liquid investments purchased with an
initial maturity of 90 days or less to be cash equivalents. The Company
maintains its cash balances in highly rated financial institutions. At times,
such cash balances may exceed the Federal Deposit Insurance Corporation limit.
The Company has pledged approximately $6,700,000 of its cash equivalents and
short-term investments as collateral against outstanding letters of credit.
Short-term investments
Short-term investments are classified as held-to-maturity and consist of
certificates of deposit with highly rated financial institutions with maturity
dates of less than one year, and are carried at cost.
Fixed assets
Depreciation of equipment and furniture and fixtures is provided for by
the straight-line method over their estimated useful lives of three to five
years. Amortization of leasehold improvements is provided for by the
straight-line method over the shorter of their estimated useful life or the
lease term. The costs of additions and betterments are capitalized, and repairs
and maintenance costs are charged to operations in the periods incurred.
F-7
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
Long-lived assets
The Company reviews for the impairment of long-lived assets whenever
events or circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposition is less than its carrying amount. If such assets are
considered impaired, the amount of the impairment loss recognized is measured
as the amount by which the carrying value of the asset exceeds the fair value
of the asset, fair value being determined based upon discounted cash flows or
appraised values, depending on the nature of the asset. No such impairment
losses have been identified by the Company.
Revenue recognition
The Company's revenues are primarily derived from domain name registration
fees, advertising and online products and services.
Domain name registration fees
Registration fees charged to end-users for registration services are
recognized on a straight-line basis over the life of the registration term, two
years for initial registrations and one year for the registration renewals.
Substantially all end-user subscribers pay for services with major credit cards
for which the Company receives daily remittances from the credit card carriers.
A provision for chargebacks from the credit card carriers is included in
accounts payable and accrued expenses. Such amounts are separately recorded and
deducted from gross registration fees in determining net revenues.
Online products and services
Revenue from online products and services is recognized over the period in
which services are provided, generally monthly. Payments received in advance of
services being provided are included in deferred revenue.
Advertising
Advertising revenues are derived principally from short-term advertising
contracts in which the Company typically guarantees a minimum number of
impressions or pages to be delivered to users over a specified period of time
for a fixed fee. Advertising revenues are recognized ratably in the period in
which the advertisement is displayed, provided that no significant obligations
remain, at the lesser of the ratio of impressions delivered over total
guaranteed impressions or the straight line basis over the term of the
contract. To the extent that minimum guaranteed impressions are not met, the
Company defers recognition of the corresponding revenues until the guaranteed
impressions are achieved.
Deferred revenue
Deferred revenue primarily relates to the unearned portion of revenue
related to the unexpired term of registration fees, net of an estimate for
credit card chargebacks, deferred advertising revenue and online products and
services revenue.
Prepaid domain name registry fees
Prepaid domain name registry fees represent amounts paid to the registry
for .com, .net and .org domains for updating and maintaining the registry.
Domain name registry fees are recognized on a straight-line basis over the life
of the registration term, two years for initial registrations and one year for
the registration renewals.
F-8
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
Deferred offering costs
In connection with the Company's proposed initial public offering ("IPO"),
the Company has incurred certain costs which have been deferred. In the event
the proposed IPO is not consummated, the deferred offering costs will be
expensed.
Research and development and software development costs
Research and development costs, other than certain software development
costs, are charged to expense as incurred. Software development costs incurred
subsequent to the establishment of technological feasibility and prior to the
general release of the product or service to the public, are capitalized and
amortized to cost of revenues over the estimated useful life of the related
product or service. Software development costs eligible for capitalization have
not been significant to date.
Advertising costs
The Company expenses the costs of advertising in the period in which the
costs are incurred. Advertising expenses were approximately $49,500, $228,000,
and $4,089,000 for the years ended December 31, 1997, 1998, and 1999,
respectively.
Income taxes
The Company recognizes deferred taxes by the asset and liability method of
accounting for income taxes. Under the asset and liability method, deferred
income taxes are recognized for differences between the financial statement and
tax bases of assets and liabilities at enacted statutory tax rates in effect
for the years in which the differences are expected to reverse. The effect on
deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date. In addition, valuation allowances are
established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
Fair value of financial instruments
All current assets and liabilities are carried at cost, which approximates
fair value because of the short-term maturity of those instruments.
Concentration of credit risk
Concentration of credit risks associated with registration receivables is
limited due to the wide variety and number of customers, as well as their
dispersion across geographic areas. Additionally, the majority of the Company's
receivables at December 31, 1999 are comprised of amounts due from credit card
carriers. The Company has no derivative financial instruments. At December 31,
1998 one customer aggregated 15% of the total net accounts receivable balance.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the management of the Company to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
F-9
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
Stock based compensation
The Company accounts for employee stock-based compensation in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations ("APB No. 25"). The Company applies
the disclosure requirements of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123") (Note 9).
Loss per share
Basic earnings per share ("Basic EPS") is computed by dividing net loss
available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted earnings per share ("Diluted
EPS") gives effect to all dilutive potential common shares outstanding during a
period. In computing Diluted EPS, the treasury stock method is used in
determining the number of shares assumed to be purchased from the conversion of
common stock equivalents.
Diluted net loss per share for the year ended December 31, 1999 does not
include the effect of 4,694,333 shares of Series A Convertible Preferred Stock
outstanding because its effect is anti-dilutive. Diluted net loss per share for
the years ended December 31, 1997, 1998 and 1999 does not include 35,000,
2,530,850 and 3,277,435, respectively, of stock options outstanding with
exercise prices ranging from $.17 to $1.71 per share because their effects are
anti-dilutive. Additionally, diluted net loss per share for the years ended
December 31, 1997, 1998 and 1999 excludes 1,480,295, 3,596,839, and 6,155,675,
respectively, of common shares issuable upon the exercise of outstanding
warrants, with exercise prices ranging from $.01 to $4.08 per share because
their effects are anti-dilutive.
Pro forma information (unaudited)
The pro forma balance sheet at December 31, 1999 reflects the automatic
conversion of 4,694,333 shares of the Series A Convertible Preferred Stock into
4,694,333 shares of common stock upon the closing of a qualified IPO (see Note
7). The pro forma basic and diluted net loss per share assumes the conversion
of the Exchangeable Preferred Stock and Series A Convertible Preferred Stock at
the date of original issuance.
Comprehensive income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130"). This statement requires companies to classify items
of their comprehensive income by their nature in the financial statements and
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. SFAS No. 130 is effective for financial
statements issued for fiscal years beginning after December 15, 1997. The
Company adopted SFAS No. 130 in fiscal year 1998. There was no difference
between net income and comprehensive income for the years ended December 31,
1997, 1998 or 1999.
Segment reporting
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS No. 131"), which established
standards for reporting information about operating segments in annual
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas and
F-10
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
major customers. SFAS No. 131 was adopted by the Company at December 31, 1998.
Adoption of SFAS No. 131 had no impact on the Company's results of operations,
financial position or cash flows as it operates in one segment.
Recent accounting pronouncements
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities" ("SOP 98-5"). SOP 98-5, which is effective for fiscal
years beginning after December 15, 1998, provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred. As the
Company has expensed these costs historically, the adoption of this standard
did not have a significant impact on the Company's results of operations or
financial position.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives
and Hedging Activities" ("SFAS 133"), which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. The Company does
not expect the adoption of this statement to have a significant impact on the
Company's results of operations or financial position.
3. Fixed Assets
Fixed assets consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1999
------------- -------------
<S> <C> <C>
Computer equipment ...................................... $ 307,052 $2,060,848
Furniture and fixtures .................................. 46,341 93,865
Office equipment ........................................ 59,404 148,287
Leasehold improvements .................................. -- 691,743
---------- ----------
412,797 2,994,743
Less: accumulated depreciation and amortization ......... (188,497) (536,357)
---------- ----------
Total fixed assets ................................. $ 224,300 $2,458,386
========== ==========
</TABLE>
Included in office equipment is $97,675 of assets under capital lease at
December 31, 1999. Accumulated amortization of such assets amounted to $63,454
at December 31, 1999.
4. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
December 31,
---------------------------
1998 1999
----------- -------------
Trade accounts payable ............ $334,023 $ 458,226
Accrued payroll ................... 32,361 664,377
Accrued registry fees ............. -- 3,175,982
Provision for chargebacks ......... -- 894,095
Accrued advertising ............... -- 1,962,235
Accrued professional fees ......... -- 990,500
Other ............................. 244,090 367,664
-------- ----------
$610,474 $8,513,079
======== ==========
F-11
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
5. Notes Payable
In December 1997, the Company issued an $80,000 note payable. The note
bore interest at 10% per annum and was due on the earlier of an equity
financing or December 31, 1999. In connection with the issuance of the note,
the Company issued 11,200 shares of common stock to the noteholder. The Company
has recorded the fair value of the shares, in the amount of $4,000, as interest
expense. The Company repaid the note upon the closing of the January 1998
private placement.
At December 31, 1998, the Company was indebted to a bank on notes
aggregating $52,040. The notes were payable upon demand and guaranteed by the
stockholders. The notes bore interest at the bank's prime rate +1%. The notes
were also secured by an interest in all personal property and fixtures of the
Company, but were subordinate to the capitalized lease equipment obligations.
These amounts were repaid in 1999.
6. Notes Payable -- Related Parties
In August 1996, the Company issued an aggregate of $100,000 in notes to
certain stockholders and executive officers. The notes were payable upon demand
and bore interest at 8% per annum. In addition, the Company issued warrants to
acquire an aggregate of 411,766 shares of common stock at $.24 per share. The
warrants expire on the earlier of August 2006 or repayment of the notes. The
Company has recorded the estimated fair value of the warrants, as determined
using the Black-Scholes model, of $69,412 as additional interest expense. In
January 1998, the noteholders elected to exercise the warrants in exchange for
repayment of the notes.
In August 1996, the Company was advanced $30,000 under an informal note
agreement with a principal stockholder of the Company. The note bore interest
at 8% per annum and was payable upon demand. In January 1998, the Company and
the noteholder agreed to convert the principal and unpaid interest on the note
into 123,529 shares of common stock. The Company has recorded the difference
between the conversion price and the fair value of the common stock issued, in
the amount of $14,118 as additional interest expense.
Interest expense to related parties amounted to approximately $10,400,
$14,100 and $0 for the years ended December 31, 1997, 1998, and 1999,
respectively.
7. Stockholders' Equity
Authorized Capital
In June 1999, the Company amended its certificate of incorporation to
increase the authorized shares of Common Stock to 25,000,000 and Preferred
Stock to 5,000,000 shares.
Common Stock
In January and May 1998, the Company completed private placements of an
aggregate of 6,440,000 shares of common stock at $.36 per share, providing
proceeds, net of offering expenses, of $2,290,732. In connection with these
placements, the Company issued warrants to acquire an aggregate of 1,143,338
shares of its common stock as a finders fee to two individuals who were members
of two different entities that are principal stockholders of the Company (Note
8). Additionally, the Company issued warrants to acquire up to 2,450,001 shares
of common stock to all stockholders of record prior to the January 1998 private
placement, on a pro rata basis to their stock holdings (Note 8).
F-12
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
In June 1998, the Company completed a private placement of 466,666 shares
of common stock at $.43 per share, providing proceeds of $200,000.
In May 1999, the Company completed a private placement of 2,041,666 shares
of its common stock and a warrant to acquire 700,000 shares of its common stock
at an exercise price of $.01 per share (Note 8), providing gross proceeds of
$7,000,000 and proceeds, net of offering expenses, of $6,693,497. Until such
time as the Company consummates its initial public offering, the Company must
obtain the written consent of the investor prior to entering into a merger,
consolidation or sale of substantially all of its assets at a price of less
than $3.43 per share. In addition, the Company and the investor entered into a
two-year marketing agreement that allows for cross-marketing among each of the
parties websites. In addition, the Company issued the placement agent in the
offering warrants to acquire 308,959 shares of common stock at an exercise
price of $4.08 per share (Note 8).
Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of the Company's stockholders. Common stockholders are
entitled to receive dividends, if any, as may be declared by the Board of
Directors, subject to any preferential dividend rights of the preferred
stockholders. The Company has reserved a total of 16,485,308 shares for
issuance under the Company's stock option plans, exercise of warrants and
non-plan options, and conversion of the Series A Convertible Preferred Stock.
Exchangeable Preferred Stock
In March 1999, the Company completed a private placement of 1,499,999
shares of exchangeable preferred stock at a price of $2.00 per share, providing
proceeds, net of expenses, of $2,840,775. The Company also issued the investor
warrants to acquire 420,000 shares of common stock at an exercise price of
$2.14 per share in exchange for financial consulting services (Note 8). In
addition, the Company issued the placement agent in the offering warrants to
acquire 185,490 shares of common stock at an exercise price of $4.08 per share
(Note 8). On August 15, 1999, the Exchangeable Preferred Stock automatically
converted into 1,499,999 shares of common stock.
Series A Convertible Preferred Stock
In June and July 1999, the Company completed a private placement of
4,694,333 shares of its Series A Convertible Preferred Stock (the "Series A
Stock") at $3.43 per share, providing proceeds, net of offering expenses, of
$15,290,021. In addition, the Company also issued the investors warrants to
acquire an aggregate of 938,888 shares of common stock at an exercise price of
$3.43 per share (Note 8). Additionally, the Company entered into a marketing
and distribution agreement with one investor who purchased 1,405,835 shares of
the Company's Series A Convertible Preferred Stock (Note 10).
Voting
Each share of Series A Stock is entitled to the number of votes equal to
the number of shares of common stock into which the Series A Stock are then
convertible. Series A stockholders vote together with common stockholders as
one class. The holders of the Series A Stock, voting as a single class, have
the right to elect 1 member of the Board of Directors.
Conversion
Each share of Series A Stock is currently convertible, at the option of
the holder, into one share of common stock, subject to certain antidilutive
adjustments. Each share of Series A
F-13
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
Stock will automatically convert into common stock upon the completion of an
initial public offering of the Company's common stock at a price of at least
$5.14 per share (subject to adjustment for stock splits, stock dividends or
recapitalizations) and with gross proceeds of at least $20,000,000.
Dividends and liquidation preference
The holders of the Series A Stock are entitled to receive dividends prior
and in preference to dividends on common stock. Dividends, if any, are
noncumulative and are payable when declared by the Board of Directors. In the
event of liquidation of the Company, the holders of the Series A Stock are
entitled to receive, prior and in preference to any distribution to the holders
of the common stock, an amount equal to $3.43 per share, plus any declared but
unpaid dividends.
8. Warrants
In September 1996, the Company issued warrants to acquire an aggregate of
945,000 shares of common stock at $.17 per share to two officers and directors
of the Company in exchange for their personal guarantees on a $162,000 demand
note payable to a bank. The fair value of the warrants at the time of issuance
of $85,320 was recorded as interest expense. In January 1998, the warrant
holders exercised the warrants by forgiving approximately $260,000 in accrued
compensation. The difference between the accrued compensation forgiven and the
exercise price of the warrants was recorded as a contribution of capital.
In January and April 1998, and in connection with a private placement of
common stock, the Company issued warrants to acquire 571,669 shares of common
stock at an exercise price of $.36 per share and warrants to acquire 571,669
shares of common stock at an exercise price of $.86 per share as a finders fee.
The warrants were immediately exercisable and expire at various dates through
May 2003.
In January 1998, and in connection with the January 1998 private placement
of common stock, the Company issued warrants to acquire up to, in the
aggregate, 2,450,001 shares of its common stock at $.36 per share to all the
stockholders of record prior to the private placement. The warrants were issued
to stockholders on a pro rata basis to their stock holdings prior to the
private placement. Under the initial terms of the agreement, the vesting of
these warrants was contingent upon the Company reaching certain revenue targets
for the quarter ended June 30, 2000. In June 1999, the Company and the warrant
holders modified the terms of the warrant to (i) remove the revenue targets,
(ii) fix the aggregate number of shares at 2,450,001, and (iii) increase the
exercise price to $.97 per share. The Company has recorded compensation expense
in the amount of $3,878,000 based upon the difference between the fair value of
the Common Stock and the exercise price of the warrants at the time of
modification. In December 1999, warrants to acquire 52,500 shares of common
stock were exercised, providing gross proceeds of $51,000.
In September 1998, the Company issued warrants to acquire an aggregate of
3,500 shares of common stock to consultants at an exercise price of $.43 per
share. The Company has recorded the estimated fair value of the warrants, in
the amount of $2,587, at the time of grant as consulting expense. The warrants
are exercisable through September 2008.
In March 1999, in connection with a private placement of Exchangeable
Preferred Stock, the Company entered into a six-month financial advisory
services agreement with the acquirer of the Exchangeable Preferred Stock. Under
the terms of the agreement, the Company issued
F-14
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
the investor warrants to acquire 420,000 shares of common stock at an exercise
price of $2.14 per share. The warrants expire in February 2004. The Company has
recorded the estimated fair value of the warrants, in the amount of $493,320,
as consulting expense.
In May 1999, in connection with a private placement of the Company's
common stock (see Note 7), the Company issued the purchaser warrants to acquire
700,000 shares of common stock at an exercise price of $.01 per share. The
warrants are exercisable through May 2002.
In February, March, May and June 1999, the Company issued warrants to
acquire an aggregate of 45,749 shares of common stock to consultants at
exercise prices ranging from $.57 to $1.57 per share. The Company has recorded
the estimated fair value of the warrants, in the amount of $75,890, at the time
of grant as consulting expense. The warrants are exercisable through May 2009.
In March and May 1999, the Company issued warrants to acquire an aggregate
of 494,449 shares of common stock at an exercise price of $4.08 per share as a
fee for the March 1999 sale of Exchangeable Preferred Stock and the May 1999
sale of common stock. The warrants expire in March and May 2004.
In June 1999, and in connection with a private placement of Series A
Convertible Preferred Stock, the Company issued the investors warrants to
acquire an aggregate of 938,888 shares of common stock at an exercise price of
$3.43 per share. The warrants are exercisable through June 2004.
In November 1999, the Company issued warrants to acquire 12,250 shares of
common stock to a consultant at an exercise price of $2.86 per share. The
Company has recorded the estimated fair value of the warrants, in the amount of
$151,928, at the time of grant as consulting expense. The warrants are
exercisable through November 2009.
F-15
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
The following table is a summary of the common shares issuable upon
exercise of warrants outstanding at December 31, 1999:
Shares Issuable Exercise Price
Issuance Date Expiration Date Upon Exercise Per Share
- ---------------- ----------------- ----------------- ---------------
January 1998 January 2003 350,000 $ .36
January 1998 January 2003 350,000 $ .86
January 1998 June 2005 2,397,501 $ .97
April 1998 May 2003 221,669 $ .36
April 1998 May 2003 221,669 $ .86
September 1998 September 2008 3,500 $ .43
February 1999 February 2009 29,999 $ .57
March 1999 March 2009 5,250 $ .57
March 1999 February 2004 420,000 $ 2.14
March 1999 March 2004 185,490 $ 4.08
May 1999 May 2002 700,000 $ .01
May 1999 May 2009 5,250 $ 1.43
May 1999 May 2004 308,959 $ 4.08
June 1999 June 2009 5,250 $ 1.57
June 1999 June 2004 938,888 $ 3.43
November 1999 November 2009 12,250 $ 2.86
--------- ------
Total shares and average exercise 6,155,675 $ 1.50
========= ======
price
9. Stock Option Plans
1997 Stock Option Plan
The Company's 1997 Stock Option Plan (the "1997 Plan") permits the grant
of both "incentive stock options" designed to qualify under the Internal
Revenue Code Section 422 and non-qualified stock options. Options under the
plan may only be granted to employees of the Company. A total of 1,750,000
shares of common stock have been reserved for issuance under the 1997 Plan.
Each option, once vested, allows the optionee the right to purchase one share
of the Company's common stock. The Board of Directors determines the exercise
price of the options. Options granted to date generally vest over 36 to 45
months and expire ten years from the date of grant.
1999 Stock Option Plan
The Company's 1999 Stock Option Plan (the "1999 Plan") permits the grant
of both incentive stock options and non-qualified stock options. Incentive
stock options may only be granted to employees of the Company whereas
non-qualified stock options may be granted to non-employees, directors and
consultants. A total of 2,275,000 shares have been reserved for issuance under
the 1999 Plan. The Compensation Committee of the Board of Directors determines
the exercise price of the options.
F-16
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
Stock option activity under the 1997 and 1999 Plans can be summarized as
follows:
Weighted-
Average
Number Exercise
of Shares Price
------------- ----------
Outstanding at December 31, 1996 ........... -- $ --
Granted .................................. 35,000 .17
Exercised ................................ -- --
Forfeited ................................ -- --
------ -------
Outstanding at December 31, 1997 ........... 35,000 .17
Granted .................................. 745,850 .42
Exercised ................................ -- --
Forfeited ................................ (35,000) .17
------- -------
Outstanding at December 31, 1998 ........... 745,850 .42
Granted .................................. 1,063,510 1.28
Exercised ................................ (175,000) .36
Forfeited ................................ (141,925) 1.12
--------- -------
Outstanding at December 31, 1999 ........... 1,492,435 $ 1.01
========= =======
Options available for future grant ......... 2,357,565
=========
The following table summarizes information about options outstanding under
the 1997 and 1999 Plans at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------- ----------------------------
Weighted-
Number Average Weighted- Number Weighted
Outstanding at Remaining Average Exercisable at Average
Exercise December 31, Contractual Exercise December 31, Exercise
Price 1999 Life (Years) Price 1999 Price
- -------------- ---------------- -------------- ----------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
$ .17-$.43 428,750 8.4 $ .35 218,750 $ .35
$ .50-$.86 339,850 9.0 $ .71 112,613 $ .75
$1.00-$1.43 723,835 9.6 $ 1.41 117,843 $ 1.40
------- --- ------ ------- ------
1,492,435 9.1 $ 1.01 449,206 $ .72
========= === ====== ======= ======
</TABLE>
In January 1998, the Company granted an aggregate of 1,750,000 non-plan
options to an officer and principal stockholder of the Company. 525,000 of such
options have an exercise price of $.17 per share and vested immediately. The
remaining 1,225,000 of such options vest over a period of 24 months and have
the following exercise prices: 350,000 are exercisable at $.46 per share,
350,000 are exercisable at $.86 per share and the remaining 525,000 are
exercisable at $1.71 per share. The Company has recorded compensation expense
of $97,500 based upon the difference between the exercise price and estimated
fair value of the common stock on the date of grant.
F-17
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
As permitted by SFAS No. 123. "Accounting for Stock-Based Compensation",
the Company accounts for its stock-based compensation arrangements pursuant to
APB Opinion No.25, "Accounting for Stock Issued to Employees". In accordance
with the provisions of SFAS No. 123, the Company discloses the pro forma
effects of accounting for these arrangements using the minimum value method to
determine fair value. Based on the fair value of the stock options at the grant
date the Company's net loss would have been adjusted to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------
1997 1998 1999
-------------- ---------------- ----------------
<S> <C> <C> <C>
Net loss
As reported ........................... $ (205,526) $ (1,160,748) $ (8,776,918)
Pro forma ............................. $ (205,526) $ (1,164,635) $ (8,828,475)
Net loss per share
As reported-basic and diluted ......... $ (0.08) $ (0.26) $ (0.46)
Pro forma basic and diluted ........... $ (0.08) $ (0.26) $ (0.46)
</TABLE>
The fair value of each option grant to employees is estimated using the
minimum value method of the Black-Scholes option-pricing model, which assumes
no volatility. The values were obtained using assumptions which were arrived
using information provided by management of the Company. Changes in the
information would affect the assumptions and the option prices derived from the
assumptions. The weighted average assumptions used for grants made in 1997,
1998 and 1999 were as follows:
1997 1998 1999
--------- --------- ---------
Risk free interest rate .......... 6.3% 6.1% 5.5%
Expected lives (years) ........... 5.0 5.0 5.0
Expected dividends ............... 0.0% 0.0% 0.0%
In October 1998, the Company granted non-plan options to acquire 35,000
shares of the Company's common stock at exercise prices ranging from $.17 to
$.36 per share to a consultant for services rendered. The Company has recorded
the estimated fair value of the options on the date of grant, as determined
using the Black-Scholes option pricing model, of $26,300 as consulting expense.
The fair value of options and warrants (Note 8) granted to non-employees
is estimated using the Black-Scholes option-pricing model. The values were
obtained using assumptions, which were arrived using information provided by
management of the Company. Changes in the information would affect the
assumptions and the option prices derived from the assumptions. The weighted
average assumptions used for grants to non-employees made in 1998 and 1999 were
as follows: risk free interest rate of 6.1% and 5.5%, respectively; expected
lives of 5 to 10 years based upon the term of the option or warrant; expected
dividends of 0% for each year; and a volatility of 100% for each year.
F-18
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
<TABLE>
<CAPTION>
1997 1998 1999
---------------------- ----------------------- -----------------------
Exercise Fair Exercise Fair Exercise Fair
Price Value Price Value Price Value
---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Options granted to employees
and consultants:
Exercise price less than fair
value of stock on date of
grant ............................. $-- $-- $ 0.27 $ 0.29 $ 1.28 $ 3.10
Exercise price equal to fair value
of stock on date of grant ......... 0.17 0.09 0.40 0.01 -- --
Exercise price greater than fair
value of stock on date of
grant ............................. -- -- 1.11 -- -- --
Warrant grants to employees and
consultants for services:
Exercise price less than fair
value of stock on date of
grant ............................. $-- $-- $ 0.43 $ 0.74 $ 1.22 $ 3.93
Exercise price equal to fair value
of stock on date of grant ......... -- -- 0.35 0.16 -- --
Exercise price greater than fair
value of stock on date of
grant ............................. -- -- -- -- 2.14 1.17
</TABLE>
10. Related Party Transactions
General and administrative
During 1997 and 1998, the Company leased office space and received
administrative and support services from an entity in which a principal
stockholder of the Company is an executive officer. These expenses aggregated
approximately $18,682 and $577 in 1997 and 1998, respectively. Included in
accounts payable are approximately $4,890 due to the aforementioned related
party at December 31, 1998.
Concentric Network Corporation
In June 1999, the Company entered into a one-year marketing and
distribution agreement with Concentric Network Corporation ("Concentric").
Under the terms of the agreement, the Company is required to fund $41,667 per
month to a cooperative marketing program from which the parties will jointly
promote their services. In addition, Concentric has agreed to purchase a
minimum of $100,000 per month of advertising from the Company. In June 1999,
Concentric also purchased 1,405,835 shares of the Company's Series A
Convertible Preferred Stock (Note 7). In December 1999, Concentric agreed to
purchase additional advertising on our website for seven months commencing in
March 2000 at a value of $100,000 per month.
F-19
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
11. Income Taxes
Net operating loss carryforwards and temporary differences between the
carrying amounts of assets and liabilities for financial reporting and income
tax purposes result in a net deferred tax asset of $702,243, $1,206,744 and
$11,921,024 at December 31, 1997, 1998 and 1999, respectively. The Company's
operating plans anticipate taxable income in future periods; however, such
plans make significant assumptions which cannot be reasonably assured.
Therefore, in consideration of the Company's accumulated losses and the
uncertainty of its ability to utilize the deferred tax asset in the future, the
Company has recorded a valuation allowance in the amount of $702,243,
$1,206,744 and $3,342,979 at December 31, 1997, 1998, and 1999, respectively,
to offset the deferred tax benefit amount.
The provision for income taxes for the years ended December 31, 1997,
1998, and 1999 consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1997 1998 1999
------ ------ ---------------
<S> <C> <C> <C>
Current:
Federal ................................ $-- $-- $5,210,244
State .................................. -- -- 3,367,801
--- --- ----------
Total current .......................... -- -- 8,578,045
--- --- ----------
Deferred:
Federal ................................ -- -- (5,210,244)
State .................................. -- -- (3,367,801)
--- --- ----------
Total deferred ......................... -- -- (8,578,045)
--- --- ----------
Total provision for income taxes ......... $-- $-- $ --
=== === ==========
</TABLE>
F-20
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
The components of the net deferred tax asset as of December 31, 1997,
1998, and 1999 consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------
1997 1998 1999
------------- --------------- ---------------
<S> <C> <C> <C>
Deferred tax assets:
Operating loss carryforward ............... $ 538,957 $ 982,066 $ --
Allowance for doubtful accounts ........... 24,703 29,620 144,070
Accrued expenses .......................... 124,139 121,137 472,264
Stock compensation ........................ -- -- 547,551
Deferred revenue .......................... 14,444 50,990 14,704,541
---------- ------------ ------------
Total deferred tax assets .............. 702,243 1,183,813 15,868,426
Deferred tax liabilities:
Prepaid domain name registry fees ......... -- -- 3,907,804
Depreciation and amortization ............. -- (22,931) 39,598
---------- ------------ ------------
Total deferred tax liabilities ......... -- (22,931) 3,947,402
Net deferred tax asset ...................... 702,243 1,206,744 11,921,024
Less: valuation allowance ................... (702,243) (1,206,744) (3,342,979)
---------- ------------ ------------
Deferred tax asset .......................... $ -- $ -- $ 8,578,045
========== ============ ============
</TABLE>
The financial statement income tax provision differs from income taxes
determined by applying the statutory Federal income tax rate to the financial
statement net loss for the years ended December 31, 1997, 1998, and 1999 as a
result of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------------------
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Tax benefit at Federal statutory rate ....................... (34.0)% (34.0)% (35.0)%
State income tax benefit, net of Federal tax charge ......... ( 7.1) ( 8.0) (11.8)
Non-deductible compensation expenses ........................ -- .1 15.5
Valuation allowance ......................................... 41.1 41.9 31.3
----- ----- -----
--% --% --%
====== ====== ======
</TABLE>
F-21
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
12. Commitments
Operating and Capital leases
The Company leases office facilities and equipment under operating leases
expiring through 2009. The Company also leases telephone and other office
equipment under capital leases expiring through 2004. Future minimum lease
payments due under noncancellable operating leases and capital leases were as
follows:
<TABLE>
<CAPTION>
Operating Capital
------------- ------------
<S> <C> <C>
Year ending December 31,
2000 .................................................... $ 269,076 $ 10,704
2001 .................................................... 332,072 10,704
2002 .................................................... 342,084 10,704
2003 .................................................... 352,295 10,704
2004 .................................................... 367,864 3,568
Thereafter .............................................. 1,977,959 --
---------- ---------
Total minimum lease payments ......................... $3,641,350 46,384
==========
Less: amount representing interest ........................ (12,559)
---------
Present value of future minimum lease payments ............ 33,825
Less: current portion ..................................... (5,967)
---------
Capital lease obligations, net of current portion ......... $ 27,858
=========
</TABLE>
Rent expense for the years ended December 31, 1997, 1998, and 1999 was
approximately $14,000, $43,000 and $220,000, respectively.
Employment agreements
In the normal course of business, the Company has entered into two
employment agreements with its employees.
Marketing and distribution/strategic partnership agreements
In the normal course of business, the Company enters into marketing and
distribution/strategic partnership agreements with various entities. These
agreements generally have a term of 12 to 24 months, and a number require the
Company to purchase a minimum amount of advertising or pay other fees over the
term of the contract. Future minimum payments required under the marketing and
distribution/strategic partnership agreements for the years ended December 31,
2000 and 2001 are approximately $1,800,000 (including $250,000 to Concentric --
Note 10) and $750,000, respectively.
13. Contingencies
Litigation
There are various claims, lawsuits and pending actions against the Company
incidental to the operations of its business. It is the opinion of management,
after consultation with counsel, that the ultimate resolution of such claims,
lawsuits and pending actions will not have a material adverse effect on the
Company's financial position, results of operations or liquidity.
14. Subsequent Events
In January 2000, the Company's stockholders approved the 2000 Stock
Incentive Plan (the "2000 Plan"). The 2000 Plan will serve as the successor to
the 1997 and the 1999 Plans.
F-22
<PAGE>
Register.com, Inc.
Notes to Financial Statements -- (Continued)
All outstanding options under the 1997 and 1999 Plans will be incorporated into
the 2000 Plan, and no further option grants would be made under the predecessor
plan. The maximum aggregate number of shares reserved for issuance under the
2000 Plan is 7,350,000. All non-employee board members who first join the board
on or after January 26, 2000 will automatically be granted an option to acquire
35,000 shares of common stock, which will vest over two years. In addition, each
non-employee board member will receive an annual option grant to purchase 5,250
shares of common stock, which will vest over one year, after the initial grant
of 35,000 is fully vested.
In January 2000, the Company's stockholders approved the Employee Stock
Purchase Plan (the "ESPP"). The ESPP is intended to qualify under Section 423
of the Code in order to provide employees of the Company with an opportunity to
purchase Common Stock through payroll deductions. An aggregate of 350,000
shares have been reserved for issuance under the ESPP, plus an annual increase
on the first trading day of each calendar year, beginning in 2001, equal to the
lessor of (i) .25% of the outstanding shares on such date or (ii) 140,000
shares.
In January 2000, the Company filed an amendment to its certificate of
incorporation to increase the authorized shares of Common Stock to 60,000,000.
In January 2000, the Company granted options to acquire an aggregate of
1,075,851 shares of common stock to employees at $12.86 per share. During the
first quarter of 2000, the Company will record approximately $3,400,000 of
unearned compensation based upon the difference between the fair value of the
common stock on the date of grant and the exercise price of the options. The
unearned compensation will be amortized over the 42 month vesting period of the
options.
In January 2000, Concentric agreed to purchase an additional $800,000 of
advertising space on the company's website for the period from September to
December 2000.
F-23
<PAGE>
[Inside Back Cover]
The words "Register..." "...your family" "...your business" "...your brand"
appearing from top to bottom on the page.
Next to "your family" is a picture of a young boy holding a drawing with the tag
line "I registered my imagination" and www.emmettsworld.com underneath.
Next to "your business" is a picture of a man holding a diamond necklace with
two security guards behind him with the tag line "I registered my rocks" and
www.auctionjeweler.com underneath.
Next to "your business" is a picture of a man sitting on cardboard boxes with
the tag line "I registered my brand" and www.staples.com underneath.
"The above are reproductions of advertisements for our domain name registration
services." appears at the bottom of the page.
<PAGE>
================================================================================
You may rely only on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in this
prospectus. Neither the delivery of this prospectus nor the sale of common
stock means that information contained in this prospectus is correct after the
date of this prospectus. This prospectus is not an offer to sell or
solicitation of an offer to buy these shares in any circumstances under which
the offer or solicitation is unlawful.
TABLE OF CONTENTS
Page
---------
Prospectus Summary .......................... 3
Risk Factors ................................ 8
Use of Proceeds ............................. 23
Dividend Policy ............................. 23
Capitalization .............................. 24
Dilution .................................... 25
Selected Financial Data ..................... 27
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................... 28
Business .................................... 37
Management .................................. 51
Certain Relationships and Related
Transactions ............................. 64
Principal and Selling Stockholders .......... 69
Description of Capital Stock ................ 72
Shares Eligible for Future Sale ............. 76
Underwriting ................................ 78
Legal Matters ............................... 81
Experts ..................................... 82
Where You Can Find Additional
Information .............................. 82
Index to Financial Statements ............... F-1
Dealer Prospectus Delivery Obligation: Until , 2000 (25 days after the
date of this prospectus), all dealers that buy, sell or trade in these shares
of common stock, whether or not participating in this offering, may be required
to deliver a prospectus. Dealers are also obligated to deliver a prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
================================================================================
<PAGE>
================================================================================
[GRAPHIC OMITTED]
5,000,000 Shares
Common Stock
Deutsche Banc Alex. Brown
Thomas Weisel Partners LLC
Legg Mason Wood Walker
Incorporated
WIT SOUNDVIEW
PROSPECTUS
, 2000
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth an estimate of the costs and expenses,
other than the underwriting discounts and commissions, payable by the
Registrant in connection with the issuance and distribution of the common stock
being registered.
SEC registration fee ................................... $ 25,806
NASD fee ............................................... 10,275
NASDAQ listing fee ..................................... 95,000
Legal fees and expenses ................................ 450,000
Accounting fees and expenses ........................... 325,000
Printing expenses ...................................... 225,000
Blue sky fees and expenses ............................. 5,000
Transfer Agent and Registrar fees and expenses ......... 3,500
Miscellaneous .......................................... 60,419
----------
Total .............................................. $1,200,000
==========
Item 14. Indemnification of Directors and Officers
The registrant's certificate of incorporation in effect as of the date
hereof, and the registrant's certificate of incorporation to be in effect upon
the closing of this offering (collectively, the "Certificate") provides that,
except to the extent prohibited by the Delaware General Corporation Law, as
amended (the "DGCL"), the registrant's directors shall not be personally liable
to the registrant or its stockholders for monetary damages for any breach of
fiduciary duty as directors of the registrant. Under the DGCL, the directors
have a fiduciary duty to the registrant which is not eliminated by this
provision of the Certificate and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of non-monetary relief will remain
available. In addition, each director will continue to be subject to liability
under the DGCL for breach of the director's duty of loyalty to the registrant,
for acts or omissions which are found by a court of competent jurisdiction to
be 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 prohibited by DGCL. This provision does not limit the
directors' responsibilities under any other laws, including the federal
securities laws or state or federal environmental laws. The registrant
maintains liability insurance for its officers and directors.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this
provision shall not eliminate or limit the liability of a director: (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) arising under
Section 174 of the DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit. The DGCL provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's bylaws, any agreement, a vote of stockholders or otherwise. The
Certificate eliminates the personal liability of directors to the fullest
extent permitted by Section 102(b)(7) of the DGCL and provides that the
registrant shall fully indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (whether civil, criminal, administrative or investigative)
by reason of the fact that
II-1
<PAGE>
such person is or was a director or officer of the registrant, or is or was
serving at the request of the registrant as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the Certificate. The registrant is not aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification.
Item 15. Recent Sales of Unregistered Securities
Within the last three years, the Registrant has sold and issued the
following securities:
(1) In December 1997, the Registrant issued 11,200 shares of common stock
to Kenneth Greif, the managing member of Internet Web Builders LLC, one
of its stockholders.
(2) From January 1997 through December 1997, the Registrant granted
employees options to purchase 35,000 shares of common stock at a
weighted average exercise price of $0.17.
(3) In January and May 1998, the Registrant issued an aggregate of
6,440,000 shares of common stock to Internet Web Builders LLC, Capital
Express LLC, Richard D. Forman and Peter A Forman, at a purchase price
of $0.36 per share, with proceeds, net of offering expenses, of
$2,290,732. In connection with these transactions, the Registrant
issued to Niles H. Cohen and Zachary Prenskey warrants to acquire an
aggregate of 571,669 shares of common stock at an exercise price of
$0.36 per share and 571,669 shares of common stock at an exercise price
of $0.86 per share. The Registrant also issued to Richard D. Forman,
Peter A. Forman, Dan B. Levine and Capital Express LLC, stockholders of
record prior to the private placement, warrants to purchase 2,450,001
shares of its common stock at an exercise price of $0.36 per share.
These warrants were modified in June 1999 to increase the exercise
price to $0.97 per share.
(4) In June 1998, the Registrant issued 446,666 shares of common stock to
a RHL Investors LLC at a purchase price of $0.43 per share, with
proceeds of $200,000.
(5) In August 1998, the Registrant issued 13,503 shares of common stock to
James Krantz, a consultant, in consideration for services.
(6) In September 1998, the Registrant issued to Steve Klebe, a consultant,
warrants to purchase an aggregate of 3,500 shares of common stock at an
exercise price of $0.43 per share.
(7) From January 1998 through December 1998, the Registrant granted
employees options to purchase 745,850 shares of common stock at a
weighted average exercise price of $0.41.
(8) In March 1999, the Registrant issued 1,499,999 shares of exchangeable
preferred stock to Palisade Private Partnership, LP at a price of $2.00
per share, with proceeds, net of expenses, of $2,840,775. The
Registrant also issued warrants to purchase 420,000 shares of common
stock at an exercise price of $2.14 per share to Palisade Private
Partnership, LP for financial advisory services.
(9) In May 1999, the Registrant issued 2,041,666 shares of its common
stock to Staples, Inc. at a purchase price of $3.43 per share for an
aggregate purchase price of $6,999,996. In connection with the
transaction, the Registrant also issued warrants to purchase 700,000
shares of common stock at an exercise price of $.0029 per share.
II-2
<PAGE>
(10) In June and July 1999, the Registrant issued 4,694,333 shares of its
Series A Convertible Preferred Stock to Bayview Investors Ltd.,
Bessemer Venture Partners IV L.P., Bessec Ventures IV L.P., Staples,
Inc., Concentric Network Corporation, Sandler Capital Partners IV
L.P., Sandler Capital IV FTE Partners, L.P., Sandler Capital
Management, Hikari Tsushin Inc., Irwin Leiber, Barry Rubenstein,
Richard A. Forman, Alan G. Breitman, Brian L. Greenspun Separate
Property Trust, Internet Web Builders LLC, Peter D. Forman, and Dan B.
Levine, at a price of $3.43 per share, with proceeds, net of offering
expenses, of $15,290,021. In connection with the transaction, the
Registrant also issued warrants to acquire an aggregate of 938,888
shares of common stock at an exercise price of $3.43 per share.
(11) In February 1999, the Registrant issued to Terrence Kaliner, a
consultant, a warrant to purchase 29,999 shares of common stock at an
exercise price of $0.57 per share. In March 1999, the Registrant
issued to Robert Lessin, a consultant, a warrant to purchase 5,250
shares of common stock at $0.57 per share. In May 1999, the Registrant
issued to Peter Varava, a consultant, a warrant to purchase 5,250
shares at an exercise price of $1.43 per share. In June 1999, the
Registrant issued to Stuart Levi, a consultant, a warrant to purchase
5,250 shares of common stock at an exercise price of $1.57 per share.
In November 1999, the Registrant issued to Peter Varvara, a
consultant, a warrant to purchase 12,250 shares of common stock at an
exercise price of $2.86 per share.
(12) From January 1999 through December 1999, the Registrant granted
employees options to purchase 1,063,510 shares of common stock at a
weighted average exercise price of $1.28.
Legg Mason Wood Walker, Incorporated was the placement agent for the
equity sales in March, May, June and July 1999. In connection with its
services, it was issued warrants to purchase 494,449 shares of common stock at
an exercise price of $4.08 per share.
The issuances of the above securities were issued in transactions exempt
from registration under the Securities Act in reliance upon Section 4(2)
thereof as transactions by an issuer not involving any public offering. In
addition, the issuances of employee options described above were issued in
transactions exempt from registration under the Securities Act in reliance upon
Rule 701 and/or Rule 4(2) promulgated under the Securities Act. The issuances
in Items 8, 9 and 10 and the issuance to Internet Web Builders, LLC in Item 3
were issued in transactions exempt from registration under the Securities Act
in reliance upon Section 506 of Regulation D.
All share numbers in this registration statement have been adjusted to
reflect a 3.5-for-one stock split of our common stock that was effectd in
January 2000 in the form of a stock dividend.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ----------- --------------------------------------------------------------------------
<S> <C>
1.1* Form of underwriting agreement.
3.1 + Certificate of Incorporation, as amended.
3.2 Form of amended and restated certificate of incorporation to be in effect
upon the closing of the offering.
3.3 + Bylaws.
3.4 Form of amended and restated bylaws to be in effect upon the closing of
the offering.
4.1* Specimen common stock certificate.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
See Exhibits 3.1, 3.2, and 3.3 for provisions of the certificate of incorporation
4.2 and bylaws defining the rights of holders of Common Stock.
4.3 Registration Rights Agreements.
<S> <C>
4.4 Amended and Restated Stockholders Agreement.
4.5+ Certificate of designations, preferences and relative, participating, optional and
other special rights of preferred stock and qualifications, limitations and
restrictions of Series A Convertible Preferred Stock.
4.6.1 Form of warrant to purchase common stock issued to Series A Convertible
Preferred Stockholders.
4.6.2 Warrant to purchase common stock issued to Staples, Inc.
4.6.3 Warrant to purchase common stock issued to Palisade Private Partnership, LP.
4.6.4 Form of warrant to purchase common stock issued to Niles H. Cohen and
Zachary Prensky.
4.6.5 Form of Amended and Restated Common Stock Purchase Warrant -- Series A
issued to Richard D. Forman, Peter A. Forman, Dan Levine and Capital Express
LLC.
4.6.6 Warrants to purchase common stock issued to Legg Mason Wood Walker,
Incorporated.
4.6.7 Form of warrant to purchase common stock issued to consultants.
4.6.8 Warrant to purchase common stock issued to Terrence Kaliner.
4.7.1 Employee Stock Option Certificate issued to Richard D. Forman.
4.7.2 Stock Option Certificate issued to Pondfield Associates, Inc.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 + 1997 Stock Option Plan.
10.2 1999 Stock Option Plan.
10.3+ Registrar Accreditation Agreement, dated November 30, 1999, by and between
ICANN and Register.com, Inc.
10.4+ Registrar License and Agreement, dated December 13, 1999, by and between
Network Solutions, Inc. and Register.com, Inc.
10.5 Lease between Pennbus Realties, Inc. and Forman Interactive Corp.
10.6 2000 Stock Incentive Plan.
10.7 Employee Stock Purchase Plan.
10.8 Employment Agreement with Richard D. Forman
10.9 Employment Agreement with Jack S. Levy
10.10* Agreement with Staples, Inc.
10.11* Agreement with Concentric Network Corporation
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1+ Powers of attorney (please see Signature Page).
24.2 Power of attorney of Reginald Van Lee
27.1 Financial Data Schedule.
</TABLE>
- -------------
* To be filed by amendment.
+ Previously filed.
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Page Number Description
<S> <C>
S-1 Report of Independent Accountants on Financial Statement Schedule
S-2 Schedule II -- Valuation and Qualifying Accounts
</TABLE>
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or the notes thereto.
II-4
<PAGE>
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, 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 the Registrant pursuant to Rule 424 (b) (1)
or (4) or 497 (h) under the Securities Act of 1933 shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, 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, the registrant
has duly caused this Amendment No. 1 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on this day of February 4, 2000.
REGISTER.COM, INC.
By: /s/ Richard D. Forman
--------------------------------
Richard D. Forman
President and Chief Executive
Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the registration statement has been signed by the following persons in
the capacities indicated on February 4, 2000:
<TABLE>
<CAPTION>
Signature Title(s)
- ---------------------------------------------------------------- ---------------------------------------------
<S> <C>
/s/ Richard D. Forman President, Chief Executive Officer and
- ------------------------------------- Director (Principal Executive Officer)
Richard D. Forman
*
- ------------------------------------- Vice President of Finance and Accounting
Alan G. Breitman (Principal Accounting and Financial Officer)
*
- ------------------------------------- Director
Peter A. Forman
*
- ------------------------------------- Director
Niles H. Cohen
*
- ------------------------------------- Director
Samantha McCuen
*
- ------------------------------------- Director
Mark S. Hoffman
*
- -------------------------------------
Reginald Van Lee Director
*By: /s/ Richard D. Forman
- ------------------------------------
Richard D. Forman
Attorney-in-Fact
</TABLE>
II-6
<PAGE>
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of Register.com, Inc.
Our audits of the financial statements referred to in our report dated January
31, 2000 appearing in the prospectus constituting part of this Registration
Statement on Form S-1 of Register.com, Inc. also included an audit of the
financial statement schedule listed in Part II herein. In our opinion, this
financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements.
PricewaterhouseCoopers LLP
New York, New York
January 31, 2000
S-1
<PAGE>
Schedule II -- Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and Ending
of Period Expenses Deductions of Period
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
For the year ended December 31, 1997:
Provision for doubtful accounts ......... $ -- $ 75,764 $ 55,000 $ 20,764
======= ======== ======== ========
For the year ended December 31, 1998:
Provision for doubtful accounts ......... $20,764 $ 72,232 $ 27,049 $ 65,947
======= ======== ======== ========
For the year ended December 31, 1999:
Provision for doubtful accounts ......... $65,947 $536,585 $288,016 $314,516
======= ======== ======== ========
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------------- --------------------------------------------------------------------------------
<S> <C>
1.1* Form of underwriting agreement.
3.1+ Certificate of Incorporation, as amended.
3.2 Form of amended and restated certificate of incorporation to be in effect
upon the closing of the offering.
3.3+ Bylaws.
3.4 Form of amended and restated bylaws to be in effect upon the closing of
the offering.
4.1* Specimen common stock certificate.
4.2 See Exhibits 3.1, 3.2, and 3.3 for provisions of the certificate of
incorporation and bylaws defining the rights of holders of Common Stock.
4.3 Registration Rights Agreements.
4.4 Amended and Restated Stockholders Agreement.
4.5+ Certificate of designations, preferences and relative, participating, optional
and other special rights of preferred stock and qualifications, limitations and
restrictions of Series A Convertible Preferred Stock.
4.6.1 Form of warrant to purchase common stock issued to Series A Convertible
Preferred Stockholders.
4.6.2 Warrant to purchase common stock issued to Staples, Inc.
4.6.3 Warrant to purchase common stock issued to Palisade Private Partnership,
LP.
4.6.4 Form of warrant to purchase common stock issued to Niles H. Cohen and
Zachary Prensky.
4.6.5 Form of Amended and Restated Common Stock Purchase Warrant -- Series
A issued to Richard D. Forman, Peter A. Forman, Dan Levine and Capital
Express LLC.
4.6.6 Warrants to purchase common stock issued to Legg Mason Wood Walker,
Incorporated.
4.6.7 Form of warrant to purchase common stock issued to consultants.
4.6.8 Warrant to purchase common stock issued to Terrence Kaliner.
4.7.1 Employee Stock Option Certificate issued to Richard D. Forman.
4.7.2 Stock Option Certificate issued to Pondfield Associates, Inc.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1+ 1997 Stock Option Plan.
10.2 1999 Stock Option Plan.
10.3+ Registrar Accreditation Agreement, dated November 30, 1999, by and
between ICANN and Register.com, Inc.
10.4+ Registrar License and Agreement, dated December 13, 1999, by and
between Network Solutions, Inc. and Register.com, Inc.
10.5 Lease between Pennbus Realties, Inc. and Forman Interactive Corp.
10.6 2000 Stock Incentive Plan.
10.8 Employment Agreement with Richard D. Forman
10.9 Employment Agreement with Jack S. Levy
10.10* Agreement with Staples, Inc.
10.11* Agreement with Concentric Network Corporation
10.7 Employee Stock Purchase Plan.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1+ Powers of attorney.
24.2 Power of attorney of Reginald Van Lee
27.1 Financial Data Schedule.
</TABLE>
- -------------
* To be filed by amendment.
+ Previously filed.
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
REGISTER.COM, INC.
(Pursuant to Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware)
Register.com, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "General Corporation Law"),
DOES HEREBY CERTIFY:
FIRST: That the Corporation was originally incorporated in
Delaware, and the date of its filing of its original Certificate of
Incorporation with the Secretary of State of Delaware was May 11, 1999.
SECOND: That the Board of Directors duly adopted resolutions
proposing to amend and restate the Certificate of Incorporation of the
Corporation, declaring said amendment and restatement to be advisable and in the
best interests of the Corporation and its stockholders, and authorizing the
appropriate officers of the Corporation to solicit the consent of the
stockholders of the issued and outstanding Common Stock, $0.0001 par value, and
Preferred Stock, $0.0001 par value, voting as a single class and as separate
classes, all in accordance with the applicable provisions of Sections 228, 242
and 245 of the General Corporation Law of the State of Delaware;
THIRD: That the resolution setting forth the proposed
amendment and restatement is as follows:
RESOLVED, that the Amended and Restated of Certificate of
Incorporation of the Corporation be amended and restated in
its entirety as follows:
ARTICLE I
Name
The name of the Corporation is Register.com, Inc.
<PAGE>
ARTICLE II
Registered Office
The address of the registered office of the Corporation in the
State of Delaware is to be located at 9 East Loockerman Street, in the City of
Dover, in the County of Kent, in the State of Delaware 19901. The name of its
registered agent at such address is National Corporate Research, Ltd.
ARTICLE III
Powers/Term
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. The Corporation is to have perpetual existence.
ARTICLE IV
Capital Stock
A. Classes of Stock. The total number of shares of stock which the
Corporation shall have authority to issue is two hundred million (205,000,000),
consisting of five million (5,000,000) shares of Preferred Stock, par value
$0.0001 per share (the "Preferred Stock"), and two hundred million (200,000,000)
shares of Common Stock, par value $0.0001 per share (the "Common Stock").
B. Preferred Stock. The Preferred Stock may be issued from time to time in
one or more series. The Board of Directors is hereby authorized to provide for
the issuance of shares of Preferred Stock in one or more series and, by filing a
certificate pursuant to the applicable law of the State of Delaware (the
"Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof. The authority of the Board of Directors
with respect to each series shall include, but not be limited to, determination
of the following:
(a) The designation of the series, which may be by
distinguishing number, letter or title.
(b) The number of shares of the series, which number the Board
of Directors may thereafter (except where otherwise provided in the Preferred
Stock Designation) increase or decrease (but not below the number of shares
thereof then outstanding).
(c) The amounts payable on, and the preferences, if any, of
shares of the series in respect of dividends, and whether such dividends, if
any, shall be cumulative or noncumulative.
(d) Dates at which dividends, if any, shall be payable.
<PAGE>
(e) The redemption rights and price or prices, if any, for
shares of the series.
(f) The terms and amount of any sinking funds provided for the
purchase or redemption of shares of the series.
(g) The amounts payable on, and the preferences, if any, of
shares of the series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation.
(h) Whether the shares of the series shall be convertible into
or exchangeable for shares of any other class or series, or any other security,
of the Corporation or any other corporation, and, if so, the specification of
such other class or series or such other security, the conversion or exchange
price or prices or rate or rates, any adjustments thereof, the date or dates at
which such shares shall be convertible or exchangeable and all other terms and
conditions upon which such conversion or change may be made.
(i) Restrictions on the issuance of shares of the same series
or of any other class or series.
(j) The voting rights, if any, of the holders of shares of the
series.
C. Common Stock; Voting. The Common Stock shall be subject to the express
terms of the Preferred Stock and any series thereof. Except as may otherwise be
provided in this Certificate of Incorporation, in a Preferred Stock Designation
or by applicable law, the holders of shares of Common Stock shall be entitled to
one vote for each such share upon all questions presented to the stockholders,
the Common Stock shall have the exclusive right to vote for the election of
directors and for all other purposes, and holders of Preferred Stock shall not
be entitled to vote at or receive notice of any meeting of stockholders.
The number of shares of authorized Common Stock may be
increased or decreased (but not below the number then outstanding) by the
affirmative vote of the holders of a majority in voting power of the outstanding
shares of capital stock of the Corporation entitled to vote thereon, voting
together as a single class notwithstanding the provisions of Section 242(b)(2)
of the General Corporation Law of the State of Delaware.
The Corporation shall be entitled to treat the person in whose
name any share of its stock is registered as the owner thereof for all purposes
and shall not be bound to recognize any equitable or other claim to, or interest
in, such share on the part of any other person whether or not the Corporation
shall have notice thereof, except as expressly provided by applicable law.
<PAGE>
ARTICLE V
Directors
A. Number. The number of directors of the Corporation shall be
such number, not less than five (5) nor more than nine (9) (exclusive of
directors, if any, to be elected by holders of preferred stock of the
Corporation, voting separately as a class), as shall be set forth from time to
time in the bylaws, provided that no action shall be taken to decrease or
increase the number of directors below five (5) or above nine (9) unless at
least 66.67% of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called for that
purpose approve such decrease or increase, provided further that the limit on
the number of directors set forth herein shall increase each time the
Corporation makes an acquisition and adds a director or directors in connection
with such acquisition by the number of directors added at such time, but shall
in no event exceed fifteen (15) (exclusive of directors, if any, to be elected
by holders of preferred stock of the Corporation, voting separately as a class).
Vacancies in the Board of Directors of the Corporation, however caused, and
newly created directorships shall be filled by a vote of a majority of the
directors then in office, whether or not a quorum, and any director so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of the class to which the director has been chosen expires and
when the director's successor is elected and qualified.
B. Removal of Directors. Notwithstanding any other provisions
of this Amended and Restated Certificate of Incorporation or the bylaws of the
Corporation, any director or the entire Board of Directors of the Corporation
may be removed, at any time, but only for cause and only by the affirmative vote
of the holders of not less than 66.67% of the outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the stockholders
called for that purpose. Notwithstanding the foregoing, whenever the holders of
any one or more series of preferred stock of the Corporation shall have the
right, voting separately as a class, to elect one or more directors of the
Corporation, the preceding provisions of this ARTICLE V shall not apply with
respect to the director or directors elected by such holders of preferred stock.
ARTICLE VI
Stockholder Meetings
Meetings of stockholders may be held within or without the
State of Delaware, as the bylaws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the bylaws of the Corporation. The stockholders of
the Corporation may not take any action by written consent in lieu of a meeting.
<PAGE>
ARTICLE VII
Limitation of Directors' Liability
A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any amendment,
modification or repeal of the foregoing sentence shall not adversely affect any
right or protection of a director of the Corporation hereunder in respect of any
act or omission occurring prior to the time of such amendment, modification or
repeal. If the General Corporation Law of the State of Delaware is amended after
approval by the stockholders of this ARTICLE VII to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended.
ARTICLE VIII
Indemnification
A. Right to Indemnification. The Corporation shall indemnify
and hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person (a "Covered Person")
who was or is made is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding"), by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director or officer of the
Corporation or, while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or nonprofit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses (including
attorneys' fees) reasonably incurred by such Covered Person. Notwithstanding the
preceding sentence, except as otherwise provided in this Article VIII, the
Corporation shall be required to indemnify a Covered Person in connection with a
proceeding (or part thereof) commenced by such Covered Person only if the
commencement of such proceeding (or part thereof) by the Covered person was
authorized by the Board of Directors of the Corporation.
B. Prepayment of Expenses. The Corporation shall pay the
expenses (including attorneys' fees) incurred by a Covered person in defending
any proceeding in advance of its final disposition, provided, however, that, to
the extent required by law, such payment of expenses in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the Covered Person to repay all amounts advanced if it should be ultimately
determined that the Covered person is not entitled to be indemnified under this
Article VIII or otherwise.
C. Claims. If a claim for indemnification or advancement of
expenses under this Article VIII is not paid in full within thirty days after a
written claim therefor by the Covered Person has been received by the
Corporation, the Covered Person may file suit to recover the unpaid amount of
such claim and, if successful in whole or in part, shall be entitled to be paid
the expense of prosecuting such claim. In any such action the corporation shall
have the burden of proving that the Covered Person is not entitled to the
requested indemnification or advancement of expenses under applicable law.
<PAGE>
D. Nonexclusivity of Rights. The rights conferred on any
Covered Person by this Article VIII shall not be exclusive of any other rights
which such Covered Person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, these bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.
E. Other Sources. The Corporation's obligation, if any, to
indemnify or to advance expenses to any Covered person who was or is serving at
its request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or nonprofit entity shall be
reduced by any amount such Covered Person may collect as indemnification or
advancement of expenses from such other corporation, partnership, joint venture,
trust, enterprise or non-profit enterprise.
F. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VIII shall not adversely affect any right
or protection hereunder of any Covered Person in respect of any act or omission
occurring prior to the time of such repeal or modification.
G. Other Indemnification and Prepayment of Expenses. This
Article VIII shall not limit the right to the Corporation to the extent and in
the manner permitted by law, to indemnify and to advance expenses to persons
other than Covered Persons when and as authorized by appropriate corporate
action.
ARTICLE IX
Amendment of Bylaws
In furtherance of and not in limitation of powers conferred by
statute, the Board of Directors of the Corporation is expressly authorized to
adopt, repeal, alter, amend and rescind the bylaws of the Corporation by vote of
66.67% of the Board of Directors.
<PAGE>
ARTICLE X
Amendment of Certificate of Incorporation
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute and this
Amended and Restated Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation. Notwithstanding the
foregoing, the provisions set forth in ARTICLES V, VI, VII, VIII, IX and this
ARTICLE X may not be repealed, altered, amended or rescinded in any respect
unless the same is approved by the affirmative vote of the holders of not less
than 66.67% of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for this
purpose as a single class) cast at a meeting of the stockholders called for that
purpose (provided that notice of such proposed repeal, alteration, amendment or
rescission is included in the notice of such meeting).
* * *
FOURTH: That said amendments were duly adopted in accordance
with the provisions of Sections 242 and 245 of the General Corporation Law.
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed by the President and the Secretary of the
Corporation this __ day of _____________, 2000.
------------------------------
Richard D. Forman,
President and Chief Executive
Officer
------------------------------
Jack S. Levy, Secretary
<PAGE>
AMENDED AND RESTATED BY-LAWS
OF
REGISTER.COM, INC.
ARTICLE I
Certificate of Incorporation and Bylaws
Section 1. These By-Laws are subject to the Certificate of Incorporation of
the Corporation, as amended to date. In these By-Laws, references to law, the
Certificate of Incorporation and By-Laws mean the law, the provisions of the
Certificate of Incorporation and the By-Laws as from time to time in effect.
ARTICLE II
Offices
Section 1. The registered office of the Corporation in the State of
Delaware shall located at 9 East Loockerman Street, in the City of Dover, in the
County of Kent, in the State of Delaware 19901. The name of the registered agent
at that address is National Corporate Research Ltd.
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Section 2. The Corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE III
Meetings of Stockholders
Section 1. All meetings of the stockholders for the election of directors
shall be held at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting. Meetings of stockholders for any other purpose may be
held at such time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual meetings of stockholders shall be held at such date and
time as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting, at which they shall elect by a plurality
vote the directors to be elected at such meeting, and transact such other
business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at such
meeting not fewer than ten (10) nor more than sixty (60) days before the date of
the meeting.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
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 so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the chairman of the board or president and shall
be called by the chairman of the board, the president or secretary at the
request in writing of a majority of the Board of Directors.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty 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.
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Section 9. When a quorum is present at any meeting, the vote of the holders
of a majority of the stock having voting power present in person or represented
by proxy shall decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes or of the
Certificate of Incorporation, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the Certificate of Incorporation,
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the Certificate of Incorporation,
the Chairman of the Board may adjourn a meeting of stockholders from time to
time, without notice other than announcement at the meeting. No notice of the
time and place of an adjourned meeting need be given except as required by law.
Section 12.
A. Annual Meetings of Stockholders
1. Nominations of persons for election to the Board of Directors and the
proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders only (a) pursuant to the Corporation's notice of
meeting (or any supplement thereto), (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of notice provided for in this Section 12, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Section 12.
2. For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (a)(1) of
this Section 12, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. 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 date of the
preceding year's annual meeting; provided, however, that if either the date of
the annual meeting is more than thirty (30) days before or more than seventy
(70) days after such anniversary date, 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 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. Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes 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, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange 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 it elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, the text of
the proposal or business (including the text of any resolutions proposed for
consideration and in the event that such business includes a proposal to amend
the By-laws of the Corporation, the language of the proposed amendment), 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 capital stock of the Corporation which are owned beneficially and of
record by such stockholder and such beneficial owner, (iii) a representation
that the stockholder is a holder of record of stock of the Corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to propose such business or nomination, and (iv) a representation
whether the stockholder or the beneficial owner, if any, intends or is part of a
group which intends (a) to deliver a proxy statement and/or form of proxy to
holders of at least the percentage of the Corporation's outstanding capital
stock required to approve or adopt the proposal or elect the nominee and/or (b)
otherwise to solicit proxies from stockholders in support of such proposal or
nomination. The Corporation may require any proposed nominee to furnish such
other information as it may reasonably require to determine the eligibility of
such proposed nominee to serve as a director of the Corporation.
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<PAGE>
3. Notwithstanding anything in the second sentence of paragraph (a)(2) of
this Section 12 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 by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors 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 12 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 office 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.
B. Special Meetings of Stockholders. Only such business shall be conducted
at a special meeting of stockholders as shall have been brought before the
meeting pursuant to the Corporation's notice of meeting. 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 (a) by or at the direction of the Board of Directors or (b)
provided that the Board of Directors has determined that directors shall be
elected at such meeting, by any stockholder of the Corporation who is a
stockholder of record at the time notice provided for in this Section 12 is
delivered to the Secretary of the Corporation, who is entitled to vote at the
meeting and upon such election, who complies with the notice procedures set
forth in this Section 12. If 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 entitled to vote in such election of directors
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 paragraph (A)(2) of this Section 12 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 (120) day
prior to such special meeting and not later than the later of (x) the close of
business of the ninetieth (90th) day prior to such special meeting or (y) the
close of business of the tenth (10th) day following the day on which public
announcement is first made of the date of such 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 or postponement of a
special meeting commence a new time period (or extend any time period) for the
giving of a stockholder's notice as described above.
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<PAGE>
C. General.
1. Only such persons who are nominated in accordance with the procedures
set forth in this Section 12 shall be eligible to be elected at an annual or
special meeting of stockholders of the Corporation 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 12. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the chairman of the meeting shall have the power
and duty (a) 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 this Section 12 (including whether
the stockholder or beneficial owner, if any, on whose behalf the nomination or
proposal is made solicited (or is part of a group which solicited) or did not so
solicit, as the case may be, proxies in support of such stockholder's nominee or
proposal in compliance with such stockholder's representation as required by
clause (A)(2)(c)(iv) of this Section 12) and (b) if any proposed nomination or
business was not made or proposed in compliance with this Section 12, to declare
that such nomination shall be disregarded or that such proposed business shall
not be transacted.
2. For purposes of this Section 12, "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 Sections 13,
14 and 15(d) of the Exchange Act.
3. Notwithstanding the foregoing provisions of this Section 12, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth herein. Nothing in this Section 12 shall be deemed to affect any rights
(i) of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of Preferred Stock to elect directors pursuant to any applicable
provisions of the Certificate of Incorporation.
Notwithstanding any other provision of law, the Certificate of
Incorporation or these By-Laws, and notwithstanding the fact that a lesser
percentage may be specified by law, the affirmative vote of the holders of at
least 66.67% of the votes which all the stockholders would be entitled to cast
at any annual election of directors or class of directors shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Section 12.
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<PAGE>
ARTICLE IV
Directors
Section 1. The number of directors which shall constitute the whole Board
shall be determined by resolution of the Board of Directors or by the
stockholders at the annual meeting of the stockholders, except as provided in
Section 2 of this Article.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by 66.67% of the
directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election at which such director's class is to be elected and until their
successors are duly elected and shall qualify, unless sooner displaced. If there
are no directors in office, then an election of directors may be held in the
manner provided by statute. 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 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 office.
Section 3. The business of the Corporation shall be managed by or under the
direction of its Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
Meetings of the Board of Directors
Section 4. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board. Members of the Board of Directors may participate in regular or
special meetings by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each other.
Such participation shall constitute presence in person.
Section 6. Special meetings of the Board may be called by the chairman of
the board or president on two (2) days notice to each director by mail or
forty-eight (48) hours notice to each director either personally or by telecopy;
special meetings shall be called by the president or secretary or chairman of
the board in like manner and on like notice on the written request of two
directors unless the Board consists of only one director, in which case special
meetings shall be called by the chairman of the board or the president or
secretary in like manner and on like notice on the written request of the sole
director.
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Section 7. At all meetings of the Board a majority of the directors fixed
by Section 1 shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 8. Unless otherwise restricted by the Certificate of Incorporation
of these By-Laws, any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
Section 9. Unless otherwise restricted by the Certificate of Incorporation
or these By-Laws, members of the Board of Directors, or any committee designated
by the Board of Directors, may participate in a meeting of the Board of
Directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
Committees of Directors
Section 10. The Board of Directors may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of one or more of the directors of the Corporation. The Board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the By-Laws of the Corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
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Section 11. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
Compensation of Directors
Section 12. Unless otherwise restricted by the Certificate of Incorporation
or these By-Laws, the Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Director and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Removal of Directors
Section 13. Any director or the entire Board of Directors may be removed
only in accordance with the provisions of the Corporation's Certificate of
Incorporation.
ARTICLE V
Notices
Section 1. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telecopy.
Section 2. Whenever any notice is required to be given under the provisions
of the statutes or of the Certificate of Incorporation or of these By-Laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
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ARTICLE VI
Officers
Section 1. The officers of the Corporation shall be chosen by the Board of
Directors and shall consist of a chief executive officer, president, treasurer
and a secretary. The Board of Directors may elect from among its members a
Chairman of the Board and a Vice Chairman of the Board. The Board of Directors
may also choose one or more vice-presidents, assistant secretaries and assistant
treasurers. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these By-Laws otherwise provide.
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a chief executive officer, a president, a
treasurer, and a secretary and may choose vice presidents.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 4. The salaries of all officers and agents of the Corporation may
be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the Board
of Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
The Chairman of the Board
Section 6. The Chairman of the Board shall preside at all meetings of the
stockholders and directors. The Chairman shall conduct general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board are carried into effect, subject, however, to the right
of the directors to delegate any specific powers, except such as may be by
statute exclusively conferred on the Chairman of the Board, to any other officer
or officers of the Corporation. The Chairman shall have the general powers and
duties of supervision and management usually vested in the office of Chairman of
the Board of a corporation. Such individual shall execute bonds, mortgages and
other contracts requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to some officer or agent of the Corporation.
President
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Section 7.
The President shall conduct general and active management of the business
of the Corporation and shall see that all orders and resolutions of the Board
are carried into effect, subject, however, to the right of the directors to
delegate any specific powers, except such as may be by statute exclusively
conferred on the President, to any other officer or officers of the Corporation.
The President shall have the general power and duties of supervision and
management usually vested in the office of President of a corporation. In the
absence of the Chairman and Vice Chairman of the Board, the President shall
preside at all meetings of the stockholders and the Board of Directors.
Such individual shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
The Vice-Presidents
Section 8.
In the absence of the president or in the event of his inability or refusal
to act, the vice-president, if any, (or in the event there be more than one
vice-president, the vice-presidents in the order designated by the directors, or
in the absence of any designation, then in the order of their election) shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The
vice-presidents shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
The Secretary and Assistant Secretary
Section 9.
The secretary shall attend all meetings of the Board of Directors and all
meetings of the stockholders and record all the proceedings of the meetings of
the Corporation and of the Board of Directors in a book to be kept for that
purpose and shall perform like duties for the standing committees when required.
Such individual shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or president,
under whose supervision such individual shall be. Such individual shall have
custody of the corporate seal of the Corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of directors may from
time to time prescribe.
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The Treasurer and Assistant Treasurers
Section 11. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
Section 12. The treasurer shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
Corporation.
Section 13. If required by the Board of Directors, such individual shall
give the Corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 14. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
ARTICLE VII
Certificate of Stock
Section 1. 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 or vice-chairman of the Board of Directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the Corporation, certifying the number of shares owned
by him in the Corporation.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, 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.
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Section 2. Any of or all the signatures on the certificate may be
facsimile. 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 by the Corporation with the same effect as if such
individual were such officer, transfer agent or registrar at the date of issue.
Lost Certificates
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, 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. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Transfer of Stock
Section 4. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Fixing Record Date
Section 5. 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, or to express consent to corporate action in writing
without a meeting unless expressly disallowed by the Certificate of
Incorporation, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action. 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.
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Registered Stockholders
Section 6. 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 to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VIII
General Provisions
Dividends
Section 1. Dividends upon the capital stock of the Corporation, subject to
the provisions of the Certificate of Incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purposes as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Checks
Section 3. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
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Fiscal Year
Section 4. The fiscal year of the Corporation shall end on December 31,
unless otherwise fixed by resolution of the Board of Directors.
Seal
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 6. No contract or transaction between the Corporation and one or
more of the directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of the directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
such director or officer is present at or participates in the meeting of the
Board of Directors or a committee of the Board of Directors which authorizes the
contract or transaction or solely because his, her or their votes are counted
for such purpose, if:
(1) The material facts as to his or her relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of Directors
or the committee, and the Board or committee in good faith authorizes the
contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum;
(2) The material facts as to his or her relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee of the Board of Directors, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IX
Amendments
These By-Laws may be repealed, altered, amended or rescinded by the
stockholders of the Corporation by vote of not less than 66.67% of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed repeal, alteration, amendment or rescission is
included in the notice of such meeting). In addition, in accordance with the
Corporation's Certificate of Incorporation, the Board of Directors may repeal,
alter, amend or rescind these By-Laws by vote of 66.67% of the Board of
Directors.
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REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (this "Agreement") dated as of June 30, 1999,
by and among REGISTER.COM, INC., a Delaware corporation (the "Company"), and DAN
B. LEVINE, a natural person ("DBL"), PETER A. FORMAN, a natural person ("PAF"),
RICHARD D. FORMAN, a natural person ("RDF"), CAPITAL EXPRESS, L.L.C., a New
Jersey limited liability company ("CapEx"), INTERNET WEB BUILDERS, L.L.C., a New
Jersey limited liability company ("IWB"), PALISADE PRIVATE PARTNERSHIP L.P., a
Delaware limited partnership ("PPP"), STAPLES, INC., a Delaware corporation
("Staples"), and the Persons named as purchasers (the "Investors") of the
Company's Series A Convertible Preferred Stock pursuant to the Series A
Convertible Preferred Stock Purchase Agreement of even date herewith (the
"Purchase Agreement").
PREAMBLE
WHEREAS, the Company and DBL, PAF, RDF, CapEx, IWB, PPP and Staples
(collectively, the "Existing Stockholders") are parties to a Shareholders'
Agreement, dated as of January 5, 1998, as amended (the "Shareholders
Agreement") and desire to amend and restate the Shareholders' Agreement and
amend and restate in this Agreement the obligations with respect to the
registration rights set forth in Section 9 of the Shareholders' Agreement, which
amendment and restatement shall for all purposes subsume, supersede and replace
the registration rights set forth in the Shareholders' Agreement.
WHEREAS, in order to induce the Investors to enter into the Purchase
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
closing under the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company, the
Existing Stockholders and the Investors agree as follows:
1. Definitions
As used in this Agreement, the following capitalized terms shall have the
following meanings:
CapEx Investors: CapEx and each other Person, other than the Company or an
affiliate of the Company, who (i) at any time acquires any Registrable
Securities directly or indirectly from CapEx in a transaction or chain of
transactions not involving a public offering within the meaning of the
Securities Act and (ii) was assigned, by the CapEx Investor from whom such
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Registrable Securities were acquired, the registration rights of the CapEx
Investor hereunder with respect to such Registrable Securities, together with
the successors and assigns, heirs and personal representatives of each of the
foregoing, in each case for so long as any such Person continues to hold
Registrable Securities; provided, however, that no such other Person shall
constitute a CapEx Investor unless each Person to whom any such transfer is made
shall, contemporaneously with such transfer and by written instrument, become a
party to, and a "Stockholder" under, and accept and adopt the terms and
provisions of, this Agreement.
Common Stock: Common Stock of the Company, par value $ 0.001 per share as
constituted on the date hereof, and any capital stock into which such Common
Stock may hereafter be changed, and such term shall also include (unless the
context clearly indicates otherwise) (i) capital stock of the Company of any
other class or series (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets on liquidation over any other class or
series of capital stock of the Company and which is not subject to redemption
and (ii) shares of common stock of any successor or acquiring corporation or any
affiliate thereof which are issued or may be issuable to any Stockholders in the
circumstances contemplated by Section 13(k).
Convertible Preferred Stock: Series A Convertible Preferred Stock of the
Company, par value $0.001 per share.
Demand Registration: See Section 3(a) hereof.
DPR Investors: DBL, PAF, RDF and each other Person, other than the Company
or an affiliate of the Company, who (i) at any time acquires any Registrable
Securities directly or indirectly from any of DBL, PAF or RDF in a transaction
or chain of transactions not involving a public offering within the meaning of
the Securities Act and (ii) was assigned, by the DPR Investor from whom such
Registrable Securities were acquired, the registration rights of the DPR
Investor hereunder with respect to such Registrable Securities, together with
the successors and assigns, heirs and personal representatives of each of the
foregoing, in each case for so long as any such Person continues to hold
Registrable Securities; provided, however, that no such other Person shall
constitute a DPR Investor unless each Person to whom any such transfer is made
shall, contemporaneously with such transfer and by written instrument, become a
party to, and a "Stockholder" under, and accept and adopt the terms and
provisions of, this Agreement.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder by the SEC.
Exchangeable Preferred Stock: Exchangeable Preferred Stock of the Company,
par value $0.001 per share.
Indemnified Holder: See Section 8(a) hereof.
Initial Public Offering: The initial underwritten sale of equity securities
by the Company pursuant to an effective registration statement under the
Securities Act.
IWB Investors: IWB and each other Person, other than the Company or an
affiliate of the Company, who (i) at any time acquires any Registrable
Securities directly or indirectly from IWB in a transaction or chain of
transactions not involving a public offering within the meaning of the
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Securities Act and (ii) was assigned, by the IWB Investor from whom such
Registrable Securities were acquired, the registration rights of the IWB
Investor hereunder with respect to such Registrable Securities, together with
the successors and assigns, heirs and personal representatives of each of the
foregoing, in each case for so long as any such Person continues to hold
Registrable Securities; provided, however, that no such other Person shall
constitute a IWB Investor unless each Person to whom any such transfer is made
shall, contemporaneously with such transfer and by written instrument, become a
party to, and a "Stockholder" under, and accept and adopt the terms and
provisions of, this Agreement.
NASD: National Association of Securities Dealers, Inc.
Person: An individual, partnership, corporation, limited liability company,
joint venture, trust or unincorporated organization, or a government or agency
or political subdivision thereof of whatever nature.
PPP Investors: PPP and each other Person, other than the Company or an
affiliate of the Company, who (i) at any time acquires any Registrable
Securities directly or indirectly from PPP in a transaction or chain of
transactions not involving a public offering within the meaning of the
Securities Act and (ii) was assigned, by the PPP Investor from whom such
Registrable Securities were acquired, the registration rights of the PPP
Investor hereunder with respect to such Registrable Securities, together with
the successors and assigns, heirs and personal representatives of each of the
foregoing, in each case for so long as any such Person continues to hold
Registrable Securities; provided, however, that no such other Person shall
constitute a PPP Investor unless each Person to whom any such transfer is made
shall, contemporaneously with such transfer and by written instrument, become a
party to, and a "Stockholder" under, and accept and adopt the terms and
provisions of, this Agreement.
Prospectus: The prospectus included in any Registration Statement, as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments to the Registration Statement of
which such prospectus is a part and all material incorporated by reference in
such prospectus.
Registration Expenses: See Section 7(a)(9) hereof.
Registrable Securities: Any and all shares of Common Stock which (i) at any
time and from time to time are issued or issuable upon exercise, in whole or in
part, of any Right owned by any of DBL, PAF, RDF, CapEx, IWB, PPP and Staples on
the date of this Agreement, (ii) are owned by any of DBL, PAF, RDF, CapEx, IWB,
PPP and Staples on the date of this Agreement, (iii) at any time and from time
to time are issued or issuable upon exercise, in whole or in part, of the
conversion of the Convertible Preferred Stock or the exercise of the warrants
acquired by the Investors pursuant to the Purchase Agreement, (iv) or are issued
or are issuable to the holders of any Registrable Securities or would be issued
or issuable upon the exercise of any Rights referred to in clauses (i) or (iii)
of this sentence by reason of the declaration or payment of a dividend or other
distribution or any stock split issued to the holders of Registrable Securities,
or (v) are issued or issuable pursuant to a stock dividend, stock split or other
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distribution with respect to Common Stock, or issued to any of them in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization; provided, however, that any Registrable Security shall
cease to be a Registrable Security if (a) a registration statement under the
Securities Act covering such Registrable Security shall have been declared
effective by the Commission and such Registrable Security shall have been
disposed of pursuant to such registration statement, (b) such Registrable
Security shall have been sold in a transaction which satisfies the requirements
of paragraph (f) of Rule 144 under the Securities Act (as such paragraph is in
effect on the Issue Date) and, if such transaction is a "brokers' transaction"
referred to in such paragraph of Rule 144, also satisfies the requirements of
paragraph (g) of Rule 144 under the Securities Act (as such paragraph is in
effect on the Issue Date), or (c) such Registrable Security is no longer held by
a Stockholder.
Registration Statement: Any registration statement of the Company that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.
Rights: Any options, warrants, convertible or exchangeable securities or
other rights, however denominated, to subscribe for, purchase or otherwise
acquire any equity interest or other security of any class or series, with or
without payment of additional consideration in cash or property, either
immediately or upon the occurrence of a specified date or a specified event or
the satisfaction or happening of any other condition or contingency.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder by the SEC.
SEC: The Securities and Exchange Commission.
Series A Investors: The Investors and each other Person, other than the
Company or an affiliate of the Company, who (i) at any time acquires any
Registrable Securities directly or indirectly from the Investors in a
transaction or chain of transactions not involving a public offering within the
meaning of the Securities Act and (ii) was assigned, by the Series A Investor
from whom such Registrable Securities were acquired, the registration rights of
the Series A Investor hereunder with respect to such Registrable Securities,
together with the successors and assigns, heirs and personal representatives of
each of the foregoing, in each case for so long as any such Person continues to
hold Registrable Securities; provided, however, that no such other Person shall
constitute a Series A Investor unless each Person to whom any such transfer is
made shall, contemporaneously with such transfer and by written instrument,
become a party to, and a "Stockholder" under, and accept and adopt the terms and
provisions of, this Agreement.
Staples Investors: Staples and each other Person, other than the Company or
an affiliate of the Company, who (i) at any time acquires any Registrable
Securities directly or indirectly from Staples in a transaction or chain of
transactions not involving a public offering within the meaning of the
Securities Act and (ii) was assigned, by the Staples Investor from whom such
Registrable Securities were acquired, the registration rights of the Staples
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Investor hereunder with respect to such Registrable Securities, together with
the successors and assigns, heirs and personal representatives of each of the
foregoing, in each case for so long as any such Person continues to hold
Registrable Securities; provided, however, that no such other Person shall
constitute a Staples Investor unless each Person to whom any such transfer is
made shall, contemporaneously with such transfer and by written instrument,
become a party to, and a "Stockholder" under, and accept and adopt the terms and
provisions of, this Agreement.
Stockholder: Each Person who is a DPR Investor, a CapEx Investor, or a IWB
Investor, each of PPP, Staples and the Investors and each other Person, other
than the Company or an affiliate of the Company, who (i) at any time acquires
any Registrable Securities directly or indirectly from such Stockholder in a
transaction or chain of transactions not involving a public offering within the
meaning of the Securities Act and (ii) was assigned, by such Person from whom
such Registrable Securities were acquired, the registration rights of such
Stockholder hereunder with respect to such Registrable Securities, together with
the successors and assigns, heirs and personal representatives of each of the
foregoing, in each case for so long as any such Stockholder continues to hold
Registrable Securities; provided, however, that no such other Person shall
constitute a Stockholder unless each Person to whom any such transfer is made
shall, contemporaneously with such transfer and by written instrument, become a
party to, and a "Stockholder" under, and accept and adopt the terms and
provisions of, this Agreement.
2. Securities Subject to this Agreement
(a) Registrable Securities. The securities entitled to the benefits of this
Agreement are the Registrable Securities.
(b) Holders of Registrable Securities. A Person is deemed to be a holder of
Registrable Securities whenever such Person owns of record Registrable
Securities or has the Right to acquire such Registrable Securities, whether or
not such acquisition has actually been effected and disregarding any legal
restrictions upon the exercise of such right.
3. Demand Registration
(a) Request for Registration by Certain Holders of Registrable Securities.
(i) If the Company has not effected an Initial Public Offering prior to or on
June 30, 2004, and after June 30, 2004 the Company receives from the holders
representing at least forty percent (40%) of the Registrable Securities then
held by the DPR Investors, the CapEx Investors, the IWB Investors, the Staples
Investors, the PPP Investors or the Series A Investors, in the aggregate, a
written request that the Company effect a registration or qualification of such
Registrable Securities, and (ii) at any time during the period commencing six
months following the effective date of the registration statement in respect of
the Initial Public Offering of securities of the Company (or any successor
entity to the Company through merger, reorganization, exchange, transfer or
otherwise), the Company receives from the holder(s) representing a majority of
the Registrable Securities then held by the DPR Investors, the CapEx Investors,
the IWB Investors, the Staples Investors, the PPP Investors or the Series A
Investors, as the case may be, a written request that the Company effect a
registration or qualification of such Registrable Securities (each right under
clause (i) and (ii) of this Section 3(a), a "Demand Registration"), the Company
will:
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(1) promptly give written notice of the proposed registration or
qualification to all other holders of Registrable Securities held by the DPR
Investors, the CapEx Investors, the IWB Investors, the Staples Investors, the
PPP Investors or the Series A Investors, as the case may be, which holders may
request in writing within 20 days after receipt of such notice that Registrable
Securities held by them be included in such Demand Registration, and the number
of Registrable Securities requested to be so included shall be deemed a part of
such Demand Registration; and
(2) as soon as practicable, use commercially reasonable efforts to
effect such registration or qualification in the manner provided in this
Agreement as may be so requested and as is reasonably necessary to permit or
facilitate the sale and distribution of all or such portion of such holder's or
holders' Registrable Securities as is specified in such request; provided that
the Company will not be obligated to effect more than (x) one (1) Demand
Registration pursuant to a request under clause (i) of this Section 3(a), and
(y) one (1) Demand Registration for each of the DPR Investors, the CapEx
Investors, the IWB Investors, the Staples Investors, the PPP Investors and the
Series A Investors pursuant to a request under clause (ii)of this Section 3(a).
Notwithstanding anything to the contrary contained in this Agreement, the
Company will have no obligation to effect a Demand Registration if the number of
shares of the Company a holder or holders of Registrable Securities have
requested to be registered could be sold by them pursuant to Rule 144 of the
Securities Act in any three-month period without registration in compliance with
Rule 144 of the Securities Act.
(b) Effective Registration and Expenses. A registration of Registrable
Securities will not count as a Demand Registration until it has become effective
and has remained effective for 180 days or until all of the Registrable
Securities included therein have been sold, if earlier. The Company will pay all
Registration Expenses (as hereinafter defined) in connection with any
registration initiated as a Demand Registration, whether or not it becomes
effective.
(c) Priority on Demand Registrations. If the holder or holders of a majority
in number of the Registrable Securities to be registered in a Demand
Registration under this Section 3 so elect, the offering of such Registered
Securities pursuant to such Demand Registration shall be in the form of an
underwritten offering. In such event, if the managing underwriter or
underwriters of such offering advise the Company and the holders in writing that
in its or their opinion the number of Registrable Securities requested to be
included in such offering exceeds the number of securities that can be sold in
such offering without an adverse affect on such offering, then the Company will
include in such registration the maximum amount of Registrable Securities which
in the opinion of such managing underwriter or underwriters can be sold without
any such adverse effect. Subject to the advice of the managing underwriter or
underwriters concerning the size, composition and pricing of the offering, the
Company will include Registrable Securities or other Common Stock in such
registration in accordance with the following priorities: (i) first, pro rata
among all holders of Registrable Securities who have requested to be included in
such registration pursuant to Section 3(a) (i.e., a demand registration right)
hereof, in proportion to the number of shares each such holder requested to be
included in the offering; and (ii) second, pro rata among all holders of
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Registrable Securities who have requested to be included in such registration
pursuant to Section 4 hereof, in proportion to the number of shares each such
holder requested to be included in the offering; and (iii) third, the Common
Stock of other holders of Common Stock of the Company who have requested to be
included in such registration pursuant to piggy-back registration provisions of
other registration rights agreements, and any additional shares of Common Stock
proposed to be issued or sold for the account of the Company, all in accordance
with the applicable agreements between the Company and such other holders.
(d) Selection of Underwriters. If any Demand Registration is to be in the
form of an underwritten offering, the investment banker or bankers and manager
or managers that will administer the offering will be selected by the holders of
a majority of the stockholders exercising demand registration rights under
Section 3(a); provided that such investment bankers and managers must be
reasonably satisfactory to the Company.
(e) Restrictions on Demand Registrations. Notwithstanding the foregoing
provisions, (i) the Company shall not be obligated to effect any registration if
such registration would require an audit of the Company's financial statements
for a period as of a date other than its fiscal year end unless the holders of
Registrable Securities requesting such registration agree to bear responsibility
for the expenses of such an audit; (ii) the Company may defer the filing of a
Registration Statement hereunder or delay the processing and effectiveness
thereof for a period of up to 90 days based on the good faith judgment of the
Board of Directors of the Company, that such delay is needed to avoid premature
disclosure of a matter the Board has determined should not, in the best
interests of the Company, and otherwise need not, be currently disclosed
including, without limitation, that a material acquisition or disposition by the
Company is being negotiated or has been publicly announced or that such
registration statement would have a material adverse effect on the Company;
provided, that the Company shall be entitled to exercise such deferment only
once during any twelve month period; and (iii) the Company shall not be
obligated to effect a Demand Registration within 180 days after the effective
date of any previous underwritten registration of Common Stock, whether or not
made pursuant to this Section. If applicable, the Company shall furnish to the
holder or holders of Registrable Securities requesting a Registration Statement
pursuant to this Section 3 a certificate signed by the President of the Company
stating the Company has deferred the filing of a registration statement pursuant
to clause (ii) hereof.
(f) Preemption by the Company. Notwithstanding the foregoing provisions of
this Section 3, at any time any holder of Registrable Securities shall request a
Demand Registration pursuant to this Section 3, the Company may elect at that
time to effect a firm commitment underwritten primary registration if the
Company's Board of Directors believes that such primary registration would be in
the best interests of the Company or if the managing underwriters for the
requested Demand Registration advise the Company in writing that in their
opinion in order to sell the Registrable Securities to be sold the Company
should include its own securities. Promptly after receiving a written request
for a Demand Registration, the Company shall meet with the managing
underwriters, if any, and shall decide whether or not to effect an underwritten
primary registration on behalf of the Company. If the Company elects to effect a
primary registration after receiving a request for a Demand Registration, (i)
the Company shall give prompt written notice (and in any event within 15 days of
receiving a written request for a Demand Registration) to all holders of
Registrable Securities of its intention to effect such a registration and shall
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afford such holders the right to Piggyback Registrations contained in Section 4
hereof, (ii) such registration shall not count as a Demand Registration for
purposes of this Section 3, and (iii) the Company shall have the sole discretion
to designate the managing underwriter or underwriters to be used in connection
with such registration.
4. Piggy-Back Registration.
If the Company at any time or from time to time subsequent to the date of
this Agreement proposes to register any securities under the Securities Act
either for its own account or the account of any selling security holders (other
than pursuant to (i) a registration statement on Forms S-4 or S-8 or any
successor or similar forms, (ii) a registration relating solely to a Commission
Rule 145 offering, or (iii) a registration on any form that does not permit
secondary sales), the Company shall:
(a) give to each holder of a Registrable Security written notice thereof at
least 20 days in advance of the filing of any registration statement in respect
thereof (which notice will include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the applicable blue
sky or other state securities laws, the proposed offering price, and the plan of
distribution);
(b) include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests, made within
20 days after receipt of such written notice from the Company, by any holder or
holders of Registrable Securities;
(c) use commercially reasonable efforts to cause the managing underwriter or
underwriters of such proposed underwritten offering to permit the Registrable
Securities requested to be included in the Registration Statement for such
offering to be included on the same terms and conditions as any similar
securities of the Company included therein. Notwithstanding the foregoing, if
the managing underwriter or underwriters of such offering deliver a written
opinion to the holders of such Registrable Securities that marketing
considerations require a limitation on the number of shares of Common Stock or
other Registrable Securities offered pursuant to any Registration Statement
subject to this Section, then subject to the advice of said managing underwriter
or underwriters as to the size and composition of the offering, the Company will
include Common Stock and other Registrable Securities in such registration in
accordance with the following priorities: (i) first, if such offering is a
secondary offering on behalf of other holders of securities of the Company
pursuant to a contractual obligation of the Company to register such securities
(i.e., a demand registration right), the securities to be sold for the account
of such holders; (ii) second, pro rata among holders of Registrable Securities
who hold Registrable Securities that were requested to be included in a
registration statement pursuant to Section 3(a) but were not included in such
offering pursuant to the terms of Section 3(c), in proportion to the number of
shares each such holder requested to be included in the offering but were not
included in such offering; (iii) third, Common Stock to be sold for the account
of the Company; (iv) fourth, pro rata with respect to all holders of Registrable
Securities or other Common Stock of the Company who have requested to be
included in the registration pursuant to this Section 4; and (v) pursuant to
other, analogous piggy-back registration provisions of other agreements, in
proportion to the number of shares each such holder requested to be included in
the offering pursuant to their piggy-back rights. The Company will bear all
Registration Expenses in connection with a piggy-back registration.
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Notwithstanding the foregoing, if at any time after giving written notice of
its intention to register its equity securities and before the effectiveness of
the Registration Statement filed in connection with such registration, the
Company determines for any reason either not to effect such registration or to
delay such registration, the Company may, at its election, by delivery of
written notice to each holder of Registrable Securities (A) in the case of a
determination not to effect registration, relieve itself of its obligation to
register the Registrable Securities in connection with such registration or (B)
in the case of a determination to delay registration, delay the registration of
such Registrable Securities for the same period as the delay in the registration
of such other equity securities.
Holders of Registrable Securities may exercise piggy-back registration
rights under this Section 4 at any time or from time to time, so long as such
holders continue to hold Registrable Securities.
5. Hold-Back Agreements
(a) Restrictions on Public Sale by Holder of Registrable Securities. Each
holder of Registrable Securities agrees not to effect any public sale or
distribution of securities of the Company of the same class as the securities
included in a Registration Statement, including a sale pursuant to Rule 144
under the Securities Act, during the 7-day period prior to, and during the
period (up to 180 days) following, the effective date of such Registration
Statement for each underwritten offering made pursuant to such Registration
Statement, to the extent requested in writing by the managing underwriters
(except as part of such underwritten registration, if permitted); provided,
however, that the hold-back period shall not be longer than the hold-back period
agreed to in writing by the Company's executive officers and directors.
(b) Restrictions on Public Sale by the Company and Others. The Company
agrees:
(1) not to effect any public or private sale or distribution of its
equity securities, including a sale pursuant to Regulation D under the
Securities Act, during the 7-day period prior to, and during the period (up to
180 days) following, the effective date of the Registration Statement for each
underwritten offering made pursuant to a Registration Statement filed under
Section 3 hereof, to the extent requested in writing by the managing
underwriters (except as part of such underwritten registration or pursuant to
registrations on Forms S-4 or S-8 or any successor form to such Forms), and
(2) to endeavor to cause each holder of its privately placed equity
securities issued by the Company at any time on or after the date of this
Agreement to agree not to effect any public sale or distribution, including a
sale pursuant to Rule 144 under the Securities Act, of any such securities
during the period set forth in clause (1) above, to the extent requested in
writing by the managing underwriters (except as part of such underwritten
registration, if permitted). The Company shall not be obligated to incur any
costs or expenses in connection with its obligations under this Section 5(b)(2).
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6. Registration Procedures
In connection with the Company's registration obligations pursuant to
Sections 3 and 4 hereof, the Company will use commercially reasonable efforts to
effect such registration to permit the sale of such Registrable Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible but in no event
later than 30 days after receipt of a request for registration pursuant to the
terms of Section 3 or 4:
(a) before filing a Registration Statement or Prospectus or any amendments
or supplements thereto, furnish to the counsel selected by the holders of a
majority of the Registrable Securities covered by such Registration Statement
and the underwriters, if any, copies of all such documents proposed to be filed,
which documents will be made available for prior review and comment by such
counsel;
(b) prepare and file with the SEC a Registration Statement and such
amendments and post-effective amendments to any Registration Statement, and such
supplements to the Prospectus, as may be required by the rules, regulations or
instructions applicable to the registration form utilized by the Company or by
the Securities Act or otherwise necessary to keep such Registration Statement
continuously effective; and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such Registration
Statement during the one-year period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement or
supplement to the Prospectus;
(c) notify the selling holders of Registrable Securities and the managing
underwriters, if any, promptly, and (if requested by any such Person) confirm
such advice in writing,
(1) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective,
(2) of any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus or for additional information,
(3) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation or threatening of
any proceedings for that purpose,
(4) if at any time the representations and warranties of the Company
contemplated by paragraph (n) below cease to be true and correct,
(5) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose, and
(6) of the existence of any fact which results in the Registration
Statement, the Prospectus or any document incorporated therein by reference
containing an untrue statement of material fact or omitting to state a material
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<PAGE>
fact required to be stated therein or necessary to make the statements therein
not misleading;
(d) use reasonable efforts to prevent the issuance of any stop order or to
obtain the withdrawal of any order suspending the effectiveness of the
Registration Statement as soon as practicable;
(e) if reasonably requested by the managing underwriter or underwriters or a
holder of Registrable Securities being sold in connection with an underwritten
offering, immediately incorporate in a Prospectus supplement or post-effective
amendment such necessary information as the managing underwriters or the holders
of a majority in number of the Registrable Securities being sold reasonably
request to have included therein relating to the plan of distribution with
respect to such Registrable Securities, including, without limitation,
information with respect to the amount of Registrable Securities being sold to
such underwriters, the purchase price being paid therefor by such underwriters
and with respect to any other terms of the underwritten (or best efforts
underwritten) offering of the Registrable Securities to be sold in such
offering; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as notified of the matters to be incorporated
in such Prospectus supplement or post-effective amendment;
(f) at the request of any selling holder of Registrable Securities, furnish
to such selling holder of Registrable Securities and each managing underwriter,
without charge, at least one copy of the Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits (including
those incorporated by reference);
(g) deliver to each selling holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons may reasonably request; the Company consents to the use of the
Prospectus or any amendment or supplement thereto by each of the selling holders
of Registrable Securities and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto;
(h) prior to any public offering of Registrable Securities, use commercially
reasonable efforts to register or qualify or cooperate with the selling holders
of Registrable Securities, the underwriters, if any, and their respective
counsel in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions as any seller or underwriter reasonably requests in writing and do
any and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by the
Registration Statement; provided that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process or taxation in any such jurisdiction where it is not then so subject;
(i) cooperate with the selling holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and delivery
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of certificates representing Registrable Securities to be sold and not bearing
any restrictive legends; and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters may
request at least two business days prior to any sale of Registrable Securities
to the underwriters;
(j) use commercially reasonable efforts to cause the Registrable Securities
covered by the applicable Registration Statement to be registered with or
approved by such other United States federal or state governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof and the
underwriters, if any, to consummate the disposition of such Registrable
Securities;
(k) if any fact contemplated by paragraph (c)(6) above shall exist, prepare
a supplement or post-effective amendment to the Registration Statement or the
related Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(l) use commercially reasonable efforts to cause all Registrable Securities
covered by the Registration Statement to be listed on each securities exchange
or automated quotation system on which similar securities issued by the Company
are then listed, if requested by the holders of a majority in number of such
Registrable Securities or by the managing underwriters, if any;
(m) not later than the effective date of the applicable Registration
Statement, provide a CUSIP number for all Registrable Securities and provide the
applicable trustee(s) or transfer agent(s) with printed certificates for the
Registrable Securities which are in a form eligible for deposit with The
Depositary Trust Company;
(n) enter into customary agreements (including underwriting agreements) and
take all other appropriate actions in order to expedite or facilitate the
disposition of such Registrable Securities and in such connection, whether or
not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration:
(1) make such representations and warranties and indemnities to the
holders of such Registrable Securities and the underwriters, if any, in form,
scope and substance as are customarily made by issuers to underwriters in
primary underwritten offerings;
(2) obtain opinions of counsel to the Company and updates thereof
addressed to each selling holder and the underwriters, if any, covering the
matters customarily covered in opinions requested in underwritten offerings;
(3) obtain "cold comfort" letters and updates thereof from the Company's
independent certified public accountants addressed to the selling holders of
Registrable Securities and the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters to underwriters in connection with primary underwritten
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offerings (provided that the Registrable Securities constitute at least 10% of
the securities covered by such Registration Statement);
(4) deliver such documents and certificates as may be reasonably
requested by the holders of a majority of the Registrable Securities being sold
and the managing underwriters, if any, to evidence compliance with paragraph (k)
above and with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company.
(o) subject to the execution of confidentiality agreements in form and
substance satisfactory to the Company, make available to a representative of the
holders of a majority in number of the Registrable Securities being registered
pursuant to such Registration Statement, any underwriter participating in any
disposition pursuant to such Registration Statement, and any attorney or
accountant retained by the sellers or underwriter all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all information
reasonably requested by any such representative, underwriter, attorney or
accountant in connection with the registration, with respect to each at such
time or times as the Company shall reasonably determine; provided that any
records, information or documents that are designated by the Company in writing
as confidential shall be kept confidential by such Persons unless disclosure of
such records, information or documents (i) is required by court or
administrative order; (ii) becomes generally available to the public other than
as a result of a disclosure by such Persons; (iii) was available to such Persons
on a non-confidential basis prior to its disclosure by the Company, as shown by
prior written record, or (iv) becomes available to such Persons on a
non-confidential basis from a source other than the Company or its
representatives, provided that such source is not known by such Persons to be
bound by a confidentiality agreement with or other obligation of secrecy to the
Company.
(p) otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make generally available to its
security holders earnings statements satisfying the provisions of Section 11(a)
of the Securities Act, no later than 45 days after the end of any 12-month
period (or 90 days, if such a period is a fiscal year) (1) commencing at the end
of any month in which Registrable Securities are sold to underwriters in an
underwritten offering, or, if not sold to underwriters in such an offering, (2)
beginning with the first month commencing after the effective date of the
Registration Statement, which statements shall cover said 12-month periods;
(q) cooperate and assist in any filings required to be made with the NASD
and in the performance of any due diligence investigation by any underwriter
(including any "qualified independent underwriter" that is required to be
retained in accordance with the rules and regulations of the NASD); and
(r) promptly prior to the filing of any document which is to be incorporated
by reference into the Registration Statement or the Prospectus (after initial
filing of the Registration Statement) provide copies of such document for review
and comment to counsel to the selling holders of Registrable Securities and to
the managing underwriters, if any, and make the Company's representatives
available for discussion of such document.
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The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
Each holder of Registrable Securities agrees that to avail itself of the
rights afforded hereby, upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraph (k) above, such holder
will forthwith discontinue disposition of Registrable Securities registered in a
Registration Statement until such holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by paragraph (k) above, or until
it is advised in writing by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings which
are incorporated by reference in the Prospectus, and, if so directed by the
Company, such holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such holder's possession, of
the Prospectus covering such Registrable Securities current at the time of
receipt of such notice.
Each holder of Registrable Securities agrees that to avail itself of the
rights afforded hereby, such holder shall (i) make such representations and
warranties and indemnities to the Company and the underwriters in form, scope
and substance as are customarily made by selling shareholders in primary
underwritten offerings; (ii) obtain opinions of counsel to such holder and
updates thereof (provided that such opinions shall be at the sole expense of the
Company) and addressed to the Company and the underwriter covering the matters
customarily covered in opinions requested in underwritten offerings; and (iii)
deliver such documents and certificates as may be reasonably requested by the
Company and the managing underwriters to ensure the Company's compliance with
Section 6(k) above.
In the event the Company shall give any such notice, the time periods
mentioned in Section 6(b) hereof shall be extended by the number of days during
the period from and including the date of the giving of such notice to and
including the date when each seller of Registrable Securities covered by such
Registration Statement either receives the copies of the supplemented or amended
prospectus contemplated by Section 6(k) hereof or is advised in writing by the
Company that the use of the Prospectus may be resumed.
7. Registration Expenses
(a) All expenses incident to the Company's performance of or compliance with
this Agreement will be paid by the Company, regardless whether a Registration
Statement becomes effective, including, without limitation:
(1) all registration and filing fees (including, without limitation,
with respect to filings required to be made with the NASD);
(2) fees and expenses of compliance with securities or blue sky laws
(including, without limitation, fees and disbursements of counsel for the
underwriters or selling holders in connection with blue sky qualifications of
the Registrable Securities and determination of their eligibility for investment
14
<PAGE>
under the laws of such jurisdictions, as the managing underwriters or holders of
Registrable Securities being sold may designate);
(3) printing (including, without limitation, expenses of printing or
engraving certificates for the Registrable Securities in a form eligible for
deposit with The Depositary Trust Company and of printing prospectuses),
messenger, telephone and delivery expenses;
(4) fees and disbursements of counsel for the Company, for the
underwriters and for the selling holders of the Registrable Securities (subject
to the provisions of Section 7(b) hereof);
(5) fees and disbursements of all independent certified public
accountants of the Company (including, without limitation, the expenses of "cold
comfort" letters required by or incident to such performance);
(6) fees and disbursements of underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals relating to the distribution of the
Registrable Securities or legal expenses of any Person other than the Company,
the underwriters and the selling holders);
(7) securities acts liability insurance if the Company so desires;
(8) fees and expenses of other Persons retained by the Company; and
(9) fees and expenses associated with any NASD filing required to be
made in connection with the Registration Statement, including, if applicable,
the fees and expenses of any "qualified independent underwriter" (and its
counsel) that is required to be retained in accordance with the rules and
regulations of the NASD (all such expenses being herein called "Registration
Expenses").
The Company will, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the securities to
be registered on each securities exchange on which similar securities issued by
the Company are then listed, rating agency fees and the fees and expenses of any
Person, including special experts, retained by the Company.
(b) In connection with each Registration Statement required hereunder, the
Company will reimburse the holders of Registrable Securities being registered
pursuant to such Registration Statement for the reasonable fees and
disbursements of not more than one counsel chosen by the holders of a majority
of such Registrable Securities being registered pursuant to such Registration
Statement; provided such counsel is reasonably acceptable to the Board of
Directors of the Company.
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8. Indemnification
(a) Indemnification by the Company. The Company agrees to indemnify and hold
harmless each holder of Registrable Securities, and, if applicable, its
officers, directors, employees and agents and each Person who controls such
holder within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act (each such person being sometimes hereinafter referred to
as an "Indemnified Holder") from and against all losses, claims, damages and
liabilities, including all actual legal or other expenses reasonably incurred by
an Indemnified Holder in connection with investigating or defending against such
loss, claim, damage, liability or action, joint or several, to which such
Indemnified Holders may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except insofar as any such untrue statement or omission is
based upon information furnished in writing to the Company by such holder
expressly for use therein; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any preliminary
prospectus if the Prospectus would have completely corrected such untrue
statement or omission; and provided further, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in the Prospectus, if
such untrue statement or alleged untrue statement, omission or alleged omission
is completely corrected in an amendment or supplement to the Prospectus and if,
having previously been furnished by or on behalf of the Company with copies of
the Prospectus as so amended or supplemented, such holder thereafter fails to
deliver such Prospectus as so amended or supplemented prior to or concurrently
with the sale of a Registrable Security to the person asserting such loss,
claim, damage, liability or expense who purchased such Registrable Security
which is the subject thereof from such holder. This indemnity will be in
addition to any liability which the Company may otherwise have. The Company will
also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers and directors and each Person who controls such Persons (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
to the same extent as provided above with respect to the indemnification of the
Indemnified Holders of Registrable Securities.
If any action or proceeding (including any governmental investigation or
inquiry) shall be brought or asserted against an Indemnified Holder in respect
of which indemnity may be sought from the Company, such Indemnified Holder shall
promptly notify the Company in writing, and the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Holder and the payment of all expenses. Such Indemnified Holder
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be the expense of such Indemnified Holder unless (a) the Company has
agreed to pay such fees and expenses or (b) the Company shall have failed to
assume the defense of such action or proceeding or shall have failed to employ
counsel reasonably satisfactory to such Indemnified Holder in any such action or
proceeding or (c) such Indemnified Holder in its reasonable judgment has
16
<PAGE>
separate defenses available or due to actual or potential material differing
interests between them (in which case, if such Indemnified Holder notifies the
Company in writing that it elects to employ separate counsel at the expense of
the Company, the Company shall not have the right to assume the defense of such
action or proceeding on behalf of such Indemnified Holder, it being understood,
however, that the Company shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for such Indemnified Holder and any
other Indemnified Holders, which firm shall be designated in writing by such
Indemnified Holders). The Company shall not be liable for any settlement of any
such action or proceeding effected without its written consent, but if settled
with its written consent, or if there be a final judgment for the plaintiff in
any such action or proceeding, the Company agrees to indemnify and hold harmless
such Indemnified Holders from and against any loss or liability by reason of
such settlement or judgment.
(b) Indemnification by Holder of Registrable Securities. Each holder of
Registrable Securities severally agrees to indemnify and hold harmless the
Company, its directors, officers, employees and agents and each Person, if any,
who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act and each other holder of
Registrable Securities that participates in such offering to the same extent as
the foregoing indemnity from the Company to such holder, but only with respect
to information relating to such holder furnished in writing by such holder
expressly for use in any Registration Statement or Prospectus, or any amendment
or supplement thereto, or any preliminary prospectus. In case any action or
proceeding shall be brought against the Company or its directors or officers or
any such controlling person, in respect of which indemnity may be sought against
a holder of Registrable Securities, such holder shall have the rights and duties
given the Company and the Company or its directors or officers or such
controlling person shall have the rights and duties given to each holder by the
preceding paragraph. Notwithstanding the foregoing, if the Company is an
indemnified party, the Company shall designate the one counsel, and in all other
circumstances, the one counsel shall be designated by a majority in interest
based upon the Registrable Securities of the Indemnified parties. In no event
shall the liability of any selling holder of Registrable Securities hereunder be
greater in amount than the proceeds received by such holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
The Company and each other holder of Registrable Securities that
participates in such offering shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration Statement or any
amendment or supplement thereto, or any preliminary prospectus.
(c) Contribution. If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
17
<PAGE>
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Company, on
the one hand, and of the Indemnified Holder, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of the Company, on the one hand, and of the Indemnified
Holder, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Indemnified Holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in the second paragraph
of Section 8(a) hereof, any legal or other fees or expenses reasonably incurred
by such party in connection with investigating or defending any action or claim.
The Company and each holder of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this Section 8(c) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
8(c), an Indemnified Holder shall not be required to contribute any amount in
excess of the amount by which the total price at which the securities sold by
such Indemnified Holder or its affiliated Indemnified Holders and distributed to
the public were offered to the public exceeds the amount of any damages which
such Indemnified Holder, or its affiliated Indemnified Holders, has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
9. Rule 144.
The Company covenants that at all times after the effective date of the
first registration filed by the Company which involves a sale of securities of
the Company to the general public, it will file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder and will take such further action as
any holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time or (b) any similar rule or regulation hereafter
adopted by the SEC. Upon the request of any holder of Registrable Securities,
the Company will deliver to such holder a written statement as to whether it has
complied with such information and requirements.
10. Participation in Underwritten Registrations.
(a) No holder (or its successors or assigns) may participate in any
underwritten registration hereunder unless such Person (a) agrees to sell such
Person's securities on the basis provided in any underwriting arrangements
18
<PAGE>
approved by the underwriters and other Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
(b) In the case of an underwritten offering by the Company of securities,
each holder of Registrable Securities shall, with respect to Registrable
Securities that such holder then desires to sell pursuant to Section 4, enter
into an underwriting agreement with the same underwriters engaged by the Company
with respect to securities being offered by the Company and the Company shall
cause such underwriters to include in any such underwriting all of the
securities that a holder of Registrable Securities then desires to sell;
provided, however, that such underwriting agreement is in substantially the same
form as the underwriting agreement that the Company enters into in connection
with the primary offering it is making, except for such differences in the
underwriting agreement as are generally customary to distinguish between an
issuer and its selling stockholders.
11. Restrictive Legend.
Each certificate representing Registrable Securities and Rights exercisable,
convertible or exchangeable for Registrable Securities shall, except as
otherwise provided in this Section 11 or in Section 12, be stamped or otherwise
imprinted with a legend substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or applicable state securities
laws. These securities have been acquired for investment and not with a view
to distribution or resale, and may not be sold mortgaged, pledged,
hypothecated or otherwise transferred without an effective registration
statement for such securities under the Securities Act of 1933 and
applicable state securities laws, or the availability of an exemption from
the registration provisions of the Securities Act of 1933 and applicable
state securities laws."
A certificate shall not bear such legend if in the opinion of counsel reasonably
satisfactory to the Company the securities being sold thereby may be publicly
sold without registration under the Securities Act.
12. Notice of Proposed Transfer.
Prior to any proposed transfer of any Registrable Securities (other than
under the circumstances described in Sections 3 or 4), the holder thereof shall
give written notice to the Company of its intention to effect such transfer.
Each such notice shall describe the manner of the proposed transfer and, if
requested by the Company, shall be accompanied by an opinion of counsel
reasonably satisfactory to the Company to the effect that the proposed transfer
may be effected without registration under the Securities Act, whereupon the
holder of such stock shall be entitled to transfer such stock in accordance with
the terms of its notice; provided, however, that no such opinion of counsel
shall be required for a transfer to one or more partners of the transferor (in
the case of a transferor that is a partnership), to one or more members of the
transferor (in the case of a transferor that is a limited liability company) or
19
<PAGE>
to an affiliated corporation (in the case of a transferor that is a
corporation); provided, further, however, that any transferee other than a
partner or affiliate of the transferor shall execute and deliver to the Company
a representation letter in form reasonably satisfactory to the Company's counsel
to the effect that the transferee is acquiring Registrable Securities for its
own account, for investment purposes and without any view to distribution
thereof. Each certificate for Registrable Securities transferred as above
provided shall bear the legend set forth in Section 11, except that such
certificate shall not bear such legend if (i) such transfer is in accordance
with the provisions of Rule 144 (or any other rule permitting public sale
without registration under the Securities Act) or (ii) the opinion of counsel
referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act. The restrictions provided for in this Section 12 shall not apply
to securities which are not required to bear the legend prescribed by Section 11
in accordance with the provisions of that Section.
13. Miscellaneous.
(a) Remedies. Each holder of Registrable Securities, in addition to being
entitled to exercise all rights provided herein, and granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
unless the Company has obtained the written consent of holders of at least a
majority of the outstanding Registrable Securities; provided, however, that the
rights of the DPR Investors, the CapEx Investors, the IWB Investors, the Staples
Investors, PPP Investors and the Series A Investors to a Demand Registration may
not be amended or modified and a waiver or consent to the departure from the
applicable provisions relating thereto may not be given unless the Company has
obtained the written consent of the holders of at least a majority of the
outstanding Registrable Securities held by the DPR Investors, the CapEx
Investors, the IWB Investors, Staples Investors, PPP Investors or the Series A
Investors, as the case may be; provided, further, that no such amendment shall
unfairly discriminate against any particular holder of Registrable Securities
relative to the other holders thereof. Any action taken under this Section
unless as specifically provided herein, shall bind all holders of Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to departure from
the provisions hereof that relates exclusively to the rights of holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other holders of Registrable Securities may be given by the holders of
a majority of the Registrable Securities being sold.
(c) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telecopier, or air courier guaranteeing overnight delivery:
20
<PAGE>
(1) if to a holder of Registrable Securities initially at its address
set forth on the signature page hereof and thereafter at such other address,
notice of which is given by such holder to the Company in accordance with the
provisions of this Section 13(c); and
(2) if to the Company, initially at its address set forth on the
signature page hereof and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 13(c), with a copy to
Loeb & Loeb LLP, 345 Park Avenue, New York, New York, Attention: David S.
Schaefer, Esq.
All such notices and communications shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered during regular business
hours on a business day (otherwise, on the next business day); when received if
deposited in the mail, postage prepaid, if mailed; when receipt of confirmation
of delivery occurs, if telecopied during regular business hours on a business
day (otherwise, on the next business day); and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
(d) Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon the successors and assigns of each of the parties, including,
without limitation, and without the need for an express assignment, subsequent
holders of Registrable Securities.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
(h) Severability. The invalidity or unenforceability of any provision of
this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction.
(i) Entire Agreement. This Agreement, including any exhibits hereto and the
documents and instruments referred to herein and therein, is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties, covenants or undertakings, other than those set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(j) Termination as to Stockholders. If a Stockholder ceases to hold any
Registrable Securities, such Stockholder shall cease to be a party to this
Agreement, but (i) this Agreement shall continue in full force and effect and
continue to be binding on the Company and the other Stockholders and (ii) the
rights and obligations under Sections 3, 4 and 8 of such former Stockholder,
21
<PAGE>
each Person (if any) who controls such former Stockholder within the meaning of
the Securities Act and each of their respective affiliates, partners, directors,
officers, employees and agents of the foregoing with respect to any Demand
Registration or piggyback registration in which such former Stockholder was a
selling stockholder shall survive.
(k) Certain Mergers and Other Events. If the Company proposes to consummate
any consolidation, merger, binding share exchange or reorganization to which the
Company is a party and in which the Company is not the continuing corporation or
any sale, conveyance, transfer or lease to another entity of the properties and
assets of the Company as an entirety or substantially as an entirety and if, as
a result of or in connection with such transaction, the Stockholders would
receive or would be entitled to receive, in exchange for or otherwise with
respect to the Registrable Securities held by them, any common stock, other
capital stock or other securities of the successor or acquiring corporation or
any affiliate thereof or any Rights for any such common stock, capital stock or
other securities, then the Company shall not consummate such transaction unless
the successor or acquiring entity (as the case may be) shall, in a manner
reasonably satisfactory to the holders of a majority of the Registrable
Securities, grant to the Stockholders registration rights with respect to such
common stock, other capital stock or other securities which shall be no less
favorable to the Stockholders than the provisions of this Agreement. In the
event of (i) any reclassification, reorganization or change of the outstanding
shares of Common Stock or other capital stock of the Company, (ii) any
consolidation, merger, binding share exchange or reorganization to which the
Company is party (other than a consolidation, merger, share exchange or
reorganization in which the Company is the continuing corporation and which does
not result in any reclassification of or change in the Common Stock) or (iii)
any other event of any kind occurs which results in a change in the securities
constituting or included in the Common Stock immediately before such event, then
the Stockholders shall be entitled to registration rights with respect to such
all securities issued or issuable to them by reason thereof which are comparable
in all material respects to those provided for herein with respect to
Registrable Securities. In the event any dispute relating to this Section 13(k)
shall arise, then such dispute shall promptly thereafter be submitted for
resolution by an independent law firm of recognized national standing selected
by the Company and reasonably acceptable to the holders of a majority of the
Registrable Securities, whose decision (with the advice of an independent
investment banking firm of recognized national standing selected by such law
firm, if such law firm believes it advisable to seek such advice) shall be final
and conclusive. The fees and expenses of such law firm (and of any such
investment banking firm) shall be paid by the Company.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
REGISTER.COM INC.
By:__________________________________
Name:
Title:
575 Eighth Avenue
11th Floor
New York, NY 10018
Facsimile: (212) 627-6477
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<PAGE>
Stockholders:
_____________________________________
Dan B. Levine
P.O. Box 292
Old Westbury, NY 11564
Facsimile: (516) 626-7869
<PAGE>
_____________________________________
Peter A. Forman
201 Water Street
Brooklyn, NY 11201
Facsimile: (718) 596-3959
<PAGE>
_____________________________________
Richard D. Forman
c/o Register.com Inc.
575 Eighth Avenue
11th Floor
New York, NY 10018
Facsimile: (212) 627-6477
<PAGE>
CAPITAL EXPRESS, L.L.C.
By:__________________________________
Name: Niles H Cohen
Title: Managing Member
100 Plaza Drive
Secaucus, NJ 07094
Facsimile: (201) 583-3634
<PAGE>
INTERNET WEB BUILDERS, LLC
By:__________________________________
Name: Zachary Prensky
Title: Managing Member
372 Central Park West
New York, NY 10025
Facsimile: (212) 280-4035
<PAGE>
PALISADE PRIVATE PARTNERSHIP, L.P.
By:__________________________________
Name:
Title:
One Bridge Plaza
Fort Lee, NJ 07024
Facsimile: (201) 585-9798
<PAGE>
STAPLES, INC.
By:__________________________________
Name:
Title:
500 Staples Drive
Framingham, MA 01702
Facsimile: (508) 370-7805
<PAGE>
SANDLER CAPITAL IV PARTNERS, L.P.
By: Sandler Investment Partners,
L.P., a General Partner
By: Sandler Capital Management,
a General Partner
By: MJDM Corp., a General Partner
By:__________________________________
Edward Grinacoff
President
767 Fifth Avenue
45th Floor
New York, NY 10153
Facsimile: (212) 826-0280
<PAGE>
SANDLER CAPITAL IV FTE PARTNERS, L.P.
By: Sandler Investment Partners,
L.P., a General Partner
By: Sandler Capital Management,
a General Partner
By: MJDM Corp., a General Partner
By:__________________________________
Edward Grinacoff
President
767 Fifth Avenue
45th Floor
New York, NY 10153
Facsimile: (212) 826-0280
<PAGE>
SANDLER CAPITAL MANAGEMENT
By: MJDM Corp., a General Partner
By:__________________________________
Edward Grinacoff
President
767 Fifth Avenue
45th Floor
New York, NY 10153
Facsimile: (212) 826-0280
<PAGE>
BESSEMER VENTURE PARTNERS IV L.P.
By: Deer IV & Co. LLC,
General Partner
By:__________________________________
Robert H. Buescher
Manager
1400 Old Country Road
Suite 407
Westbury, NY 11590
Facsimile: (516) 997-2371
<PAGE>
BESSEC VENTURES IV L.P.
By: Deer IV & Co. LLC,
General Partner
By:__________________________________
Robert H. Buescher
Manager
630 Fifth Avenue
37th Floor
New York, NY 10111
Facsimile: (212) 265-5826
<PAGE>
HIKARI TSUSHIN INC.
By:__________________________________
Name:
Title:
3333 Bowers Avenue
Suite 239
Santa Clara, CA 95054
Facsimile: (408) 844-7969
<PAGE>
CONCENTRIC NETWORK CORPORATION
By:__________________________________
Name:
Title:
1400 Parkmoor Avenue
San Jose, CA 95126
Facsimile: (408) 817-2810
<PAGE>
BAYVIEW INVESTORS LTD.
By:__________________________________
Name:
Title:
555 California Street, 2600
San Francisco, CA 94104
Facsimile: (415) 676-2977
<PAGE>
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT, dated as of June
30, 1999, is made by and among REGISTER.COM INC., a Delaware corporation (the
"Company"), DAN B. LEVINE ("DBL"), PETER A. FORMAN, ("PAF"), RICHARD D. FORMAN,
("RDF"), CAPITAL EXPRESS, L.L.C., a New Jersey limited liability company
("CapEx"), INTERNET WEB BUILDERS, L.L.C., a New Jersey limited liability company
("IWB"), PALISADE PRIVATE PARTNERSHIP, L.P., a Delaware limited partnership
("PPP"), STAPLES, INC., a Delaware corporation ("Staples;" and together with
DBL, PAF, RDF, CapEx, IWB and PPP, the "Existing Stockholders"), and the Persons
named as purchasers (the "Investors") of the Company's Series A Convertible
Preferred Stock, par value $0.0001 per share (the "Series A Preferred Stock"),
pursuant to the Series A Convertible Preferred Stock Purchase Agreement, dated
as of the date hereof.
WHEREAS, the Company and the Existing Stockholders are parties
to a Shareholders' Agreement, dated as of January 5, 1998, as amended by
Amendment No. 1 to the Shareholders' Agreement dated as of March 25, 1999 and
Amendment No. 2 to the Shareholders' Agreement, dated as of May 21, 1999 (as
amended, the "Existing Shareholders' Agreement");
WHEREAS, in connection with the sale of the Company's Series A
Convertible Preferred Stock to the Investors, the Company and the Existing
Stockholders desire to amend (and, for ease of reference, restate) the Existing
Shareholders' Agreement on the terms and conditions set forth herein; and
WHEREAS, it is a condition to sale of the Company's Series A
Preferred Stock that the Investors become parties to this Agreement;
NOW, THEREFORE, in consideration of the mutual benefits to be
derived here from and the mutual agreements hereinafter set forth, the parties
hereto agree as follows:
1. Defined Terms.
(a) For purposes of this Agreement, the following terms
shall have the meanings indicated:
"Board of Directors" shall mean the board of directors of the
Company.
"Common Stock" shall mean the Common Stock of the Company, par
value $0.0001 per share, as constituted on the date hereof, and any capital
stock into which such Common Stock may hereafter be changed, and such term shall
also include (unless the context clearly indicates otherwise) (i) capital stock
of the Company of any other class or series (regardless of how denominated)
issued to the holders of shares of Common Stock upon any reclassification
thereof which is also not preferred as to dividends or assets on liquidation
over any other class or series of capital stock of the Company and which is not
subject to redemption and (ii) shares of common stock of any successor or
acquiring corporation or any affiliate thereof which are issued or may be
issuable to any Stockholders pursuant to any consolidation, merger, binding
share exchange or reorganization to which the Company is a party and in which
the Company is not the continuing corporation and which does not give rise to
termination of this Agreement pursuant to Section 2.
<PAGE>
"Competitor" means as of any date of determination any Person
or Entity (and any officer, director, partner, member, key employee or
beneficial owner of 10% or more of such Entity's voting equity) engaged, or
whose business is such that it is reasonably likely that such Person or Entity
could within one year as of such date of determination be engaged, in the
business of developing, marketing or distributing e-commerce services to create,
maintain and/or host web sites, or providing domain name registration services.
"DPR" means DBL, PAF and RDF.
"Entity" means any corporation, limited liability company,
general or limited partnership, joint venture, association, joint stock company,
trust, other unincorporated business or organization or other Person which is
not either a natural person or a governmental authority.
"Exempt Sale" means a sale of Shares owned by a Stockholder
pursuant to an effective registration statement under the Securities Act.
"Family Donee" means, with respect to individual Stockholders,
(i) such Stockholders' parents, spouse, adult lineal descendants and siblings,
(ii) the adult spouses of such siblings, the adult spouses of such lineal
descendants and the parents of such spouse, and (iii) trusts for the benefit of
any of such individuals or their children.
"Outstanding Shares" means, as of any date of determination,
all issued shares of Common Stock as of such date, except for such shares then
owned or held by or for the account of the Company or any subsidiary thereof,
and all shares of Common Stock issuable upon exercise, conversion or exchange of
any Rights outstanding as of such date, except for such Rights then owned or
held by or for the account of the Company and such Rights that cannot be
exercised, converted or exchanged without the occurrence of a specified date or
event or the satisfaction or happening of any other condition or contingency,
other than the payment of cash or property. "Outstanding Shares" shall not
include any shares of Common Stock issuable in payment of any dividend or other
distribution which has been declared but not actually paid. In determining the
percentage of Outstanding Shares of any Person, the numerator shall be the
number of Outstanding Shares beneficially owned by such Person and the
denominator shall be the number of Outstanding Shares beneficially owned by all
Persons.
"Person" means any individual, corporation, limited liability
company, general or limited partnership, joint venture, association, joint stock
company, trust, unincorporated business or organization, governmental authority
or other entity or legal person, whether acting in an individual, fiduciary or
other capacity.
"Prohibited Party" means any Person who has been convicted of
(or pleaded nolo contendere to) a felony or other crime, or who is or has been
the subject of any order, judgment, writ, decree, award or other determination,
decision or ruling of any court, judge, justice or magistrate, involving
self-dealing, fraud, embezzlement or acts of moral turpitude.
2
<PAGE>
"Public Offering" means an underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale to the public of Common Stock and/or Rights.
"Publicly Held Date" means the date on which shares of Common
Stock having an aggregate public offering price of not less than $10 million
have been effectively registered under the Securities Act and disposed of in
accordance with the registration statement or statements covering such shares.
"Related Party" means with respect to any Person, any other
Person who is a director, officer, partner, manager, member or shareholder of
such Person.
"Rights" means any options, warrants, convertible or
exchangeable securities or other rights, however denominated, to subscribe for,
purchase or otherwise acquire Common Stock or other Rights to subscribe for
purchase or otherwise acquire Common Stock, with or without payment of
additional consideration in cash or property, either immediately or upon the
occurrence of a specified date or a specified event or the satisfaction or
happening of any other condition or contingency.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, or any successor statute, and (unless the context otherwise
requires) the rules and regulations promulgated thereunder.
"Shares" means (i) any Common Stock and any Rights purchased
or otherwise acquired by any Stockholder, (ii) any Common Stock or Rights issued
or issuable directly or indirectly with respect to the Common Stock referred to
in clause (i) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization, and (iii) any other Common Stock or Rights held by a
Stockholder. As to any particular securities constituting Shares, such
securities shall cease to be Shares when they have been sold to the public
through a Public Offering or other subsequent public sale unless thereafter they
are reacquired by a Stockholder.
"Stockholder" means each Person who is a party to this
Agreement other than the Company, except that such Person shall cease to be a
Stockholder as of the time such Person ceases to own any Shares subject to this
Agreement.
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<PAGE>
(b) The following additional terms listed below shall have
the meanings ascribed thereto in the Section (or other provision hereof)
indicated next to such term:
Term Section
---- -------
CapEx Preamble
Company Preamble
DBL Preamble
Existing Shareholder Agreement Recitals
Existing Stockholders Preamble
Investors Preamble
IWB Preamble
Offer 8(a)
Offer Notice 7(a)
Offered Shares 7(a)
Offeror 7(a)
Option Period 7(d)(i)
Other Stockholders 7(a)
PAF Preamble
Participating Stockholder 7(d)(i)
PPP Preamble
RDF Preamble
Remaining Shares 7(b)(ii)
Selling Stockholder 7(a)
Series A Preferred Stock Preamble
Staples Preamble
Stockholder Offer Notice 7(b)(ii)
Stockholder Shares 5(a)
Transfer 5(a)
2. Termination of Prior Agreements; Term of Agreement.
(a) The Existing Shareholders' Agreement and any and all
other shareholder agreements heretofore made or presently in effect between or
among the parties hereto, and all amendments thereto, are hereby in all respects
canceled, terminated and superseded by this Agreement.
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(b) This Agreement shall continue from and after the date
hereof and will terminate upon the earliest to occur of the following: (i) the
sale of all or substantially all of the assets of the Company, (ii) the merger
or consolidation of the Company pursuant to which the holders of the voting
power of the Company immediately prior to such merger or consolidation are less
than 50% of the voting power immediately after such merger or consolidation,
(iii) the liquidation and dissolution of the Company, (iv) the commencement of
bankruptcy proceedings or the appointment of a receiver for the Company, or (v)
the Publicly-Held Date.
3. Legend on Certificates.
(a) Each Stockholder agrees to present the certificates
representing the Shares presently owned or hereafter acquired by him to the
Secretary of the Company and the Company agrees to cause the Secretary to stamp
on the certificate in a prominent manner the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A CERTAIN AMENDED AND RESTATED STOCKHOLDERS'
AGREEMENT, DATED JUNE 30, 1999, BY AND AMONG THE COMPANY AND THE
STOCKHOLDERS OF THE COMPANY SPECIFIED THEREIN, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. THE SALE,
PLEDGE, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE OR ANY INTEREST THEREIN IS RESTRICTED BY SUCH
AGREEMENT AND ANY SUCH SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION MAY
BE MADE ONLY UPON COMPLIANCE THEREWITH. SUCH AGREEMENT ALSO CONTAINS
PROVISIONS RELATING TO THE EXERCISE OF CERTAIN VOTING AND CONSENT
RIGHTS, IF ANY, OF THE HOLDERS OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE."
(b) An original copy of this Agreement, duly executed by
each of the parties hereto, shall be delivered to the Secretary of the Company
and maintained at the principal executive office of the Company and made
available for inspection by any Person requesting it.
4. Restrictions on Issuance of Stock.
(a) From and after the date hereof, the Company shall not
issue Shares to any Person, unless such Person shall first execute a written
consent to be bound by all of the provisions of, become a party to, and a
"Stockholder" under, this Agreement and shall deliver a copy of such consent to
the Company and the Stockholders; provided, however, that this Section 4 shall
not apply to any Shares issued pursuant to (i) any stock options granted to
employees of the Company who are not a party to this Agreement, which stock
options are issued pursuant to stock option plans of the Company as may be in
effect from time to time, (ii) Rights outstanding as of the date hereof held by
Persons who as of the date hereof are not a party to this Agreement, and (iii) a
Public Offering or pursuant to Rights issued and sold in a Public Offering.
(b) Regardless of whether a written consent is executed and
delivered, each Person to which the Company properly issues Shares pursuant to
Section 4(a) or to which a Stockholder properly sells Shares pursuant to
Sections 6 or 7, by accepting Stockholder Shares, shall be deemed to be a party
to, and a "Stockholder" under, this Agreement and to have accepted and adopted
the terms and provisions of this Agreement as if such Person executed and
delivered such written instrument. Promptly (but in any case within five days)
after a Person becomes a Stockholder, the Company agrees to give (i) to those
Persons who are then Stockholders, notice of the name and address of the Person
becoming a Stockholder and (ii) to the Person who becomes a Stockholder, a copy
of this Agreement and a list of the names and addresses of each Person who is
then a Stockholder. The Company agrees not to effect a transfer on its books of
any of the Stockholder Shares except in accordance with the foregoing terms.
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5. Restrictions on Transfer of Shares.
(a) No Transfers. No Stockholder shall sell, transfer,
assign, pledge, hypothecate, encumber or otherwise dispose of (collectively, a
"Transfer") any Shares or any interest in any Shares, beneficially owned by such
Stockholder ("Stockholder Shares") except in compliance with the provisions of
this Agreement. Any purported Transfer which is not made in compliance with this
Agreement shall be void.
(b) No Circumvention. Each Stockholder hereby agrees not to
Transfer or attempt to Transfer any Stockholder Shares indirectly in a manner
that would be inconsistent with the essential intent of this Agreement. For
purposes of this Agreement, any Transfer of an equity interest of an Entity that
was formed for the purpose of acquiring Stockholder Shares shall be deemed to be
a Transfer of such portion of the Shares, as applicable, owned by such Entity as
corresponds to the portion of the equity of such Entity that has been so
transferred.
(c) Prohibited Transferees. Each Stockholder agrees that,
notwithstanding any provision of this Agreement to the contrary, such
Stockholder will not Transfer or seek to Transfer any Stockholder Shares to any
Prohibited Party or Competitor.
6. Permitted Transfers. Any Stockholder may Transfer any
Stockholder Shares (i) to a Family Donee of such Stockholder, (ii) to any
Related Party of such Stockholder (together with a Family Donee, a "Permitted
Transferee"), (iii) to a Person pursuant to an Exempt Sale, or (iv) to another
Stockholder (unless such Stockholder, together with his affiliates, Related
Parties and Family Donee, would beneficially own more than 50% of the voting
power of the voting securities of the Company), in each case without complying
with the provisions of Section 7, provided that, in each instance of a Transfer
pursuant to clauses (i) and (ii) above, such Permitted Transferee first executes
a written consent to be bound by all of the provisions of, become a party to,
and a "Stockholder" under, this Agreement and shall deliver a copy of such
consent to the Company and the Stockholders.
7. Rights of First Refusal and Tag-Along Rights.
(a) Bona Fide Offer; Offer Notice. If any Stockholder
desires to Transfer any of his Shares, or any interest in such Shares, in any
transaction, other than pursuant to Section 6 of this Agreement, pursuant to a
bona fide written offer, such Stockholder (the "Selling Stockholder") shall
first deliver written notice of his desire to do so (the "Offer Notice") to the
Company and each of the other Stockholders (the "Other Stockholders"), in the
manner prescribed in Section 11 of this Agreement. The Offer Notice must
specify: (i) the name and address of the Selling Stockholder, (ii) the name and
address of the party to which the Selling Stockholder proposes to sell or
otherwise dispose of the Shares or an interest in the Shares (the "Offeror"),
(iii) the number and description of Shares the Selling Stockholder proposes to
sell or otherwise dispose of (the "Offered Shares"), (iv) the proposed amount
and form of the consideration per Share to be delivered to the Selling
Stockholder for the proposed sale, transfer or disposition, and the conditions
of payment, (v) all other material terms and conditions of the proposed
transaction, (vi) whether, upon consummation of the proposed sale, transfer or
disposition, the Offeror, together with the Offeror's Related Parties, would
beneficially own more than 50% of the voting power of the voting securities of
the Company, and (vii) that the Offeror has received a copy of this Agreement
and has agreed to purchase the Offered Shares in accordance with the terms and
conditions hereof. The Selling Stockholder shall include with the Offer Notice
copies any agreements or other documents related to the offer by the Offeror.
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(b) Company's Option to Purchase.
(i) Subject to Section 7(d)(i), the Company shall have
the first option to purchase all or any part of the Offered Shares for the
consideration per share and on the terms and conditions specified in the Offer
Notice. The Company must exercise such option by written notice to the Selling
Stockholder, no later than 10 days after such Offer Notice is deemed to have
been delivered to it under Section 11 hereof.
(ii) In the event the Company does not exercise its
option within such 10-day period with respect to all of the Offered Shares, the
Company shall, by the last day of such period, give written notice of that fact
to the other Stockholders and the Selling Stockholder (the "Stockholder Offer
Notice"). The Stockholder Offer Notice shall specify the number of Offered
Shares that the Company elected not to purchase (the "Remaining Shares").
(iii) In the event the Company duly exercises its
option to purchase all or part of the Offered Shares, the closing of such
purchase shall take place at the offices of the Company on the later of (i) the
date five days after the expiration of such 10-day period or (ii) the date that
the Other Stockholders consummate their purchase of Remaining Shares under
Section 7(c)(iii) hereof.
(iv) To the extent that the consideration proposed to
be paid by the Offeror for the Offered Shares consists of property other than
cash or promissory notes, the consideration required to be paid by the Company
and/or the Other Stockholders exercising their options under Sections 7(b) and
(c) hereof may consist of cash equal to the value of such property, as
determined in good faith by agreement of the Selling Stockholder and the Company
and/or the Other Stockholders acquiring such Offered Shares.
(v) At the closing of such purchase, the Selling
Stockholder shall only be required to provide representations and warranties
that he has title to the Offered Shares, free and clear of any liens, claims or
encumbrances, and that he has the power and authority to sell the Offered Shares
and to provide indemnities with respect thereto and shall only be required to
sign such stock powers and other documents as may reasonably be requested by the
Company or the Other Stockholders, as applicable, with respect to the transfer
thereof.
(vi) Notwithstanding anything to the contrary herein,
neither the Company nor any of the Other Stockholders shall have any right to
purchase any of the Offered Shares hereunder unless the Company and/or the Other
Stockholders exercise their option or options to purchase all of the Offered
Shares.
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(c) Other Stockholders' Option to Purchase.
(i) Subject to Section 7(d)(i), the Other Stockholders
shall have an option, exercisable for a period of 10 days from the date of
delivery of the Stockholder Offer Notice, to purchase, on a pro rata basis
according to the number of Shares beneficially owned by such Stockholder
(calculated on a fully diluted basis), the Remaining Shares for the
consideration per share and on the terms and conditions set forth in the Offer
Notice. Such option shall be exercised by delivery by such Stockholder of
written notice to the Selling Stockholder and the Secretary of the Company.
Alternatively, each Stockholder may within the same 10-day period, notify the
Selling Stockholder and the Secretary of the Company of its desire to
participate in the sale of the Shares on the terms set forth in the Offer
Notice, and the number of Shares it wishes to sell.
(ii) In the event options to purchase have been
exercised by the Stockholders with respect to some but not all of the Remaining
Shares, those Stockholders who have exercised their options within the 10-day
period specified in Section 7(c)(i) shall have an additional option, for a
period of five days next succeeding the expiration of such 10-day period, to
purchase all or any part of the balance of such Remaining Shares on the terms
and conditions set forth in the Offer Notice, which option shall be exercised by
the delivery of written notice to the Secretary of the Company. In the event
there are two or more such Stockholders that choose to exercise the
last-mentioned option for a total number of Remaining Shares in excess of the
number available, the Remaining Shares available for each such Stockholder's
option shall be allocated to such Stockholder pro rata based on the number of
Shares beneficially owned by the Stockholders so electing.
(iii) If the options to purchase the Remaining Shares
are exercised in full by the Stockholders, the Company shall immediately notify
all of the exercising Stockholders of that fact. The closing of the purchase of
the Remaining Shares shall take place at the offices of the Company no later
than five days after the date of such notice to the Stockholders.
(d) Failure to Fully Exercise Options; Tag-Along Right.
(i) If the Company and the Other Stockholders do not
exercise their options to purchase all of the Offered Shares within the periods
described in this Agreement (the "Option Period"), then all options of the
Company and the Other Stockholders to purchase the Offered Shares, whether
exercised or not, shall terminate; provided, however, that each Stockholder
which has, pursuant to Section 7(c)(i), expressed a desire to sell Shares in the
transaction (a "Participating Stockholder"), shall be entitled to do so pursuant
to this Section 7(d). The Company shall promptly, on expiration of the Option
Period, notify the Selling Stockholder of the aggregate number of Shares the
Participating Stockholders wish to sell. The Selling Stockholder shall use his
commercially reasonable efforts to interest the Offeror in purchasing, in
addition to the Offered Shares, the Shares the Participating Stockholders wish
to sell. If the Offeror does not wish to purchase all of the Shares made
available by the Selling Stockholder and the Participating Stockholders, then
each Participating Stockholder and the Selling Stockholder shall be entitled to
sell, at the price and on the terms and conditions set forth in the Offer
Notice, a portion of the Shares being sold to the Offeror, in the same
proportion as such Selling Stockholder or Participating Stockholder's beneficial
ownership of Shares bears to the aggregate number of Shares beneficially owned
(calculated on a fully diluted basis) by the Selling Stockholder and the
Participating Stockholders, it being agreed, however, that (i) any Participating
Stockholder shall be entitled to elect to be paid in cash in lieu of receiving
any non-cash consideration (the amount of such cash to be determined based on
the fair market value by an investment banking firm or, if an investment banking
firm is generally not qualified to render such a determination, by an appraisal
firm, in either case, of recognized national standing), and (ii) such terms and
conditions shall not include the making of any representations and warranties,
indemnities or other similar agreements other than representations and
warranties with respect to title of the Shares being sold and authority to sell
such Shares and indemnities related thereto. The transaction contemplated by the
Offer Notice shall be consummated not later than 60 days after the expiration of
the Option Period. It shall be a condition to the consummation thereof that the
Offeror execute a written consent to be bound by the provisions of, and become a
party to, and a "Stockholder" under, this Agreement in form and substance
reasonably satisfactory to the Company and deliver an original thereof to the
Secretary to the Company.
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(ii) If the Participating Stockholders do not elect to
sell the full number of Shares which they are entitled to sell pursuant to
Section 7(d)(i), the Selling Stockholder shall be entitled to sell to the
Offeror, according to the terms set forth in the Offer Notice, that number of
his own Shares which equals the difference between the number of Shares desired
to be purchased by the Offeror and the number of Shares the Participating
Stockholders are entitled to sell pursuant to Section 7(d). If the Selling
Stockholder wishes to Transfer any such Shares at a price per Share which
differs from that set forth in the Offer Notice, upon terms different from those
previously offered to the Company and the Stockholders, or more than 60 days
after the expiration of the Option Period, then, as a condition precedent to
such transaction, such Shares must first be offered to the Company and the
Stockholders on the same terms and conditions as given the Offeror, and in
accordance with the procedures and time periods set forth above.
(iii) The proceeds of any sale made by the Selling
Stockholder without compliance with the provisions of this Section 7(d) shall be
deemed to be held in constructive trust in such amount as would have been due
the Participating Stockholders if the Selling Stockholder had complied with this
Agreement.
8. Drag-Along.
(a) Notwithstanding anything to the contrary contained in
this Agreement, if at any time the Company or DPR receives a bona fide offer
that DPR desires to accept (an "Offer") from a third party (i.e., a Person other
than a Related Party or Family Donee of DPR), to purchase, in a single or a
series of related arms' length transactions (the "Sale"), all or any part of the
outstanding shares of Common Stock (the "Subject Shares"), then, if requested by
DPR, each other Stockholder shall sell his shares of Common Stock in such
transaction, on the same terms and conditions, and for the same consideration,
as set forth in such Offer and in the same proportion as DPR's beneficial
ownership of the shares of Common Stock (calculated on a fully diluted basis) to
be sold in such sale bears to the aggregate number of shares of Common Stock
beneficially owned by DPR (calculated on a fully diluted basis). DPR shall give
each Stockholder written notice (the "Sale Notice"), in the manner prescribed by
Section 11 of this Agreement, of any such Offer at least twenty (20) days prior
to the date on which such transaction shall be consummated, including the terms
and conditions thereof, and each shall have the obligation to sell its
proportionate amount of shares of Common Stock in accordance with the
instruction set forth in the Sale Notice.
(b) Following receipt of the Sale Notice, each such
Stockholder shall vote for, consent to and raise no objections to, nor bring a
claim against any of DPR, any of their Related Parties, the Company, its
affiliates or any of their respective officers, directors or stockholders or
contest or seek to enjoin the Sale, or seek appraisal, dissenter or other
similar such rights. Without limiting the generality of the foregoing, if such
Sale is structured as: (i) a merger or consolidation, each other Stockholder
shall waive any dissenter rights, appraisal rights or similar rights in
connection with such merger or consolidation; or (ii) a sale of securities, each
other Stockholder shall (A) agree to sell the proportionate amount of their
shares of Common Stock on the terms and conditions of a Sale approved in
accordance with Section 8(c) and (B) only be required to provide representations
and warranties that he has title to the shares of Common Stock owned by him and
subject to the Sale, free and clear of any liens, claims or encumbrances, and
that he has the power and authority to sell such shares of Common Stock, and
only be required to sign such stock powers and other documents as may reasonably
be requested by DPR and/or the Company or the purchaser, as applicable, with
respect to the transfer thereof. The Company may, at its option, deposit the
consideration payable for the shares of Common Stock with depository designated
by it and thereafter each share of Common Stock certificate shall represent only
the right to receive the consideration payable in the transaction. The
Stockholders shall take such other necessary or desirable actions in connection
with the consummation or such Sale as reasonably requested by DPR or the
Company.
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(c) The rights granted to DPR under this Section 8 shall
apply only to a Sale that is approved by the holders of a majority of the Common
Stock. For purposes of this Section 8, if the holder of a majority of the shares
of Common Stock constituting the shares of Common Stock beneficially owned by
DPR agree to take any action hereunder, each of the Stockholders constituting
DPR shall be bound thereby and shall be deemed to have agreed to such action,
provided each of them was first consulted with respect thereto.
(d) Staples shall not be bound by the provisions of Section
8(a) and (b) for (i) so long as Staples owns greater than five percent (5%) of
the outstanding Shares (calculated on a fully diluted basis) and (ii) in the
event that the per share purchase price of the Common Stock pursuant to the
Offer is less than $12.00 (as adjusted for stock splits, dividends,
recapitalizations or similar events).
9. Voting Agreements.
(a) Designation of Directors. Each of the Stockholders
severally covenants and agrees that, such Stockholder shall vote all shares of
the voting stock owned or controlled by each Stockholder, as of the record date
of any action of the stockholders of the Company, whether by consent or at a
meeting, at which members of the Board of Directors are to be elected or to
establish the number of directors of the Company, in favor of a Board of
Directors comprised of seven directors on the terms and conditions set forth in
this Section 9 as follows:
(i) Three (3) directors of the Company designated by
DPR for so long as DBL, PAF and RDF continue to beneficially own, in the
aggregate, at least 7.5% of the Outstanding Shares; provided, however, that, (A)
for so long as the Investors have a right to designate a director pursuant to
Section 9(a)(v), one of the directors for which DPR has the right to designate
shall be an industry representative designated by DPR, (B) as to the identity of
an industry representative, DPR shall consult and cooperate with the Investors
holding a majority of the issued and outstanding shares of Series A Preferred
Stock, provided, however, that the selection of such designee shall be made by
DPR, and (c) the obligation to consult and cooperate with such Investors shall
exist for so long as the issued and outstanding shares of Series A Preferred
Stock represent at least 6% of the Outstanding Shares. Upon the initial
designation by DPR of such industry representative, one of the directors for
which DPR has the right to designate, selected by DPR in its sole discretion,
shall resign and the vacancy created thereby shall be filled by such industry
representative pursuant to section 9(c).
(ii) One (1) director of the Company designated by
CapEx for so long as CapEx continues to beneficially own at least 5% of the
Outstanding Shares;
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(iii) One (1) director of the Company designated by IWB
for so long as IWB continues to beneficially own at least 5% of the Outstanding
Shares;
(iv) One (1) director of the Company designated by PPP
for so long as PPP continues to beneficially own at least 5% of the Outstanding
Shares; and
(v) One (1) director of the Company designated by the
Investors holding at least 50% of the issued and outstanding shares of Series A
Preferred Stock for so long as the issued and outstanding shares of Series A
Preferred Stock represent at least 6% of the Outstanding Shares; provided,
however, that such director shall be subject to RDF's approval.
(b) Term of Appointment. Subject to the earlier death,
resignation or removal of any director designated hereunder, each director
elected or appointed at any time as provided herein shall serve until the next
annual meeting of the Company's stockholders and his or her successor shall have
been elected as provided herein.
(c) Filling of Vacancy without Forfeiture. In the event of
any vacancy in the position of any director occurring for any reason, the
Stockholder (DPR, in the case of directors designated by DPR pursuant to Section
9(a)(i), subject to the provisos in the first sentence of Section 9(a)(i); or
the holders of at least 50% of the issued and outstanding shares of the Series A
Preferred Stock in the case of the director designated by such holders pursuant
to Section 9(a)(v), subject to the proviso in Section 9(a)(v), provided,
however, that, for so long as Sandler owns any shares of Series A Preferred
Stock, Sandler, with the consent of the holders of at least 50% of the issued
and outstanding shares of the Series A Preferred Stock, which consent shall not
be unreasonably withheld or delayed) who originally designated the director
whose position became vacant shall designate a successor to the other
Stockholders. All Stockholders shall use their commercially reasonable efforts
to cause the Board of Directors to appoint such designated successsor and will
vote all of their shares of voting stock in favor of the election of such
designated successor. If necessary, the Stockholder (or Stockholders, as
aforesaid) who originally designated the director whose position became vacant
shall have the right to request the Board of Directors to call a special meeting
of stockholders, to be held as soon as practicable after the occurrence of the
vacancy. Without limiting the generality of the foregoing, in the event that, at
any time, any of DPR, CapEx, IWB, PPP or the holders of at least 50% of the
issued and outstanding shares of the Series A Preferred Stock (collectively, the
"Replacing Stockholders"; each, a "Replacing Stockholder") determines to replace
or remove any or all of their respective designees to the Board of Directors of
the Company, the Replacing Stockholder(s) shall, as promptly as practicable,
provide written notice of such replacement or removal to each Stockholder as
then set forth in the Company's records. Following the giving of such notice,
each of the Stockholders severally agrees to vote all of the voting Shares owned
or controlled by such Stockholder for such replacement or removal and for the
replacement designee designated by the Replacing Stockholder in accordance with
the terms of this Section 9. Failure by a Replacing Stockholder to provide the
removal notice described above shall not prejudice the Replacing Stockholder's
right to replace removed directors with new designees of their choosing
provided; however, that the other members of the Board of Directors may treat
such Replacing Stockholder's former designee as a director and take all actions
with such former designee until such notice is received. The Company hereby
agrees to use its best efforts to cause such designated candidates and
replacements to be elected to the Board of Directors of the Company.
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(d) Filling a Vacancy upon Forefeiture. In the event any of
DPR, CapEx, IWB, PPP or at least 50% of the issued and outstanding shares of the
Series A Preferred Stock (each, a "Forfeiting Investor") forfeits the right to
designate one or more directors, as applicable (each such forfeiture event, a
"Forfeiture Date"), such director or directors, as designated by the Forfeiting
Investor (if applicable), shall be deemed to have resigned from the Board of
Directors of the Company as of the Forfeiture Date. Any vacancy created as a
result of any such resignation shall be filled by an individual designated by
the remaining members of the Board of Directors.
(e) Initial Designated Directors. The parties hereto agree
that as of the date hereof, the Board of Directors of the Company shall consist
of seven directors as set forth on Schedule I.
(f) Board Observer Rights. At any time prior to the
Publicly-Held Date, the Company shall invite a representative of PPP to attend
all meetings of its Board of Directors in a nonvoting-observer capacity and, in
this respect, shall give such representative copies of all notices, minutes,
consents and other materials it provides to its directors; provided, however,
that such representative shall agree to execute a confidentiality agreement in
favor of, and satisfactory, the Company and, provided further, that the Company
reserves the right to withhold any information and to exclude such
representative from any meeting or portion thereof if access to such information
or attendance at such meeting could adversely affect the attorney-client
privilege between the Company and its counsel.
10. Other Restrictions.
For so long as Staples owns Shares, the Company agrees that it
shall not agree to sell the Company by a merger or consolidation, or by a sale
of all or substantially all of the assets of the Company without the prior
written consent of Staples unless the consideration for such merger,
consolidation or sale of all or substantially all of the assets of the Company
is equal to a per share valuation of Common Stock of at least $12.00 (as
adjusted for stock splits, dividends, recapitalizations or similar events).
11. Notices.
All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telecopier, or air courier guaranteeing overnight delivery:
(a) if to a Stockholder initially at its address set
forth on the signature page hereof and thereafter at such other address, notice
of which is given by such holder to the Company in accordance with the
provisions of this Section 11; and
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(b) if to the Company, initially at its address set
forth on the signature page hereof and thereafter at such other address, notice
of which is given in accordance with the provisions of this Section 11, with a
copy to Loeb & Loeb LLP, 345 Park Avenue, New York, New York, Attention: David
S. Schaefer, Esq.
All such notices and communications shall be deemed to have
been duly given at the time delivered by hand, if personally delivered during
regular business hours on a business day (otherwise, on the next business day);
when received if deposited in the mail, postage prepaid, if mailed; when receipt
of confirmation of delivery occurs, if telecopied during regular business hours
on a business day (otherwise, on the next business day); and on the next
business day, if timely delivered to an air courier guaranteeing overnight
delivery.
12. Specific Performance.
Due to the fact that the Shares cannot be readily purchased or
sold in the open market, and for other reasons, the parties will be irreparably
damaged in the event that this Agreement is not specifically enforced. In the
event of a breach or threatened breach of the terms, covenants and/or conditions
of this Agreement by any of the parties hereto, the other parties shall, in
addition to all other remedies, be entitled to a temporary or permanent
injunction, without showing any actual damage, and/or a decree for specific
performance, in accordance with the provisions hereof.
13. Jurisdiction; Venue.
Each of the Company and each Stockholder irrevocably (i)
agrees that any suit, action or proceeding arising out of or relating to this
Agreement may be brought in the State or Federal courts located in The City of
New York, County of New York; (ii) consents to the jurisdiction of each such
court in any suit, action or proceeding relating to or arising out of this
Agreement; (iii) waives any objection which it may have to the laying of venue
in any such suit, action or proceeding in any of such court; and (iv) agrees
that service of any court paper may be made in such manner as may be provided
under applicable laws or court rules governing service of process, including,
without limitation, by the mailing of copies thereof by registered or certified
mail, postage pre-paid, to the other party at its address set forth in Section
11 hereof, such service to become effective five (5) business days after such
mailing.
14. Miscellaneous.
(a) This writing constitutes the entire agreement of
the parties with respect to the subject matter hereof and no provision may be
modified, amended, terminated or waived except by a writing signed by the
holders of not less than 51% of the outstanding Stockholder Shares (determined
on a fully diluted basis) subject to this Agreement; provided, however, that the
addition of any Stockholder to this Agreement shall not be deemed an amendment
hereof; provided, further, however, that no such writing shall be effective
against (i) any of DPR with respect to their respective rights under Sections 8
and 9 unless signed by them, (ii) CapEx with respect to its rights under Section
9 unless signed by it, (iii) IWB with respect to its rights under Section 9
unless signed by it, (iv) PPP with respect to its rights under Section 9 unless
signed by it, (v) Staples with respect to its rights under Sections 8(d) and 10
unless signed by it, and (vi) the Investors with respect to their rights under
Section 9 unless signed by the holders of a majority of the outstanding shares
of Series A Preferred Stock; provided, further, however that the consent of a
party shall not be required for any amendment, modification or termination of,
or waiver under, any provision of this Agreement if such party is not adversely
affected thereby.
13
<PAGE>
(b) No action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party or
beneficiary, shall be deemed to constitute a waiver by the party or beneficiary
taking such action of compliance with any agreements, covenants, obligations or
commitments contained herein or made pursuant hereto. The waiver by any party of
a breach or beneficiary of any provision of this Agreement shall not operate or
be construed as a waiver of any preceding or succeeding breach and no failure by
any party or beneficiary to exercise any right, privilege or remedy hereunder
shall be deemed a waiver of such party's or beneficiary's rights, privileges or
remedies hereunder or shall be deemed a waiver of such party's or beneficiary's
rights to exercise the same at any subsequent time or times hereunder.
(c) If any provision of this Agreement shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid or
unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable provision
were not contained herein.
(d) Except as expressly provided in this Agreement,
nothing in this Agreement, express or implied, is intended or shall be construed
to confer upon or give any Person (including creditors, stockholders and
affiliates of the Company) other than the parties hereto and the Persons who
from time to time are Stockholders any remedy or claim under or by reason of
this Agreement or any term, covenant or condition hereof, all of which shall be
for the sole and exclusive benefit of the parties and such Persons who from time
to time are Stockholders. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the Company and the Persons who from
time to time are Stockholders and the respective successors and permitted
assigns of the corporate parties hereto and, unless otherwise provided herein,
the respective assigns, heirs, and personal representatives of the individual
parties hereto. This Agreement constitutes the entire agreement of the parties
and supersedes all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the specific subject matter
hereof.
(e) The section headings contained herein are for the
purposes of convenience only and are not intended to define or limit the
contents of said sections.
(f) Whenever the pronouns "he", or "his" are used
herein they shall also be deemed to mean "she" or "hers" or "it" or "its"
whenever applicable. Words in the singular shall be read and construed as though
in the plural and words in the plural shall be read and construed as though in
the singular in all cases where they would so apply.
14
<PAGE>
(g) This Agreement may be executed in two or more
counterparts, all of which taken together shall be deemed one original.
(h) This Agreement shall be deemed to be a contract
under the laws of the State of New York and for all purposes shall be construed
and enforced in accordance with the internal laws of said state without regard
to the principles of conflicts of law.
(i) The number of Shares subject to the provisions of
this Agreement and all references herein to numbers of Shares and purchase
prices per share shall be appropriately adjusted in the case of any subdivision
or combination of the outstanding Shares into a greater or smaller number of
Shares, recapitalization, reorganization, reclassification of shares, stock
dividend, or like event.
(j) No Stockholder of the Company shall be entitled to
employment with the Company by virtue of his or its ownership of any Shares.
(k) Each party hereto will execute and deliver all such
further documents and instruments (including consents of stockholders and/or
directors) and will do all such further acts and things (including casting any
required stockholder votes, and approving any required amendments to the
Company's Certificate of Incorporation and/or By-Laws) as any other party hereto
shall reasonably request to give full effect to the purposes and intent of this
Agreement.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
REGISTER.COM INC.
By:___________________________
Name:
Title:
575 Eighth Avenue
11th Floor
New York, NY 10018
Facsimile: 212-627-6477
<PAGE>
Stockholders:
___________________________________
Dan B. Levine
P.O. Box 292
Old Westbury, New York 11564
Facsimile: 516-626-7869
<PAGE>
___________________________________
Peter A. Forman
201 Water Street
Brooklyn, NY
Facsimile: 718-596-3959
<PAGE>
___________________________________
Richard D. Forman
c/o Register.com, Inc.
575 Eighth Avenue
11th Floor
New York, NY 10018
Facsimile: 212-627-6477
<PAGE>
CAPITAL EXPRESS, L.L.C.
By:__________________________________________
Name: Niles H Cohen
Title: Managing Member
100 Plaza Drive
Secaucus, New Jersey 07094
Facsimile: 201-583-3634
<PAGE>
INTERNET WEB BUILDERS, LLC
By:__________________________________________
Name: Zachary Prensky
Title: Managing Member
28-10 High Street Fairlawn
New Jersey 07410
Facsimile: 212-280-4035
<PAGE>
PALISADE PRIVATE PARTNERSHIP, L.P.
By:__________________________________________
Name:
Title:
One Bridge Plaza
Fort Lee, New Jersey 07024
Facsimile: (201) 585-9798
<PAGE>
STAPLES, INC.
By:__________________________________________
Name:
Title:
500 Staples Drive
Framingham, Massachusetts 01702
Facsimile: (508) 370-7805
<PAGE>
SANDLER CAPITAL IV PARTNERS, L.P.
By: Sandler Investment Partners, L.P., a General Partner
By: Sandler Capital Management, a General Partner
By: MJDM Corp., General Partner
By:____________________________________
Edward Grinacoff
President
767 Fifth Avenue
45th Floor
New York, NY 10153
Facsimile:
<PAGE>
SANDLER CAPITAL MANAGEMENT
By: MJDM Corp., General Partner
By:________________________________
Edward Grinacoff
President
767 Fifth Avenue
45th Floor
New York, NY 10153
Facsimile:
<PAGE>
SANDLER CAPITAL IV FTE PARTNERS , L.P.
By: Sandler Investment Partners, L.P., a General Partner
By: Sandler Capital Management, a General Partner
By: MJDM Corp., General Partner
By:___________________________________
Edward Grinacoff
President
767 Fifth Avenue
45th Floor
New York, NY 10153
Facsimile:
<PAGE>
BESSEMER VENTURE PARTNERS IV L.P.
By: Deer IV & Co., LLC, General Partner
By:______________________________________
Robert H. Buescher
Manager
1400 Old Country Road
Suite 401
Westbury, NY 11590
Facsimile: (516) 997-2371
<PAGE>
BESSEC VENTURES IV L.P.
By: Deer IV & Co. LLC, General Partner
By:_____________________________________
Robert H. Buescher
Manager
630 Fifth Avenue
37th Floor
New York, NY 11590
Facsimile: (212) 265-5826
<PAGE>
HIKARI TSUSHIN, INC.
By:____________________________________
Name:
Title:
Address:
Facsimile:
<PAGE>
CONCENTRIC NETWORK CORPORATION
By:___________________________________
Name:
Title:
1400 Parkmoor Avenue
San Jose, CA 95126
Facsimile: (408) 817-2810
<PAGE>
BAYVIEW INVESTORS LTD.
By:__________________________________
Name:
Title:
555 California Street, 2600
San Francisco, CA 94104
Facsimile: (415) 676-2977
<PAGE>
Schedule I
----------
Initial Directors
DPR: Richard D. Forman
Peter A. Forman
Dan Levine
CapEx: Niles H Cohen
IWB: Zachary Prensky
PPP: Mark Hoffman
Investors: Samantha McCuen
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
Warrant No. __ Number of Shares: ______
(subject to adjustment)
Date of Issuance: June 30, 1999
REGISTER.COM, INC.
Common Stock Purchase Warrant
(Void after June 30, 2004)
Register.com, Inc., a Delaware corporation (the "Company"), for value
received, hereby certifies that ______________________________, or their
registered assigns (collectively, the "Registered Holder"), is entitled, subject
to the terms set forth below, to purchase from the Company, at any time or from
time to time on or after the date of issuance and on or before June 30, 2004 at
not later than 5:00 p.m. (New York, New York time), ________ shares of Common
Stock, $0.0001 par value per share, of the Company, at a purchase price of
$12.00 per share. The shares purchasable upon exercise of this Warrant, and the
purchase price per share, each as adjusted from time to time pursuant to the
provisions of this Warrant, are hereinafter referred to as the "Warrant Shares"
and the "Purchase Price," respectively.
1. Exercise.
(a) This Warrant may be exercised by the Registered Holder, in whole or
in part, by surrendering this Warrant, with the purchase form appended hereto as
Exhibit I duly executed by such Registered Holder or by such Registered Holder's
duly authorized attorney, at the principal office of the Company, or at such
other office or agency as the Company may designate, accompanied by payment in
full, in lawful money of the United States, of the Purchase Price payable in
respect of the number of Warrant Shares purchased upon such exercise.
(b) The Registered Holder may, at its option, elect to pay some or all
of the Purchase Price payable upon an exercise of this Warrant by cancelling a
portion of this Warrant exercisable for such number of Warrant Shares as is
determined by dividing (i) the total Purchase Price payable in respect of the
number of Warrant Shares being purchased upon such exercise by (ii) the excess
of the Fair Market Value per share of Common Stock as of the effective date of
exercise, as determined pursuant to subsection 1(c) below (the "Exercise Date")
over the Purchase Price per share. If the Registered Holder wishes to exercise
this Warrant pursuant to this method of payment with respect to the maximum
number of Warrant Shares purchasable pursuant to this method, then the number of
Warrant Shares so purchasable shall be equal to the total number of Warrant
Shares, minus the product obtained by multiplying (x) the total number of
Warrant Shares by (y) a fraction, the numerator of which shall be the Purchase
1
<PAGE>
Price per share and the denominator of which shall be the Fair Market Value per
share of Common Stock as of the Exercise Date. The Fair Market Value per share
of Common Stock shall be determined as follows:
(i) If the Common Stock is listed on a national securities exchange,
the Nasdaq National Market, the Nasdaq system, or another nationally recognized
exchange or quotation system as of the Exercise Date, the Fair Market Value per
share of Common Stock shall be deemed to be the last reported sale price per
share of Common Stock thereon on the Exercise Date; or, if no such price is
reported on such date, such price on the next preceding business day (provided
that if no such price is reported on the next preceding business day, the Fair
Market Value per share of Common Stock shall be determined pursuant to clause
(ii)).
(ii) If the Common Stock is not listed on a national securities
exchange, the Nasdaq National Market, the Nasdaq system, or another nationally
recognized exchange or quotation system as of the Exercise Date, the Fair Market
Value per share of Common Stock shall be deemed to be the amount most recently
determined by the Board of Directors to represent the fair market value per
share of the Common Stock (including, without limitation, a determination for
purposes of granting Common Stock options or issuing Common Stock under an
employee benefit plan of the Company); and, upon request of the Registered
Holder, the Board of Directors (or a representative thereof) shall promptly
notify the Registered Holder of the Fair Market Value per share of Common Stock.
Notwithstanding the foregoing, if the Board of Directors has not made such a
determination within the three-month period prior to the Exercise Date, then (A)
the Fair Market Value per share of Common Stock shall be the amount next
determined by the Board of Directors to represent the fair market value per
share of the Common Stock (including, without limitation, a determination for
purposes of granting Common Stock options or issuing Common Stock under an
employee benefit plan of the Company), (B) the Board of Directors shall make
such a determination within 10 days of a request by the Registered Holder that
it do so, and (C) the exercise of this Warrant pursuant to this subsection 1(b)
shall be delayed until such determination is made.
(c) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant
shall have been surrendered to the Company as provided in subsection 1(a) above.
At such time, the person or persons in whose name or names any certificates for
Warrant Shares shall be issuable upon such exercise as provided in subsection
1(d) below shall be deemed to have become the holder or holders of record of the
Warrant Shares represented by such certificates.
(d) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 10 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full Warrant Shares
to which such Registered Holder shall be entitled upon such exercise plus, in
lieu of any fractional share to which such Registered Holder would otherwise be
entitled, cash in an amount determined pursuant to Section 3 hereof; and
2
<PAGE>
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the sum of (a) the number of such shares purchased by
the Registered Holder upon such exercise plus (b) the number of Warrant Shares
(if any) covered by the portion of this Warrant cancelled in payment of the
Purchase Price payable upon such exercise pursuant to subsection 1(b) above.
2. Adjustments.
(a) If outstanding shares of the Company's Common Stock shall be
subdivided into a greater number of shares or a dividend in Common Stock shall
be paid in respect of Common Stock, the Purchase Price in effect immediately
prior to such subdivision or at the record date of such dividend shall,
simultaneously with the effectiveness of such subdivision or immediately after
the record date of such dividend, be proportionately reduced. If outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Purchase Price in effect immediately prior to such combination shall,
simultaneously with the effectiveness of such combination, be proportionately
increased. When any adjustment is required to be made in the Purchase Price, the
number of Warrant Shares purchasable upon the exercise of this Warrant shall be
changed to the number determined by dividing (i) an amount equal to the number
of shares issuable upon the exercise of this Warrant immediately prior to such
adjustment, multiplied by the Purchase Price in effect immediately prior to such
adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.
(b) If there shall occur any capital reorganization or reclassification
of the Company's Common Stock (other than a change in par value or a subdivision
or combination as provided for in subsection 2(a) above), or any consolidation
or merger of the Company with or into another corporation, or a transfer of all
or substantially all of the assets of the Company, then, as part of any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Registered Holder of this Warrant
shall have the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such Registered
Holder would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number of shares of Common Stock which
were then purchasable upon the exercise of this Warrant. In any such case,
appropriate adjustment (as reasonably determined in good faith by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of the
Registered Holder of this Warrant, such that the provisions set forth in this
Section 2 (including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.
(c) If, during the 18-month period following the date of issuance of
this Warrant, the Company issues additional shares of Common Stock, or
securities exchangeable or convertible into Common Stock (other than pursuant to
warrants, options, securities and other similar rights issued and outstanding as
of the date of issuance of this Warrant), for consideration of less than $10.00
per share (as such dollar amount is adjusted pursuant to the provisions of
3
<PAGE>
Sections 2(a) and (b) hereof), the Purchase Price shall be reduced to the price
per share at which such additional shares of Common Stock are issued or are
issuable; provided, however, that in no event shall the Purchase Price be
reduced below $8.00 per share (as such dollar amount is adjusted pursuant to
Sections 2(a) and (b) hereof) pursuant to the terms and provisions of this
subsection 2(c).
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This subparagraph 2(c) does not apply to (i) the conversion of Series A
Preferred Stock, or the conversion, exchange or exercise of other securities
convertible into or exchangeable or exercisable for Common Stock, (ii) up to
750,000 shares of Common Stock issued to the Corporation's directors, officers,
employees, consultants or independent contractors upon exercise of stock options
granted after the date hereof with an exercise price of less than $10.00 per
share (or such dollar amount as adjusted pursuant to Sections 2(a) and (b)
above) under bona fide stock option or employee benefit plans adopted by the
Board of Directors of the Company and approved by the holders of Common Stock
when required by law, or (iii) Common Stock issued to acquire, or in the
acquisition of, all or any portion of a business as a going concern, in an arm's
length transaction between the Company and an unaffiliated third party, whether
such acquisition shall be effected by purchase of assets, exchange of
securities, merger, consolidation or otherwise; provided, that, a majority of
the Board of Directors of the Company shall have determined in good faith that
the fair market value of such shares of Common Stock is at least $10.00 per
share.
(d) For purposes of any computation respecting consideration received
pursuant to subparagraphs 2(c) above, the following shall apply:
(i) in case of the issuance of shares of Common Stock for cash, the
consideration shall be the amount of such cash, provided that in no case shall
any deduction be made for any commissions, discounts or other expenses incurred
by the Company for any underwriting of the issue or otherwise in connection
therewith;
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined by the
Board of Directors of the Company (irrespective of the accounting treatment
thereof) provided, that if any Director shall have an interest in the stock
issuance transaction, the fair market value of the Company's Common Stock shall,
for the purposes of such transaction, be determined by a majority of the
disinterested Directors; and
(iii) in the case of the issuance of options, warrants or other
securities convertible into or exchangeable or exercisable for shares, the
aggregate consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such options, warrants
or other securities plus the additional minimum consideration, if any, to be
received by the Company upon the conversion or exchange or exercise thereof (the
consideration in each case to be determined in the same manner as provided in
clauses (i) and (ii) of this subparagraph 2(d).
(e) When any adjustment is required to be made in the Purchase Price, the
Company shall promptly mail to the Registered Holder a certificate setting forth
4
<PAGE>
the Purchase Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Such certificate shall also set forth the
kind and amount of stock or other securities or property into which this Warrant
shall be exercisable following the occurrence of any of the events specified in
subsection 2(a), (b) or (c) above.
3. Fractional Shares. The Company shall not be required upon the exercise of
this Warrant to issue any fractional shares, but shall make an adjustment
therefor in cash on the basis of the Fair Market Value per share of Common
Stock, as determined pursuant to subsection 1(b) above.
4. Requirements for Transfer.
(a) This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act of 1933, as amended (the "Act"), or (ii) the Company first shall
have been furnished with an opinion of legal counsel, reasonably satisfactory to
the Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Act.
(b) Notwithstanding the foregoing, no registration or opinion of
counsel shall be required for (i) a transfer by a Registered Holder which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner, if the transferee agrees in writing to be subject to
the terms of this Section 4, or (ii) a transfer made in accordance with Rule 144
under the Act.
(c) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered
under such Act or an opinion of counsel satisfactory to the
Company is obtained to the effect that such registration is
not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
(d) This Warrant and the Warrant Shares shall be subject to the
provisions of that certain Amended and Restated Stockholders' Agreement dated as
of June 30, 1999, as amended, by and among the Company and the stockholders
signatory thereto; and upon any transfer of the Warrant Shares hereunder, the
transferee shall be bound by the terms of such Stockholders' Agreement and be
entitled to the same rights and obligations thereunder as the original
Registered Holder of this Warrant.
5. No Impairment. The Company will not, by amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
5
<PAGE>
reasonably necessary or appropriate in order to protect the rights of the holder
of this Warrant against impairment.
6. Liquidating Dividends. If the Company pays a dividend or makes a distribution
on the Common Stock, payable otherwise than in cash out of earnings or earned
surplus (determined in accordance with generally accepted accounting
principles), except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Company will pay or distribute to the
Registered Holder of this Warrant, upon the exercise hereof, in addition to the
Warrant Shares purchased upon such exercise, the Liquidating Dividend which
would have been paid to such Registered Holder if he had been the owner of
record of such Warrant Shares immediately prior to the date on which a record is
taken for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
7. Notices of Record Date, etc. In Case:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right; or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the surviving entity), or any transfer of all or substantially
all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
(d) then, and in each such case, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up. Such notice shall be mailed at least ten (10) days
prior to the record date or effective date for the event specified in such
notice.
8. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
6
<PAGE>
9. Exchange of Warrants. Upon the surrender by the Registered Holder of any
Warrant or Warrants, properly endorsed, to the Company at the principal office
of the Company, the Company will, subject to the provisions of Section 4 hereof,
issue and deliver to or upon the order of such Holder, at the Company's expense,
a new Warrant or Warrants of like tenor, in the name of such Registered Holder
or as such Registered Holder (upon payment by such Registered Holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant or Warrants so surrendered.
10. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
11. Transfers, etc.
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its or his address as shown on the warrant register by written notice to
the Company requesting such change.
(b) Subject to the provisions of Section 4 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, upon surrender of this
Warrant with a properly executed assignment (in the form of Exhibit II hereto)
at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant register,
the Company may treat the Registered Holder of this Warrant as the absolute
owner hereof for all purposes; provided, however, that if and when this Warrant
is properly assigned in blank, the Company may (but shall not be obligated to)
treat the bearer hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
12. Mailing of Notices, etc. All notices and other communications from the
Company to the Registered Holder of this Warrant shall be mailed by first-class
certified or registered mail, postage prepaid, to the address furnished to the
Company in writing by the last Registered Holder of this Warrant who shall have
furnished an address to the Company in writing. All notices and other
communications from the Registered Holder of this Warrant or in connection
herewith to the Company shall be mailed by first-class certified or registered
mail, postage prepaid, to the Company at its principal office set forth below.
If the Company should at any time change the location of its principal office to
a place other than as set forth below, it shall give prompt written notice to
the Registered Holder of this Warrant and thereafter all references in this
Warrant to the location of its principal office at the particular time shall be
as so specified in such notice.
13. No Rights as Stockholder. Until the exercise of this Warrant, the Registered
Holder of this Warrant shall not have or exercise any rights by virtue hereof as
a stockholder of the Company.
7
<PAGE>
14. Change or Waiver. Any term of this Warrant may be changed or waived only by
an instrument in writing signed by the party against which enforcement of the
change or waiver is sought.
15. Headings. The headings in this Warrant are for purposes of reference only
and shall not limit or otherwise affect the meaning of any provision of this
Warrant.
16. Law. This Warrant will be governed by and construed in accordance with the
laws of the State of Delaware.
REGISTER.COM, INC.
By:
------------------------------
[Corporate Seal] Title:
---------------------------
ATTEST:
- -------------------------
Address of principal office:
575 Eighth Avenue, 11th Floor
New York, New York 10018
8
<PAGE>
EXHIBIT I
PURCHASE FORM
To: Register.com, Inc. Dated:______________
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase ________ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$____________, representing the full purchase price for such shares at the price
per share provided for in such Warrant. Such payment takes the form of (check
applicable box or boxes):
[ ] $_________ in lawful money of the United States, and/or
[ ] the cancellation of such portion of the attached
Warrant as is exercisable for a total of ______
Warrant Shares (using a Fair Market Value of $_______
per share for purposes of this calculation).
Signature:
-----------------------------------
Address:
------------------------------------
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EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (No. ____) with respect to the number of shares of Common Stock
covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
By acceptance of the transfer contemplated hereby and by
signing this Assignment Form, the Assignee hereby agrees to be bound by the
terms and provisions of that certain Amended and Restated Stockholders'
Agreement, dated as of June 30, 1999, as such agreement shall be amended and in
effect from time to time.
Dated: Signature:
------------------------- -----------------------------
Dated: Witness:
------------------------- -------------------------------
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THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
Warrant No. 1 Number of Shares: 200,000
(subject to adjustment)
Date of Issuance: May 21, 1999
FORMAN INTERACTIVE CORP.
Common Stock Purchase Warrant
(Void after May 21, 2002)
Forman Interactive Corp., a New York corporation (the "Company"), for
value received, hereby certifies that Staples, Inc., or its registered assigns
(the "Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time or from time to time on or after the date
of issuance and on or before May 21, 2002 at not later than 5:00 p.m. (New York,
New York time), 200,000 shares of Common Stock, $0.0001 par value per share, of
the Company, at a purchase price of $0.01 per share. The shares purchasable upon
exercise of this Warrant, and the purchase price per share, each as adjusted
from time to time pursuant to the provisions of this Warrant, are hereinafter
referred to as the "Warrant Shares" and the "Purchase Price," respectively.
1. Exercise.
(a) This Warrant may be exercised by the Registered Holder, in whole or
in part, by surrendering this Warrant, with the purchase form appended hereto as
Exhibit I duly executed by such Registered Holder or by such Registered Holder's
duly authorized attorney, at the principal office of the Company, or at such
other office or agency as the Company may designate, accompanied by payment in
full, in lawful money of the United States, of the Purchase Price payable in
respect of the number of Warrant Shares purchased upon such exercise.
(b) The Registered Holder may, at its option, elect to pay some or all
of the Purchase Price payable upon an exercise of this Warrant by cancelling a
portion of this Warrant exercisable for such number of Warrant Shares as is
determined by dividing (i) the total Purchase Price payable in respect of the
number of Warrant Shares being purchased upon such exercise by (ii) the excess
of the Fair Market Value per share of Common Stock as of the effective date of
exercise, as determined pursuant to subsection 1(c) below (the "Exercise Date")
over the Purchase Price per share. If the Registered Holder wishes to exercise
this Warrant pursuant to this method of payment with respect to the maximum
number of Warrant Shares purchasable pursuant to this method, then the number of
<PAGE>
Warrant Shares so purchasable shall be equal to the total number of Warrant
Shares, minus the product obtained by multiplying (x) the total number of
Warrant Shares by (y) a fraction, the numerator of which shall be the Purchase
Price per share and the denominator of which shall be the Fair Market Value per
share of Common Stock as of the Exercise Date. The Fair Market Value per share
of Common Stock shall be determined as follows:
(i) If the Common Stock is listed on a national securities exchange,
the Nasdaq National Market, the Nasdaq system, or another nationally recognized
exchange or trading system as of the Exercise Date, the Fair Market Value per
share of Common Stock shall be deemed to be the last reported sale price per
share of Common Stock thereon on the Exercise Date; or, if no such price is
reported on such date, such price on the next preceding business day (provided
that if no such price is reported on the next preceding business day, the Fair
Market Value per share of Common Stock shall be determined pursuant to clause
(ii)).
(ii) If the Common Stock is not listed on a national securities
exchange, the Nasdaq National Market, the Nasdaq system, or another nationally
recognized exchange or trading system as of the Exercise Date, the Fair Market
Value per share of Common Stock shall be deemed to be the amount most recently
determined by the Board of Directors to represent the fair market value per
share of the Common Stock (including without limitation a determination for
purposes of granting Common Stock options or issuing Common Stock under an
employee benefit plan of the Company); and, upon request of the Registered
Holder, the Board of Directors (or a representative thereof) shall promptly
notify the Registered Holder of the Fair Market Value per share of Common Stock.
Notwithstanding the foregoing, if the Board of Directors has not made such a
determination within the three-month period prior to the Exercise Date, then (A)
the Fair Market Value per share of Common Stock shall be the amount next
determined by the Board of Directors to represent the fair market value per
share of the Common Stock (including without limitation a determination for
purposes of granting Common Stock options or issuing Common Stock under an
employee benefit plan of the Company), (B) the Board of Directors shall make
such a determination within 10 days of a request by the Registered Holder that
it do so, and (C) the exercise of this Warrant pursuant to this subsection 1(b)
shall be delayed until such determination is made.
(c) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant
shall have been surrendered to the Company as provided in subsection 1(a) above.
At such time, the person or persons in whose name or names any certificates for
Warrant Shares shall be issuable upon such exercise as provided in subsection
1(d) below shall be deemed to have become the holder or holders of record of the
Warrant Shares represented by such certificates.
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(d) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 10 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full Warrant Shares
to which such Registered Holder shall be entitled upon such exercise plus, in
lieu of any fractional share to which such Registered Holder would otherwise be
entitled, cash in an amount determined pursuant to Section 3 hereof; and
(ii) in case such exercise is in part only, a new warrant or warrants
(dated the date hereof) of like tenor, calling in the aggregate on the face or
faces thereof for the number of Warrant Shares equal (without giving effect to
any adjustment therein) to the number of such shares called for on the face of
this Warrant minus the sum of (a) the number of such shares purchased by the
Registered Holder upon such exercise plus (b) the number of Warrant Shares (if
any) covered by the portion of this Warrant cancelled in payment of the Purchase
Price payable upon such exercise pursuant to subsection 1(b) above.
2. Adjustments.
(a) If outstanding shares of the Company's Common Stock shall be
subdivided into a greater number of shares or a dividend in Common Stock shall
be paid in respect of Common Stock, the Purchase Price in effect immediately
prior to such subdivision or at the record date of such dividend shall
simultaneously with the effectiveness of such subdivision or immediately after
the record date of such dividend be proportionately reduced. If outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Purchase Price in effect immediately prior to such combination shall,
simultaneously with the effectiveness of such combination, be proportionately
increased. When any adjustment is required to be made in the Purchase Price, the
number of Warrant Shares purchasable upon the exercise of this Warrant shall be
changed to the number determined by dividing (i) an amount equal to the number
of shares issuable upon the exercise of this Warrant immediately prior to such
adjustment, multiplied by the Purchase Price in effect immediately prior to such
adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.
(b) If there shall occur any capital reorganization or reclassification
of the Company's Common Stock (other than a change in par value or a subdivision
or combination as provided for in subsection 2(a) above), or any consolidation
or merger of the Company with or into another corporation, or a transfer of all
or substantially all of the assets of the Company, then, as part of any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Registered Holder of this Warrant
shall have the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such Registered
Holder would have been entitled to receive if, immediately prior to any such
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reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number of shares of Common Stock which
were then purchasable upon the exercise of this Warrant. In any such case,
appropriate adjustment (as reasonably determined in good faith by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of the
Registered Holder of this Warrant, such that the provisions set forth in this
Section 2 (including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.
(c) When any adjustment is required to be made in the Purchase Price,
the Company shall promptly mail to the Registered Holder a certificate setting
forth the Purchase Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such certificate shall also
set forth the kind and amount of stock or other securities or property into
which this Warrant shall be exercisable following the occurrence of any of the
events specified in subsection 2(a) or (b) above.
3. Fractional Shares. The Company shall not be required upon the exercise of
this Warrant to issue any fractional shares, but shall make an adjustment
therefor in cash on the basis of the Fair Market Value per share of Common
Stock, as determined pursuant to subsection 1(b) above.
4. Requirements for Transfer.
(a) This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act of 1933, as amended (the "Act"), or (ii) the Company first shall
have been furnished with an opinion of legal counsel, reasonably satisfactory to
the Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Act.
(b) Notwithstanding the foregoing, no registration or opinion of
counsel shall be required for (i) a transfer by a Registered Holder which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner, if the transferee agrees in writing to be subject to
the terms of this Section 4, or (ii) a transfer made in accordance with Rule 144
under the Act.
(c) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered
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<PAGE>
under such Act or an opinion of counsel satisfactory to the
Company is obtained to the effect that such registration is
not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
(d) The Warrant Shares shall be subject to the provisions of that
certain Shareholders' Agreement dated as of January 5, 1998, as amended, by and
among the Company and the shareholders signatory thereto; and upon any transfer
of the Warrant Shares hereunder, the transferee shall be bound by the terms of
such Shareholders' Agreement and be entitled to the same rights and obligations
thereunder as the original Registered Holder of this Warrant.
5. No Impairment. The Company will not, by amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
reasonably necessary or appropriate in order to protect the rights of the holder
of this Warrant against impairment.
6. Liquidating Dividends. If the Company pays a dividend or makes a distribution
on the Common Stock payable otherwise than in cash out of earnings or earned
surplus (determined in accordance with generally accepted accounting principles)
except for a stock dividend payable in shares of Common Stock (a "Liquidating
Dividend"), then the Company will pay or distribute to the Registered Holder of
this Warrant, upon the exercise hereof, in addition to the Warrant Shares
purchased upon such exercise, the Liquidating Dividend which would have been
paid to such Registered Holder if he had been the owner of record of such
Warrant Shares immediately prior to the date on which a record is taken for such
Liquidating Dividend or, if no record is taken, the date as of which the record
holders of Common Stock entitled to such dividends or distribution are to be
determined.
7. Notices of Record Date, etc. In case:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right; or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
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<PAGE>
the Company is the surviving entity), or any transfer of all or substantially
all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least ten (10) days prior to the
record date or effective date for the event specified in such notice.
8. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
9. Exchange of Warrants. Upon the surrender by the Registered Holder of any
Warrant or Warrants, properly endorsed, to the Company at the principal office
of the Company, the Company will, subject to the provisions of Section 4 hereof,
issue and deliver to or upon the order of such Holder, at the Company's expense,
a new Warrant or Warrants of like tenor, in the name of such Registered Holder
or as such Registered Holder (upon payment by such Registered Holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant or Warrants so surrendered.
10. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
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11. Transfers, etc.
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its or his address as shown on the warrant register by written notice to
the Company requesting such change.
(b) Subject to the provisions of Section 4 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, upon surrender of this
Warrant with a properly executed assignment (in the form of Exhibit II hereto)
at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant register,
the Company may treat the Registered Holder of this Warrant as the absolute
owner hereof for all purposes; provided, however, that if and when this Warrant
is properly assigned in blank, the Company may (but shall not be obligated to)
treat the bearer hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
12. Mailing of Notices, etc. All notices and other communications from the
Company to the Registered Holder of this Warrant shall be mailed by first-class
certified or registered mail, postage prepaid, to the address furnished to the
Company in writing by the last Registered Holder of this Warrant who shall have
furnished an address to the Company in writing. All notices and other
communications from the Registered Holder of this Warrant or in connection
herewith to the Company shall be mailed by first-class certified or registered
mail, postage prepaid, to the Company at its principal office set forth below.
If the Company should at any time change the location of its principal office to
a place other than as set forth below, it shall give prompt written notice to
the Registered Holder of this Warrant and thereafter all references in this
Warrant to the location of its principal office at the particular time shall be
as so specified in such notice.
13. No Rights as Stockholder. Until the exercise of this Warrant, the Registered
Holder of this Warrant shall not have or exercise any rights by virtue hereof as
a stockholder of the Company.
14. Change or Waiver. Any term of this Warrant may be changed or waived only by
an instrument in writing signed by the party against which enforcement of the
change or waiver is sought.
15. Headings. The headings in this Warrant are for purposes of reference only
and shall not limit or otherwise affect the meaning of any provision of this
Warrant.
16. Governing Law. This Warrant will be governed by and construed in accordance
with the laws of the State of New York.
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FORMAN INTERACTIVE CORP.
By:
--------------------------------
[Corporate Seal] Title:
----------------------------
ATTEST:
- -----------------------------------
<PAGE>
EXHIBIT I
PURCHASE FORM
To: Forman Interactive Corp. Dated:
-----------------
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase ________ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$____________, representing the full purchase price for such shares at the price
per share provided for in such Warrant. Such payment takes the form of (check
applicable box or boxes):
[ ] $_________ in lawful money of the United States, and/or
[ ] the cancellation of such portion of the attached
Warrant as is exercisable for a total of ______
Warrant Shares (using a Fair Market Value of $_______
per share for purposes of this calculation).
Signature:
----------------------------
Address:
------------------------------
------------------------------
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EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (No. ____) with respect to the number of shares of Common Stock
covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Dated: Signature:
----------------------- ---------------------------
Dated: Witness:
----------------------- -----------------------------
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED,
OR OTHERWISE TRANSFERRED UNLESS EITHER (A) COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS, OR (B) THE CORPORATION HAS BEEN FURNISHED WITH
AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION TO THE EFFECT THAT NO
REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR SUCH TRANSFER.
WARRANT TO PURCHASE UP TO 120,000 SHARES
OF COMMON STOCK OF
FORMAN INTERACTIVE CORP.
(Void after February 15, 2004)
W-1
This certifies that Palisade Private Partnership, L.P. or its permitted
assigns (the "Holder"), for value received, is entitled to purchase from Forman
Interactive Corp., (the "Company"), having a place of business at 134 Fifth
Avenue, 3rd Floor, New York, NY 10011, a maximum of 120,000 fully paid and
nonassessable shares of the Company's Common Stock, $0.0001 par value per share
("Common Stock") for cash at a price of $7.50 per share (as may be adjusted from
time to time in accordance with Section 3, the "Stock Purchase Price") at any
time or from time to time up to and including 5:00 p.m. (Eastern time) on
February 15, 2004, (the "Expiration Date"). Holder may purchase the shares
hereunder upon surrender to the Company at its principal office (or at such
other location as the Company may advise the Holder in writing) of this Warrant
properly endorsed with the Form of Subscription attached hereto duly filled in
and signed and, if applicable, upon payment in cash or by check of the aggregate
Stock Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares. This Warrant
is exercisable at any time prior to the Expiration Date with respect to all or
any part of the shares of Common Stock. Any unexercised portion of this Warrant
shall terminate on the Expiration Date. The Company agrees that the shares of
Common Stock purchased under this Warrant shall be and are deemed to be issued
to the Holder hereof as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered, properly
<PAGE>
endorsed, the completed, executed Form of Subscription delivered and payment
made for such shares. Certificates for the shares of Common Stock so purchased,
together with any other securities or property to which the Holder hereof is
entitled upon such exercise, shall be delivered to the Holder hereof by the
Company at the Company's expense within a reasonable time after the rights
represented by this Warrant have been so exercised. In case of a purchase of
less than all the shares which may be purchased under this Warrant, the Company
shall cancel this Warrant and execute and deliver a new Warrant or Warrants of
like tenor for the balance of the shares purchasable under the Warrant
surrendered upon such purchase to the Holder hereof within a reasonable time.
Each stock certificate so delivered shall be in such denominations of Common
Stock as may be requested by the Holder hereof and shall be registered in the
name of such Holder.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights evidenced by this Warrant may be
exercised, the Company will at all times during such period have authorized and
reserved, for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of authorized
but unissued Common Stock, or other securities and property, when and as
required to provide for the exercise of the rights evidenced by this Warrant.
The Company will take all such action as may be necessary to assure that such
shares of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the securities of the Company may be listed; provided,
however, that the Company shall not be required to effect a registration under
federal or state securities laws with respect to such exercise except as
otherwise provided by that certain Shareholders' Agreement, dated January 5,
1998, as amended, by and among the Company and the parties thereto, or any
replacement shareholders agreement (the "Shareholders' Agreement"). The Company
will not take any action which would result in any adjustment of the Stock
Purchase Price (as set forth in Section 3 hereof) if the total number of shares
of Common Stock issuable after such action upon exercise of all outstanding
warrants, together with all shares of Common Stock then outstanding and all
shares of Common Stock then issuable upon exercise of all options, warrants or
other rights to acquire securities and upon the conversion of all convertible
securities then outstanding, would exceed the total number of shares of Common
Stock then authorized by the Second Restated Certificate of Incorporation (as
amended and/or restated from time to time).
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment in accordance with this Section 3 and
from time to time upon the occurrence of certain events described in this
Section 3. Upon each adjustment of the Stock Purchase Price, including without
limitation, adjustments to the Stock Purchase Price pursuant to Section 3.5
hereof, the Holder of this Warrant shall thereafter be entitled to purchase, at
the Stock Purchase Price resulting from such adjustment, the number of shares
obtained by multiplying the Stock Purchase Price in effect immediately prior to
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such adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment, and dividing the product thereof by the Stock Purchase
Price resulting from such adjustment.
3.1 Subdivision or Combination of Stock. In case the Company shall at
any time subdivide its outstanding shares of Common Stock into a greater number
of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.2 Dividends in Preferred Stock, Property, Reclassification. If at any
time or from time to time the holders of Common Stock (or any shares of stock or
other securities at the time receivable upon the exercise of this Warrant) shall
have received or become entitled to receive, without payment therefor,
(a) Common Stock or any shares of stock or other securities which are
at any time directly or indirectly convertible into or exchangeable for any
other shares of stock or other securities, or any rights or options to subscribe
for, purchase or otherwise acquire any of the foregoing by way of dividend or
other distribution;
(b) Common Stock or additional stock or other securities or property
(including cash) by way of spinoff, split-up, reclassification, combination of
shares or similar corporate rearrangement, (other than shares of Common Stock
issued as a stock split or adjustments in respect of which shall be covered by
the terms of Section 3.1 above), then and in each such case, the Holder hereof
shall, upon the exercise of any portion of this Warrant, be entitled to receive,
in addition to the number of shares of Common Stock receivable thereupon, and
without payment of any additional consideration therefor, the amount of stock
and other securities and property (including cash in the cases referred to in
this clause (b)) which such Holder would hold on the date of such exercise had
he been the holder of record of such Common Stock as of the date on which
holders of Common Stock received or became entitled to receive such shares or
all other additional stock and other securities and property.
3.3 Reorganization, Reclassification, Consolidation, Merger or Sale. If
any recapitalization, reclassification or reorganization of the capital stock of
the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property (an
"Organic Change"), then, as a condition of such Organic Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby) such shares of stock,
securities or other assets or property as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. In the event of
any Organic Change (other than a Sale), appropriate provision shall be made by
the Company with respect to the rights and interests of the Holder of this
Warrant to the end that the provisions hereof (including, without limitation,
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<PAGE>
provisions for adjustments of the Stock Purchase Price and of the number of
shares purchasable and receivable upon the exercise of this Warrant) shall
thereafter be applicable, in relation to any shares of stock, securities or
assets thereafter deliverable upon the exercise hereof. The Company will not
effect any such consolidation, merger or sale unless, prior to the consummation
thereof, the successor corporation (if other than the Company) resulting from
such consolidation or the corporation purchasing such assets shall assume by
written instrument reasonably satisfactory in form and substance to the Holders
of a majority of the warrants to purchase Common Stock then outstanding,
executed and mailed or delivered to the registered Holder hereof at the last
address of such Holder appearing on the books of the Company, the obligation to
deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
purchase.
3.4 Certain Events. If any change in the outstanding Common Stock or
any other event occurs as to which the other provisions of this Section 3 are
not strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder of the Warrant in accordance with such provisions,
then the Board of Directors of the Company shall make an adjustment in the
number and class of shares available under the Warrant, the Stock Purchase Price
or the application of such provisions, so as to protect such purchase rights as
aforesaid. The adjustment shall be such as will give the Holder of the Warrant
upon exercise for the same aggregate Stock Purchase Price the total number,
class and kind of shares as he would have owned had the Warrant been exercised
prior to the event and had he continued to hold such shares until after the
event requiring adjustment.
3.5 Purchase Price Protection.
(a) If, at any time prior to the date upon which the Exchangeable
Preferred Stock must automatically be exchanged for Common Stock pursuant to the
terms of the Second Restated Certificate of Incorporation of the Company, the
Company issues Additional Shares of Equity Securities for per share
Consideration (as defined below) lower than the exchange price of such
Exchangeable Preferred Stock, the Purchase Price per share hereunder shall be
reduced to an amount equal to (x) such per share Consideration received by the
Company multiplied by (y) 1.0715.
(b) The term "Consideration" for the issuance of Additional Shares of
Equity Securities shall mean the consideration per share received by the
Corporation computed as follows:
(1) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be computed at the aggregate of
cash received by the Corporation, excluding amounts paid or payable for accrued
interest or accrued dividends;
(B) insofar as it consists of property other than cash, be computed at
the fair market value thereof at the time of such issue, as determined in good
faith by the Board of Directors; and
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(C) in the event Additional Shares of Equity Securities are issued
together with other shares or securities or other assets of the Corporation for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (A) and (B) above, as determined in
good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration per share
received by the Corporation for Additional Shares of Equity Securities which
take the form of options and convertible securities, shall be determined by
dividing
(A) the total amount, if any, received or receivable by the Corporation
as consideration for the issue of such options or convertible securities, plus
the minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the Corporation
upon the exercise of such options or the conversion or exchange of such
convertible securities, or in the case of options for convertible securities,
the exercise of such options for convertible securities and the conversion or
exchange of such convertible securities, by
(B) the maximum number of shares of each class of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such options or the conversion or exchange of such convertible
securities.
(c) The term "Additional Shares of Equity Securities" as used herein
shall mean all shares of equity securities issued by the Corporation, whether or
not subsequently reacquired or retired by the Corporation, and any security
convertible into or exchangeable for any equity securities issued by the
Corporation, including without limitation all rights, options or warrants to
subscribe for, purchase or otherwise acquire any class of Common Stock or
convertible securities issued by the Corporation, except that Additional Shares
of Equity Securities shall not include shares of Common Stock issued or
issuable:
(A) upon issuance or exercise of options to acquire Common Stock
granted pursuant to the 1997 Employee Stock Option Plan, not exceeding 500,000
shares (subject to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization affecting shares of
Common Stock) unless such options which have not been granted on the date hereof
are granted at an exercise price reflecting greater than a 25% discount on the
greater of (x) the fair market value thereof, as determined by the Board of
Directors in good faith, and (y) $7.00;
(B) upon exercise of warrants or options granted or issued prior to the
issuance of the Exchangeable Preferred;
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(C) upon issuance or exercise of a warrant to Legg Mason Wood Walker
Incorporated pursuant to its engagement letter with the Corporation entered into
prior to the issuance of the Exchangeable Preferred; and
(D) upon issuance or exercise of any warrants to vendors of the
Corporation that were being negotiated at the time of the issuance of the
Exchangeable Preferred and were disclosed to Palisade Private Partnership, L.P.
prior to such issuance.
(d) No Impairment. The Corporation will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all of the provisions of this Section
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holders of the Exchangeable Preferred against
impairment.
3.6 Notices of Change.
(a) Immediately upon any adjustment in the number or class of shares
subject to this Warrant and of the Stock Purchase Price, the Company shall give
written notice thereof to the Holder, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(b) The Company shall give written notice to the Holder at least 10
business days prior to the date on which the Company closes its books or takes a
record for determining rights to receive any dividends or distributions.
(c) The Company shall also give written notice to the Holder at least
30 business days prior to the date on which an Organic Change shall take place.
4. ISSUE TAX. The issuance of certificates for shares of Common Stock
upon the exercise of any portion of this Warrant shall be made without charge to
the Holder of the Warrant for any issue tax (other than any applicable income
taxes) in respect thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
then Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of any portion of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Except as
provided in the Shareholders' Agreement (as defined in Section 7), nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
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this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of such
Holder for the Stock Purchase Price or as a shareholder of the Company, whether
such liability is asserted by the Company or by its creditors.
7. TRANSFER. Subject to compliance with applicable federal and state
securities laws and the Shareholders' Agreement , this Warrant and all rights
hereunder are transferable, in whole or in part, without charge to the holder
hereof (except for transfer taxes), upon surrender of this Warrant properly
endorsed. This Warrant and all rights hereunder shall be subject to the same
restrictions on transferability as are applicable to shares of Common Stock in
the Shareholders' Agreement and each taker and holder of this Warrant shall be
deemed a "Shareholder" (as defined in the Shareholders' Agreement) for the
purposes thereof. Each taker and holder of this Warrant, by taking or holding
the same, consents and agrees to be bound by the terms and conditions of the
Shareholders' Agreement and shall, upon request by the Company, execute a
counterpart thereof.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the Holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, referred to in
Section 7 shall survive the exercise of this Warrant.
9. MODIFICATION AND WAIVER. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
10. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other.
11. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the obligations of
the Company relating to the Common Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the Holder hereof.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the internal laws of the State of New York, without regard to
its rules concerning conflicts of law.
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13. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officer thereunto duly authorized.
Dated: As of March 25, 1999 Forman Interactive Corp.,
a New York corporation
By
----------------------------
Its: President
(SIGNATURE PAGE TO PALISADE WARRANT)
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EXHIBIT A
SUBSCRIPTION FORM
Date: ____________, _____
Forman Interactive Corp.
134 Fifth Avenue
3rd Floor
New York, New York 10011
Attn: President
Ladies and Gentlemen:
[ ] The undersigned hereby elects to exercise the warrant issued
to it by Forman Interactive Corp. (the "Company") and dated
March 25, 1999 Warrant No. W-1 (the "Warrant") and to purchase
thereunder ___________ shares of the Common Stock, of the
Company (the "Shares") at a purchase price of $7.50 per Share
or an aggregate purchase price of ______________________
Dollars ($__________) (the "Purchase Price").
[ ] The undersigned hereby elects to convert ____________________
percent (____%) of the value of the Warrant pursuant to the
provisions of Section 1 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the Purchase
Price herewith in full in cash or by certified check or wire transfer. The
undersigned also makes the representations set forth on the attached Exhibit B
of the Warrant.
Very truly yours,
- ------------------------------------
By:_________________________________
Title:______________________________
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Exhibit B
INVESTMENT REPRESENTATION
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO FORMAN INTERACTIVE
CORP. ALONG WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THE WARRANT DATED MARCH 25, 1999, WILL BE ISSUED.
- ------------, ----
Forman Interactive Corp.
134 Fifth Avenue
3rd Floor
New York, New York 10011
Attn: President
Ladies and Gentlemen:
The undersigned, ________________ ("Purchaser"), intends to acquire up to ______
shares of the Common Stock, $0.0001 par value per share (the "Common Stock") of
Forman Interactive Corp. (the "Company") from the Company pursuant to the
exercise of certain Warrants to purchase Common Stock held by Purchaser. The
Common Stock will be issued to Purchaser in a transaction not involving a public
offering and pursuant to an exemption from registration under the Securities Act
of 1933, as amended (the "1933 Act") and applicable state securities laws. In
connection with such purchase and in order to comply with the exemptions from
registration relied upon by the Company, Purchaser represents, warrants and
agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Common Stock in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been registered under
the 1933 Act or state securities laws on the ground that this transaction is
exempt from registration, and that reliance by the Company on such exemptions is
predicated in part on Purchaser's representations set forth in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock must be
held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Common
Stock. Purchaser further agrees that the Company may refuse to permit Purchaser
to sell, transfer or dispose of the Common Stock (except as permitted under Rule
144) unless there is in effect a registration statement under the 1933 Act and
any applicable state securities laws covering such transfer, or unless Purchaser
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furnishes an opinion of counsel reasonably satisfactory to counsel for the
Company, to the effect that such registration is not required.
Purchaser agrees to be bound by the terms and conditions of that certain
Shareholders' Agreement by and among the Company and certain shareholders of the
Company, or any replacement shareholders agreement (the "Shareholders
Agreement"), and, to execute a counterpart thereof upon request by the Company.
Purchaser also understands and agrees that, in addition to any legends required
by the Shareholders' Agreement, there will be placed on the certificate(s) for
the Common Stock or any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
any state securities laws. These shares have been acquired for
investment and may not be sold or otherwise transferred in the absence
of an effective registration statement for these shares under the
Securities Act and applicable state securities laws, or unless an
applicable exemption is available."
Purchaser has carefully read this letter and has discussed its requirements and
other applicable limitations upon Purchaser's resale of the Common Stock with
Purchaser's counsel (which may be in-house counsel).
Very truly yours,
- ------------------------
By:
Title:
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COMMON STOCK PURCHASE WARRANT
($______ Warrant Price)
VOID AFTER 5:00 P.M., NEW YORK TIME, ON THE EXPIRATION DATE AS DEFINED BELOW.
WARRANT TO PURCHASE UP TO A MAXIMUM OF ______ SHARES OF COMMON
STOCK OF FORMAN INTERACTIVE CORP. [SUBJECT TO ADJUSTMENT - SECTION 3]
TRANSFER RESTRICTED - SEE SECTIONS 6.02 AND 7.02
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION
OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND
OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED , ASSIGNED OR
TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS.
This certifies that, for value received, ____________
_________, having an address at ______________________________
_____, or permitted registered assigns (the "Warrant Holder"),
is entitled to purchase from Register.com, Inc., a New York
corporation having a place of business at 575 Eighth Avenue,
11th Floor, New York, NY 10018 (the "Company"), subject to the
terms and conditions hereof at any time after the date
described in Section 7.01 hereof and before the Expiration
Date (as defined herein), up to the number of fully paid and
non-assessable shares of Common Stock ($0.0001 par value) of
the Company (the "Common Stock") stated above (as calculated
and adjusted from time to time pursuant to the terms hereof)
at the Warrant Price (as defined herein). The Warrant Price
and the number of shares purchasable hereunder are subject to
adjustment as provided below.
<PAGE>
ARTICLE I
Definitions
Section 1.01. The following terms, as used herein, have the respective
meanings ascribed to them as follows:
(a) "Aggregate Warrant Price" means the amount that the Warrant Holder
must pay at any time to the Company in the aggregate to acquire all of the
shares of Common Stock then remaining issuable hereunder.
(b) "Business Day" means a day other than a Saturday, Sunday or other
day on which banks in the State of New York are authorized or required by law to
remain closed.
(c) "Expiration Date" means 5:00 P.M., New York time, on _______, 2003.
(d) "Warrants" means this Warrant (evidencing the right to purchase a
maximum of _______ shares of Common Stock, as adjusted in the manner hereinafter
provided) originally issued to Warrant Holder on the date hereof, and all
warrants that may be issued in its place.
(e) "Warrant Holder" means, initially, the person named on the first
page of this Warrant and any person or entity in whose name this Warrant shall
be properly registered upon the books to be maintained by the Company for that
purpose.
(f) "Warrant Price" means that portion of the Aggregate Warrant Price
that is allocable at any given time prior to the Expiration Date to one Warrant
Share, and which shall initially be $______ per share, as such price may be
adjusted from time to time pursuant to Article III. Notwithstanding any other
provision hereof to the contrary, at any time at which the Company's common
stock is registered under Section 12 of the Securities Exchange Act of 1934, as
amended, payment of the Warrant Price upon any exercise of this Warrant may be
made in cash or by delivery to the Company of shares of the Company's common
stock, which shall be deemed valued at their fair market value on the date of
such exercise, as determined by the Board in its sole discretion, provided that
any such shares being presented for payment shall have been held by the Warrant
Holder, as beneficial owner thereof, for at least six months prior to the
exercise of this Warrant in connection with which such shares are tendered as
payment.
(g) "Warrant Shares" means the aggregate amount of shares of Common
Stock or other securities deliverable upon exercise of the Warrants.
ARTICLE II
Duration Exercise of Warrant
Section 2.01. This Warrant may be exercised in whole or in part at any
time or from time to time after 9:00 A.M., New York time, on the day following
the date specified in Section 7.01 hereof, and before 5:00 P.M., New York time,
on the Expiration Date. If this Warrant is not exercised during such time, it
shall become void, and all rights hereunder shall thereupon cease.
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Section 2.02. (a) The Warrant Holder may exercise this Warrant from
time to time upon surrender of this Warrant with the Subscription Form annexed
hereto duly executed, to the Company at its corporate office located at 575
Eighth Avenue, 11th Floor, New York, NY 10018, or at such other place within the
State of New York of which the Company shall notify the Warrant Holder in
writing, together with the full Warrant Price for each share of Common Stock to
be purchased in lawful money of the United States, or by check, bank draft or
postal or express money order payable in United States Dollars to the order of
the Company.
(a) Upon receipt of this Warrant with the Subscription Form duly
executed and accompanied by payment of the Aggregate Warrant Price for the
shares of Common Stock for which this Warrant is then being exercised, the
Company will cause to be issued certificates for the total number of whole
shares (and cash, in lieu of any fractional share) (as provided in Section. 4.04
hereof) of Common Stock for which this Warrant is being exercised in such
denominations as are required for delivery to the Warrant Holder, ant the
Company shall thereupon deliver such certificates to the Warrant Holder.
(b) The Company covenants and agrees that it will pay when due and
payable any and all transfer and similar taxes that may be payable with respect
to the issue of this Warrant or with respect to the issue of each and every
share of the Common Stock of the Company constituting a portion of the Warrant
Shares to the Warrant Holder upon the exercise of this Warrant.
ARTICLE III
Adjustment of Shares of Common Stock
Purchasable and of Warrant Price
Section 3.01. This Warrant is subject to the following further
provisions:
(a) If, before expiration of this Warrant by exercise or by its teens,
the Company issues to holders of its Common Stock any shares of its Common Stock
as a stock dividend or stock split or subdivides or combines its outstanding
shares of Common Stock by reclassification or otherwise, then the number of
Warrant Shares then in effect shall be proportionately increased, in the case of
a stock dividend, stock split or subdivision, or decreased, in the case of a
combination, effective at the close of business on the record date for such
stock dividend or immediately after the effective date of such subdivision or
combination. Any dividend paid or distributed upon the Common Stock in stock or
any other class of securities convertible into shares of Common Stock shall be
treated as a dividend paid in Common Stock to the extent that shares of Common
Stock are issuable upon the conversion thereof.
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(b) If, prior to the expiration of this Warrant by exercise or by its
terms, there is a capital reorganization, or reclassification of the Common
Stock of the Company, or consolidation of the Company with or merger of the
Company into any other corporation, or sale of all, or substantially all, of the
properties and assets of the Company to any other corporation, then, immediately
after such capital reorganization, reclassification, consolidation, merger or
sale, this Warrant shall entitle the Warrant Holder to purchase the number of
shares of stock or other securities or property of the Company, or of the
corporation resulting from such consolidation or surviving such merger or to
which such sale shall be made, as the case may be, that the owner of the Warrant
Shares (at the time of such capital reorganization, reclassification of Common
Stock, consolidation, merger or sale) would have been entitled to receive or
purchase upon such capital reorganization, reclassification of Common Stock,
consolidation, merger or sale had this Warrant been exercised at such time; and
in any such case, the provisions set forth herein with respect to the rights and
interests thereafter of the Warrant Holder shall be appropriately adjusted, if
necessary, in order to render this Warrant applicable to any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant. The subdivision or combination of shares of Common Stock issuable upon
exercise of this Warrant at any time outstanding into a greater or lesser number
of shares of Common Stock (whether with or without par value) shall not be
deemed to be a reclassification of Common Stock for the purposes of this
paragraph.
Section 3.02. Upon each adjustment of the number of Warrant Shares
pursuant to Section 3.01 hereof, the Warrant Price shall be adjusted by dividing
the adjusted number of Warrant Shares into the Aggregate Warrant Price.
Section 3.03. Whenever the Warrant Price and the Warrant Shares shall
be adjusted as herein provided, the Company shall compute the adjusted Warrant
Price and the adjusted number of Warrant Shares in accordance with such
provisions and shall immediately notify the Warrant Holder thereof. Such notice
shall contain a detailed description of the computation of such adjustments and
the circumstances necessitating the adjustments.
Section 3.04. If at any time after the date of this Warrant:
(a) the Company shall declare a dividend (or any other distribution) on
its Common Stock payable otherwise than in cash;
(b) the Company shall authorize the granting, to the holders of its
Common Stock, of rights to subscribe for or purchase any shares of any class of
its securities or of any other rights;
(c) the Company shall authorize any private offering of equity
securities of the Company in an amount and upon terms acceptable to the Company;
(d) there shall be any reclassification of the Common Stock (other than
a subdivision or combination of its outstanding Common Stock), or any
consolidation or merger of which the Company is a party or a sale or transfer of
all or substantially all of the assets of the Company and for which approval of
any holders of Common Stock is required; or
(e) there shall be a dissolution, liquidation or winding up of the
Company;
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then, in any of such events, the Company shall cause to be mailed to the Warrant
Holder at least twenty (20) days (or ten (10) days in any case specified in
clause (a) or (b) above) prior to the applicable record tale hereinafter
specified, a notice stating (i) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights are to be
determined, or (ii) the date on which such private offering, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and, in the case of a private offering,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up, the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their Common Stock for
securities or other property deliverable thereupon. Failure to give any such
notice or any defect therein shall not affect the validity of any action
contemplated in clauses (a) through (e) of this Section 3.04.
Section 3.05. The form of this Warrant need not be changed because of
any change in the Warrant Price or in the number of shares of Common Stock
purchasable upon the exercise of this Warrant pursuant to this Article III and
Warrants issued after such change may state the same Warrant Price and the same
number of shares of Common Stock as are stated in this Warrant as initially
issued.
Section 3.06. If, prior to the expiration of this Warrant by exercise
or by its terms, there is an adjustment of the number of Warrant Shares pursuant
to the antidilution provisions of Sections 3.01 and 3.02 hereof, this Warrant
shall immediately entitle the Warrant Holder to exercise this Warrant to
purchase such adjusted number of Warrant Shares as the holder hereof would have
otherwise received had such Holder exercised this Warrant immediately prior to
any such adjustment.
ARTICLE IV
Other Provisions Relating
to Rights of Warrant Holder
Section 4.01. The Warrant Holder shall not be entitled to vote or
receive dividends or be deemed the holder of shares of Common Stock for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the Warrant Holder any of the rights of a shareholder of the Company or any
right to vote, give or withhold consent to any action by the Company (whether
upon any recapitalization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings or
other action affecting shareholders (except for notices provided for in this
Warrant), receive dividends or subscription rights, or otherwise until this
Warrant shall have been exercised and the Warrant Shares purchasable upon the
exercise hereof shall have become deliverable as provided in Article II, at
which time the person or persons in whose name or names the certificate or
certificates for the Warrant Shares being purchased are to be issued shall be
deemed the holder or holders of record of such shares for all purposes;
provided, however, that if any such exercise occurs on a date when the Company's
stock transfer books are closed, the person or persons in whose name or names
the certificate or certificates for such shares are to be issues shall be deemed
the record holder or holders thereof for all purposes at the opening of business
on the next day on which such stock transfer books are open and this Warrant
shall not be deemed to have been exercised until such next day for the purpose
of determining entitlement to dividends on such Common Stock, and such exercise
shall be at the actual Warrant Price in effect at such date.
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Section 4.02. If this Warrant is lost, stolen, mutilated or destroyed,
the Company may, on such terms, including terms of indemnity, as it may
reasonably impose (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor as, and
in substitution for, this Warrant. Subject to receipt of indemnity pursuant to
provisions of the preceding sentence, any such new Warrant executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not the Warrant so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
Section 4.03. (a) The Company covenants and agrees to reserve and keep
available for the exercise of this Warrant a sufficient number of authorized
shares of Common Stock to permit the full exercise of this Warrant.
(a) The Company covenants that all shares of Common Stock issued on
exercise of this Warrant, and payment of the Warrant Price therefor, this
Warrant as provided for herein will be validly issued, fully paid and
non-assessable.
Section 4.04. Notwithstanding anything herein to the contrary, the
Company shall not issue a fraction of a share upon any exercise of this Warrant,
and if the Warrant Holder would be entitled upon the exercise hereof to receive
a fraction of a share, the Company shall, upon such exercise and receipt by the
Company of the Warrant Price, issue cash in lieu thereof.
Section 4.05. All notices or other communications required or permitted
to be given under this Warrant shall be in writing and shall be deemed given
when delivered personally, or five (5) business days after the date on which
mailed by registered or certified mail, return receipt requested, addressed to
the Company, at its then principal place of business and to the Warrant Holder
at his last known address as it shall appear on the books of the Company.
ARTICLE V
Treatment of Warrant Holder
Section 5.01. Prior to due presentment for registration of a permitted
transfer of this Warrant, the Company may deem and treat the Warrant Holder as
the absolute owner of this Warrant (notwithstanding any notation of ownership or
other writing hereon) for the purpose of any exercise hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
ARTICLE VI
Split-Up, Combination,
Exchange and Transfer of Warrants
Section 6.01. Subject to Section 6.02, this Warrant may be split up,
combined or exchanged for another Warrant or Warrants containing the same terms
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for the purchase of a like aggregate number of shares of Common Stock without
cost to the Warrant Holder. If the Warrant Holder desires to split up, combine
or exchange this Warrant, he shall make such request in writing delivered to the
Company at its principal office and shall surrender this Warrant and any other
Warrants to be so split up, combined or exchanged at said office. Upon any such
surrender for a splitup, combination or exchange, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case may
be, as so requested. The Company shall not be required to effect any split-up,
combination or exchange that will result in the issuance of a Warrant entitling
the Warrant Holder to purchase upon exercise a fraction of a share of Common
Stock or a fractional Warrant.
Section 6.02. This Warrant may not be sold, hypothecated, assigned,
transferred or otherwise disposed of, voluntarily or involuntarily, except in
accordance with and subject to the provisions of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations promulgated thereunder.
Section 6.03. Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with the Form
of Assignment annexed hereto duly executed. In such event the Company shall,
without charge, execute and deliver a new Warrant in the name of the assignee
named in such instrument of assignment and this Warrant shall promptly be
canceled. This Warrant may be divided or combined with other Warrants that carry
the same rights upon presentation thereof at the principal office of the Company
together with a written notice signed by the Warrant Holder, specifying the
denominations in which new Warrants are to be issued.
ARTICLE VII
Conditions Precedent to Exercise of Warrant;
Restrictions on Transfer; Restrictions on Warrant Shares
Section 7.01. This Warrant shall only be exercisable after the date
hereof and until the Expiration Date.
Section 7.02. Subject to the provisions of Section 6.02, this Warrant
and the Warrant Shares may not be sold, assigned, hypothecated, transferred or
otherwise disposed of except as follows:
(a) to a person to whom this Warrant or the Warrant Shares may legally
be transferred without registration under the Act and applicable state
securities law and without the delivery of a current prospectus under the Act
and applicable state securities law; or
(b) in the case of this Warrant or the Warrant Shares, to any person
upon delivery of a prospectus then meeting the requirements of the Act and
applicable state securities law relating to such Warrant and Warrant Shares (as
to which a registration statement under the Act and applicable state securities
law shall then be in effect) and the offering thereof for such sale or
disposition.
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ARTICLE VIII
Other Matters
Section 8.01. The Company will from time to time promptly pay all
transfer and similar taxes and charges that may be imposed with respect to the
issuance or delivery of Warrant Shares upon the exercise of this Warrant by the
record holder of the Warrant.
Section 8.02. All the covenants and provisions of this Warrant by or
for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder.
Section 8.03. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of New York, without regard
to any conflict of laws principles.
Section 8.04. Nothing in this Warrant expressed and nothing that may be
implied from any of the provisions hereof is intended, or shall be construed, to
confer upon, or give to, any person or entity other than the Company and the
Warrant Holder any right, remedy or claim under any promise or agreement hereof,
and all covenants, conditions, stipulations, promises and agreements contained
in this Warrant shall be for the sole and exclusive benefit of the Company and
its successor, and of the Warrant Holder and its successors and permitted
assigns.
Section 8.05. The Article headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation hereof.
Section 8.06. The Warrant Holder hereby represents to the Company that
the Warrant and the shares of Common Stock underlying the Warrant are being
acquired solely for the Warrant Holder's account, for investment, and are not
being purchased with a view to or for the resale or distribution thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed by the
Company as of the __th day of _____, 199__.
FORMAN INTERACTIVE CORP.
By: _________________________________
Richard Forman, President
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Assignment
(To be executed by the registered holder to effect a transfer of the within
Warrant.)
For value received _________________ received hereby sells, assigns and
transfers unto _________________ this Warrant and the rights represented thereby
to purchase shares of Common Stock in accordance with the terms and conditions
thereof, and does hereby irrevocably constitute and appoint _________________
attorney to transfer this Warrant on the books of the Company, with full power
of substitution.
IN WITNESS WHEREOF, the undersigned has executed this assignment this
_____ day of __________, ___.
_______________________________________
<PAGE>
Subscription Form
(To be executed by the holder to exercise the rights to purchase Shares of
Common Stock evidenced by the within Warrant.)
Register.com, Inc.
575 Eighth Avenue, 11th Floor
New York, NY 10018
The undersigned hereby irrevocably subscribes for _____ shares of your Common
Stock pursuant to and in accordance with the terms and conditions of this
Warrant and herewith makes payment of $_____ therefor in cash or by delivery of
_____ shares of your Common Stock, which has been held beneficially by the
undersigned for at least six months prior to the date hereof, and requests that
a certificate for such shares be issued in the name of the undersigned and be
delivered to the undersigned at the address stated below.
IN WITNESS WHEREOF, the undersigned has executed this assignment this
_____ day of __________, ___.
______________________________________
Address:
<PAGE>
AMENDED AND RESTATED
COMMON STOCK PURCHASE WARRANT,
SERIES A
WARRANT NO. _____
(Warrant Price - $3.40)
VOID AFTER 5:00 P.M., NEW YORK TIME, ON THE EXPIRATION DATE AS DEFINED BELOW.
WARRANT TO PURCHASE UP TO A MAXIMUM OF ________________________ SHARES
OF COMMON STOCK OF REGISTER.COM, INC. [SUBJECT TO ADJUSTMENT --SEE ARTICLE III]
TRANSFER RESTRICTED -- SEE SECTIONS 6.02 AND 7.02
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION
OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND
OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS.
This Warrant amends and restates, and for all purposes
supersedes and replaces, the original warrant dated as of
January 5, 1998.
This certifies that, for value received, ____________________
___________________________, or permitted registered assigns
(the "Warrant Holder"), is entitled to purchase from
REGISTER.COM, INC., a Delaware corporation (formerly Forman
Interactive Corp., a New York corporation) having a place of
business at 575 Eighth Avenue, 11th Floor, New York, NY 10018
(the "Company"), subject to the terms and conditions hereof,
at any time after the date described in Section 7.01 hereof,
and before the Expiration Date (as defined herein), up
to______________fully paid and non-assessable shares of Common
Stock ($.0001 par value) of the Company (the "Common Stock")
(as adjusted from time to time pursuant to the terms hereof)
at the Warrant Price (as defined herein). The Warrant Price
and the number of shares purchasable hereunder are subject to
adjustment as provided below.
<PAGE>
ARTICLE I
Definition
Section 1.01. The following terms, as used herein, have the respective:
meanings ascribed to them as follows
(a) "Aggregate Warrant Price" means the amount that the Warrant Holder
must pay at any time to the Company in the aggregate to acquire all of the
shares of Common Stock then remaining issuable hereunder,
(b) "Business Day" means a day other than a Saturday, Sunday or other
day on which banks in the State of New York are authorized or required by law to
remain closed.
(c) "Expiration Date" means 5:00 P.M., New York time, on June 4, 2005.
(d) "Warrants" means this Warrant (evidencing the right to purchase a
maximum of _________________________ shares of Common Stock, and as adjusted in
the manner hereinafter provided), which, as of June 2, 1999, amends and
restates, and for all purposes supersedes and replaces, the Common Stock
Purchase Warrant, Series A, dated as of January 5, 1998, issued to the holder
thereof, and all warrants that may be issued in place of this Warrant.
(e) "Warrant Holder" means, initially, the person named on the first
page of this Warrant and any person or entity in whose name this Warrant shall
be properly registered upon the books to be maintained by the Company for that
purpose.
(f) "Warrant Price" means that portion of the Aggregate Warrant Price
that is allocable at any given time prior to the Expiration Date to one Warrant
Share, and which shall initially be $3.40 per share, as such price may be
adjusted from time to time pursuant to Article III. Notwithstanding any other
provision hereof to the contrary, at any time at which the Company's Common
Stock is registered under Section 12 of the Securities Exchange Act of 1934, as
amended, payment of the Warrant Price upon any exercise of this Warrant may be
made in cash or by delivery to the Company of shares of the Company's Common
Stock, which shall be deemed valued at their fair market value on the date of
such exercise, as determined by the Board in its sole discretion, provided that
any such shares being presented for payment shall have been held by the Warrant
Holder, as beneficial owner thereof, for at least six months prior to the
exercise of this Warrant in connection with which such shares are tendered as
payment.
(g) "Warrant Shares" means the aggregate amount of shares of Common
Stock or other securities deliverable upon exercise of the Warrants.
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<PAGE>
ARTICLE II
Duration and Exercise of Warrant
Section 2.01. This Warrant may be exercised in whole or in part at any
time or from time to time after 9:00 A.M., New York time, on June 2, 1999 and
before 5:00 P.M., New York time, on the Expiration Date. If this Warrant is not
exercised during such time, it shall become void, and all rights hereunder shall
thereupon cease.
Section 2.02. (a)The Warrant Holder may exercise this Warrant from time
to time upon surrender of this Warrant, with the Subscription Form annexed
hereto duly executed, to the Company at its corporate office located at 575
Eighth Avenue, 11th Floor, New York, NY 10018, or at such other place within the
State of New York, of which the Company shall notify the Warrant Holder in
writing, together with the full Warrant Price for each share of Common Stock to
be purchased in lawful money of the United States, or by check, bank draft or
postal or express money order payable in United States Dollars to the order of
the Company.
(b) The Company covenants and agrees that it will pay when due and
payable any and all transfer and similar taxes that may be payable with respect
to the issue of this Warrant or with respect to the issue of each and every
share of the Common Stock of the Company constituting a portion of the Warrant
Shares to the Warrant Holder upon the exercise of this Warrant.
ARTICLE III
Adjustment of Shares of Common Stock
Purchasable and of Warrant Price
Section 3.01. This Warrant is subject to the following provisions:
(a) If, before expiration of this Warrant by exercise or by its terms,
the Company issues to holders of its Common Stock any shares of its Common Stock
as a stock dividend or stock split or subdivides or combines its outstanding
shares of Common Stock by reclassification or otherwise, then the number of
Warrant Shares then in effect shall be proportionately increased, in the case of
a stock dividend, stock split or subdivision, or decreased, in the case of a
combination, effective at the close of business on the record date for such
stock dividend or immediately after the effective date of such subdivision or
combination. Any dividend paid or distributed upon the Common Stock in stock or
any other class of securities convertible into shares of Common Stock shall be
treated as a dividend paid in Common Stock to the extent that shares of Common
Stock are issuable upon the conversion thereof.
(b) If, prior to the expiration of this Warrant by exercise or by its
terms, there is a capital reorganization, or reclassification of the Common
Stock of the Company, or consolidation of the Company with or merger of the
Company into any other corporation, or sale of all, or substantially all, of the
properties and assets of the Company to any other corporation, then, immediately
after such capital reorganization, reclassification, consolidation, merger or
sale, this Warrant shall entitle the Warrant Holder to purchase the number of
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<PAGE>
shares of stock or other securities or property of the Company, or of the
corporation resulting from such consolidation or surviving such merger or to
which such sale shall be made, as the case may be, that the owner of the Warrant
Shares (at the time of such capital reorganization, reclassification of Common
Stock, consolidation, merger or sale) would have been entitled to receive or
purchase upon such capital reorganization, reclassification of Common Stock,
consolidation, merger or sale had this Warrant been exercised at such time; and
in any such case, the provisions set forth herein with respect to the rights and
interests thereafter of the Warrant Holder shall be appropriately adjusted, if
necessary, in order to render this Warrant applicable to any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant. The subdivision or combination of shares of Common Stock issuable upon
exercise of this Warrant at any time outstanding into a greater or lesser number
of shares of Common Stock (whether with or without par value) shall not be
deemed to be a reclassification of Common Stock for the purposes of this
paragraph.
Section 3.02. Upon each adjustment of the number of Warrant Shares
pursuant to this Article III, the Warrant Price shall be adjusted by dividing
the adjusted number of Warrant Shares into the Aggregate Warrant Price.
Section 3.03. Whenever the Warrant Price and the Warrant Shares shall
be adjusted as herein provided, the Company shall compute the adjusted Warrant
Price and the adjusted number of Warrant Shares in accordance with such
provisions and shall immediately notify the Warrant Holder thereof Such notice
shall contain a detailed description of the computation of such adjustments and
the circumstances necessitating the adjustments.
Section 3.04. If at any time after the date of this Warrant:
(a) the Company shall declare a dividend (or any other distribution) on
its Common Stock payable otherwise than in cash;
(b) the Company shall authorize the granting, to the holders of its
Common Stock, of rights to subscribe for or purchase any shares of any class of
its securities or of any other rights;
(c) there shall be any reclassification of the Common Stock (other than
a subdivision or combination of its outstanding Common Stock), or any
consolidation or merger of which the Company is a party or a sale or transfer of
all or substantially all of the assets of the Company and for which approval of
any holders of Common Stock is required; or
(d) there shall be a dissolution, liquidation or winding up of the
Company; then, in any of such events, the Company shall cause to be mailed to
the Warrant Holder at least twenty (20) days (or ten (10) days in any case
specified in clause (a) or (b) above) prior to the applicable record date
hereinafter specified, a notice stating (i) the date on which a record is to be
taken for the purpose of such dividend, distribution or granting of rights, or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or rights are to be
determined, or (ii) the date on which such reclassification, consolidation,
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<PAGE>
merger, sale, transfer, dissolution, liquidation or winding up is expected to
become effective, and, in the case of a private offering, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up,
the date as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their Common Stock for securities or other property
deliverable thereupon. Failure to give any such notice or any defect therein
shall not affect the validity of any action contemplated in clauses (a) through
(e) of this Section 3.04.
Section 3.05. The form of this Warrant need not be changed because of
any change in the Warrant Price or in the number of shares of Common Stock
purchasable upon the exercise of this Warrant pursuant to this Article III and
Warrants issued after such change may state the same Warrant Price and the same
number of shares of Common Stock as are stated in this Warrant as initially
issued.
Section 3.06. If, prior to the expiration of this Warrant by exercise
or by its terms, the Company shall effect any of the transactions described in
Section 3.04 hereof, this Warrant shall thereafter represent the right to
purchase such adjusted number of Warrant Shares as the holder hereof would have
otherwise received had such Holder exercised this Warrant immediately prior to
any such adjustment.
ARTICLE IV
Other Provisions Relating
to Rights of Warrant Holder
Section 4.01. The Warrant Holder shall not be entitled to vote or
receive dividends or be deemed the holder of shares of Common Stock for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the Warrant Holder any of the rights of a shareholder of the Company or any
right to vote, give or withhold consent to any action by the Company (whether
upon any recapitalization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings or
other action affecting shareholders (except for notices provided for in this
Warrant), receive dividends or subscription rights, or otherwise until this
Warrant shall have been exercised and the Warrant Shares purchasable upon the
exercise hereof shall have become deliverable as provided in Article II at which
time the person or persons in whose name or names the certificate or
certificates for the Warrant Shares being purchased are to be issued shall be
deemed the holder or holders of record of such shares for all purposes;
provided, however that if any such exercise occurs on a date when the Company's
stock transfer books are closed, the person or persons in whose name or names
the certificate or certificates for such shares are to be issued shall be deemed
the record holder or holders thereof for all purposes at the opening of business
on the next day on which such stock transfer books are open and this Warrant
shall not be deemed to have been exercised until such next day for the purpose
of determining entitlement to dividends on such Common Stock, and such exercise
shall be at the actual Warrant Price in effect at such date.
Section 4.02. If this Warrant is lost, stolen, mutilated or destroyed,
the Company may, on such terms, including terms of indemnity, as it may
reasonably impose (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor as, and
in substitution for, this Warrant. Subject to receipt of indemnity pursuant to
provisions of the preceding sentence, any such new Warrant executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not the Warrant so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
5
<PAGE>
Section 4.03. (a) The Company covenants and agrees to reserve and keep
available for the exercise of this Warrant a sufficient number of authorized
shares of Common Stock to permit the full exercise of this Warrant.
(b) The Company covenants that all shares of Common Stock issued upon
exercise of this Warrant, and upon payment of the Warrant Price therefor as
provided for herein, will be validly issued, fully paid and non-assessable.
Section 4.04. Notwithstanding anything herein to the contrary, the
Company shall not issue a fraction of a share upon any exercise of this Warrant,
and if the Warrant Holder would be entitled upon the exercise hereof to receive
a fraction of a share, the Company shall, upon such exercise and receipt by the
Company of the Warrant Price, issue cash in lieu thereof.
Section 4.05. All notices or other communications required or permitted
to be given under this Warrant shall be in writing and shall be deemed given
when delivered personally, or five (5) business days after the date on which
mailed by registered or certified mail, return receipt requested, addressed to
the Company, at its then principal place of business and to the Warrant Holder
at his last known address as it shall appear on the books of the Company.
ARTICLE V
Treatment of Warrant Holder
Section 5.01. Prior to due presentment for registration of a permitted
transfer of this Warrant, the Company may deem and treat the Warrant Holder as
the absolute owner of this Warrant (notwithstanding any notation of ownership or
other writing hereon) for the purpose of any exercise hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
ARTICLE VI
Split-Up, Combination, Exchange and Transfer of Warrants
Section 6.01. Subject to Section 6.02, this Warrant may be split up,
combined or exchanged for another Warrant or Warrants containing the same terms
for the purchase of a like aggregate number of shares of Common Stock without
cost to the Warrant Holder. If the Warrant Holder desires to split up, combine
or exchange this Warrant, he shall make such request in writing delivered to the
Company at its principal office and shall surrender this Warrant and any other
Warrants to be so split up, combined or exchanged at said office. Upon any such
surrender for a split-up, combination or exchange, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case may
be, as so requested. The Company shall not be required to effect any split-up,
combination or exchange that will result in the issuance of a Warrant entitling
the Warrant Holder to purchase upon exercise a fraction of a share of Common
Stock or a fractional Warrant.
6
<PAGE>
Section 6.02. This Warrant may not be sold, hypothecated, assigned,
transferred or otherwise disposed of, voluntarily or involuntarily, except in
accordance with and subject to the provisions of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations promulgated thereunder.
Section 6.03. Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with the Form
of Assignment annexed hereto duly executed. In such event the Company shall,
without charge, execute and deliver a new Warrant in the name of the assignee
named in such instrument of assignment and this Warrant shall promptly be
canceled. This Warrant may be divided or combined with other Warrants that carry
the same rights upon presentation thereof at the principal office of the Company
together with a written notice signed by the Warrant Holder, specifying the
denominations in which new Warrants are to be issued.
ARTICLE VII
Conditions Precedent to Exercise of
Warrant; Restrictions on Transfer; Securities
Laws and calculation of Warrant Shares
Section 7.01. This Warrant shall only be exercisable after the date
hereof and until the Expiration Date.
Section 7.02. Subject to the provisions of Section 6.02, this Warrant
and the Warrant Shares may only be sold, assigned, hypothecated, transferred or
otherwise disposed of as follows:
(a) to a person to whom this Warrant or the Warrant Shares may legally
be transferred without registration under the Act and applicable state
securities law and without the delivery of a current prospectus under the Act
and applicable state securities law; or
(b) in the case of this Warrant or the Warrant Shares, to any person
upon delivery of a prospectus then meeting the requirements of the Act and
applicable state securities law relating to such Warrant and Warrant Shares (as
to which a registration statement under the Act and applicable state securities
law shall then be in effect) and the offering thereof for such sale or
disposition.
ARTICLE VIII
Other Matters
Section 8.01. The Company will from time to time promptly pay all
transfer and similar taxes and charges that may be imposed with respect to the
issuance or delivery of Warrant Shares upon the exercise of this Warrant by the
record holder of the Warrant.
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Section 8.02. All the covenants and provisions of this Warrant by or
for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder.
Section 8.03. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of New York, without regard
to any conflict of laws principles.
Section 8.04. Nothing in this Warrant expressed and nothing that may be
implied from any of the provisions hereof is intended, or shall be construed, to
confer upon, or give to, any person or entity other than the Company and the
Warrant Holder any right, remedy or claim under any promise or agreement hereof,
and all covenants, conditions, stipulations, promises and agreements contained
in this Warrant shall be for the sole and exclusive benefit of the Company and
its successors and of the Warrant Holder and its successors and permitted
assigns.
Section 8.05. The Article headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation hereof.
Section 8.06. The Warrant Holder hereby represents to the Company that
the Warrant and the shares of Common Stock underlying the Warrant are being
acquired solely for the Warrant Holder's account, for investment, and are not
being purchased with a view to or for the resale or distribution thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
as of the 21st day of December, 1999.
REGISTER.COM, INC.
By:_________________________________________
Richard D. Forman, Chief Executive Officer
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Assignment Form
(To be executed by the registered holder to effect a transfer of the within
Warrant.)
For value received __________________________ hereby sells, assigns and
transfers unto __________________________ this Warrant and the rights
represented thereby to purchase shares of Common Stock in accordance with the
terms and conditions thereof, and does hereby irrevocably constitute and appoint
__________________________ attorney to transfer this Warrant on the books of the
Company, with full power of substitution.
IN WITNESS WHEREOF, the undersigned has executed this assignment this __ day of
_______, ____.
_______________________________________________
[Provide name, address, telephone number,
telecopier number and e-mail address]
<PAGE>
Subscription Form
(To be executed by the registered holder to exercise the fights to purchase
Shares of Common Stock evidenced by the within Warrant.)
Register.com, Inc.
575 Eighth Avenue, 11th Floor
New York, New York 10018
Attention: President
The undersigned hereby irrevocably subscribes for shares of your Common Stock
pursuant to and in accordance with the terms and conditions of this Warrant and
herewith makes payment of $________ therefor in cash or by delivery of ________
______________ shares of your Common Stock, which has been held beneficially by
the undersigned for at least six months prior to the date hereof, and requests
that a certificate for such shares be issued in the name of the undersigned and
be delivered to the undersigned at the address stated below.
IN WITNESS WHEREOF, the undersigned has executed this subscription this
___ day of _____, _______.
____________________________________________________
[Provide name, address telephone number, telecopier
number and e-mail address]
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
Warrant No. _________ Number of Shares: ______
Dated as of:___________
REGISTER.COM, INC.
Common Stock Purchase Warrant
Register.com, Inc., a Delaware corporation (the "Company"), for value
received, hereby certifies that Legg Mason Wood Walker Incorporated, or its
registered assigns (the "Registered Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company, at any time or from time to time
on or after the date of issuance and on or before ____________ __, ____ at not
later than 5:00 p.m. (New York, New York time), __________ shares of Common
Stock, $0.0001 par value per share, of the Company, at a purchase price of
$______ per share. The shares purchasable upon exercise of this Warrant, and the
purchase price per share, each as adjusted from time to time pursuant to the
provisions of this Warrant, are hereinafter referred to as the "Warrant Shares"
and the "Purchase Price," respectively.
1. Exercise.
(a) This Warrant may be exercised by the Registered Holder, in whole or in
part, by surrendering this Warrant, with the purchase form appended hereto as
Exhibit I duly executed by such Registered Holder or by such Registered Holder's
duly authorized attorney, at the principal office of the Company, or at such
other office or agency as the Company may designate, accompanied by payment in
full, in lawful money of the United States, of the Purchase Price payable in
respect of the number of Warrant Shares purchased upon such exercise.
(b) The Registered Holder may, at its option, elect to pay some or all of
the Purchase Price payable on an exercise of this Warrant by surrendering to the
Company Common Stock of the Company with a fair market value equal to the
purchase price paid. The Registered Holder may, at its option, elect to pay some
or all of the Purchase Price payable upon an exercise of this Warrant by
cancelling a portion of this Warrant exercisable for such number of Warrant
Shares as is determined by dividing (i) the total Purchase Price payable in
respect of the number of Warrant Shares being purchased upon such exercise by
(ii) the excess of the Fair Market Value per share of Common Stock as of the
effective date of exercise, as determined pursuant to subsection 1(c) below (the
"Exercise Date"), over the Purchase Price per share. If the Registered Holder
wishes to exercise this Warrant pursuant to this method of payment with respect
to the maximum number of Warrant Shares purchasable pursuant to this method,
then the number of Warrant Shares so purchasable shall be equal to the total
number of Warrant Shares, minus the product obtained by multiplying (x) the
total number of Warrant Shares by (y) a fraction, the
<PAGE>
numerator of which shall be the Purchase Price per share and the denominator of
which shall be the Fair Market Value per share of Common Stock as of the
Exercise Date. The Fair Market Value per share of Common Stock shall be
determined as follows:
(i) If the Common Stock is listed on a national securities exchange,
the Nasdaq National Market, the Nasdaq system, or another nationally recognized
exchange or trading system as of the Exercise Date, the Fair Market Value per
share of Common Stock shall be deemed to be the last reported sale price per
share of Common Stock thereon on the Exercise Date; or, if no such price is
reported on such date, such price on the next preceding business day (provided
that if no such price is reported on the next preceding business day, the Fair
Market Value per share of Common Stock shall be determined pursuant to clause
(ii)).
(ii) If the Common Stock is not listed on a national securities
exchange, the Nasdaq National Market, the Nasdaq system, or another nationally
recognized exchange or trading system as of the Exercise Date, the Fair Market
Value per share of Common Stock shall be deemed to be the amount most recently
determined by the Board of Directors to represent the fair market value per
share of the Common Stock (including without limitation a determination for
purposes of granting Common Stock options or issuing Common Stock under an
employee benefit plan of the Company); and, upon request of the Registered
Holder, the Board of Directors (or a representative thereof) shall promptly
notify the Registered Holder of the Fair Market Value per share of Common Stock.
Notwithstanding the foregoing, if the Board of Directors has not made such a
determination within the three-month period prior to the Exercise Date, then (A)
the Fair Market Value per share of Common Stock shall be the amount next
determined by the Board of Directors to represent the fair market value per
share of the Common Stock (including without limitation a determination for
purposes of granting Common Stock options or issuing Common Stock under an
employee benefit plan of the Company), (B) the Board of Directors shall make
such a determination within 10 days of a request by the Registered Holder that
it do so, and (C) the exercise of this Warrant pursuant to this subsection 1(b)
shall be delayed until such determination is made.
(c) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant
shall have been surrendered to the Company as provided in subsection 1(a) above.
At such time, the person or persons in whose name or names any certificates for
Warrant Shares shall be issuable upon such exercise as provided in subsection
1(d) below shall be deemed to have become the holder or holders of record of the
Warrant Shares represented by such certificates.
(d) As soon as practicable after the exercise of this Warrant in full or in
part, and in any event within 10 days thereafter, the Company, at its expense,
will cause to be issued in the name of, and delivered to, the Registered Holder,
or as such Holder (upon payment by such Holder of any applicable transfer taxes)
may direct:
(i) a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof; and
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<PAGE>
(ii) in case such exercise is in part only, a new warrant or warrants
(dated the date hereof) of like tenor, calling in the aggregate on the face or
faces thereof for the number of Warrant Shares equal (without giving effect to
any adjustment therein) to the number of such shares called for on the face of
this Warrant minus the sum of (a) the number of such shares purchased by the
Registered Holder upon such exercise plus (b) the number of Warrant Shares (if
any) covered by the portion of this Warrant cancelled in payment of the Purchase
Price payable upon such exercise pursuant to subsection 1(b) above.
2. Adjustments.
(a) If outstanding shares of the Company's Common Stock shall be subdivided
into a greater number of shares or a dividend in Common Stock shall be paid in
respect of Common Stock, the Purchase Price in effect immediately prior to such
subdivision or at the record date of such dividend shall simultaneously with the
effectiveness of such subdivision or immediately after the record date of such
dividend be proportionately reduced. If outstanding shares of Common Stock shall
be combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. When any
adjustment is required to be made in the Purchase Price, the number of Warrant
Shares purchasable upon the exercise of this Warrant shall be changed to the
number determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such adjustment,
multiplied by the Purchase Price in effect immediately prior to such adjustment,
by (ii) the Purchase Price in effect immediately after such adjustment.
(b) If there shall occur any capital reorganization or reclassification of
the Company's Common Stock (other than a change in par value or a subdivision or
combination as provided for in subsection 2(a) above), or any consolidation or
merger of the Company with or into another corporation, or a transfer of all or
substantially all of the assets of the Company, then, as part of any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Registered Holder of this Warrant
shall have the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such Registered
Holder would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number of shares of Common Stock which
were then purchasable upon the exercise of this Warrant. In any such case,
appropriate adjustment (as reasonably determined in good faith by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of the
Registered Holder of this Warrant, such that the provisions set forth in this
Section 2 (including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.
(c) When any adjustment is required to be made in the Purchase Price, the
Company shall promptly mail to the Registered Holder a certificate setting forth
the Purchase Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Such certificate shall also set forth the
kind and amount of stock or other securities or property into
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<PAGE>
which this Warrant shall be exercisable following the occurrence of any of the
events specified in subsection 2(a) or (b) above.
3. Fractional Shares. The Company shall not be required upon the exercise of
this Warrant to issue any fractional shares, but shall make an adjustment
therefor in cash on the basis of the Fair Market Value per share of Common
Stock, as determined pursuant to subsection 1(b) above.
4. Requirements for Transfer.
(a) This Warrant and the Warrant Shares shall not be sold or transferred
unless either (i) they first shall have been registered under the Securities Act
of 1933, as amended (the "Act"), or (ii) the Company first shall have been
furnished with an opinion of legal counsel, reasonably satisfactory to the
Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Act.
(b) Notwithstanding the foregoing, no registration or opinion of counsel
shall be required for (i) a transfer by a Registered Holder which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner, if the transferee agrees in writing to be subject to
the terms of this Section 4, or (ii) a transfer made in accordance with Rule 144
under the Act.
(c) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not
be offered, sold or otherwise transferred, pledged or hypothecated
unless and until such securities are registered under such Act or an
opinion of counsel satisfactory to the Company is obtained to the
effect that such registration is not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
(d) This Warrant and the Warrant Shares shall be subject to the provisions
of that certain Amended and Restated Stockholders' Agreement dated as of June
30, 1999, by and among the Company and the stockholders signatory thereto, as
amended from time to time (the "Stockholders' Agreement"); and upon any transfer
of the Warrant Shares hereunder, the transferee shall be bound by the terms of
the Stockholder's Agreement and be entitled to the same rights and obligations
thereunder as the original Registered Holder of this Warrant.
5. No Impairment. The Company will not, by amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
reasonably necessary or appropriate in order to protect the rights of the holder
of this Warrant against impairment.
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<PAGE>
6. Liquidating Dividends. If the Company pays a dividend or makes a
distribution on the Common Stock payable otherwise than in cash out of earnings
or earned surplus (determined in accordance with generally accepted accounting
principles) except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Company will pay or distribute to the
Registered Holder of this Warrant, upon the exercise hereof, in addition to the
Warrant Shares purchased upon such exercise, the Liquidating Dividend which
would have been paid to such Registered Holder if he had been the owner of
record of such Warrant Shares immediately prior to the date on which a record is
taken for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
7. Notices of Record Date, etc. In case:
(a) the Company shall take a record of the holders of its Common Stock (or
other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right; or
(b) of any capital reorganization of the Company, any reclassification of
the capital stock of the Company, any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the surviving entity), or any transfer of all or substantially
all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
(d) then, and in each such case, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up. Such notice shall be mailed at least ten (10) days
prior to the record date or effective date for the event specified in such
notice.
8. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
9. Exchange of Warrants. Upon the surrender by the Registered Holder of any
Warrant or Warrants, properly endorsed, to the Company at the principal office
of the Company, the
5
<PAGE>
Company will, subject to the provisions of Section 4 hereof, issue and deliver
to or upon the order of such Holder, at the Company's expense, a new Warrant or
Warrants of like tenor, in the name of such Registered Holder or as such
Registered Holder (upon payment by such Registered Holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant or Warrants so surrendered.
10. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
11. Transfers, etc
(a) The Company will maintain a register containing the names and addresses
of the Registered Holders of this Warrant. Any Registered Holder may change its
or his address as shown on the warrant register by written notice to the Company
requesting such change.
(b) Subject to the provisions of Section 4 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, upon surrender of this
Warrant with a properly executed assignment (in the form of Exhibit II hereto)
at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant register, the
Company may treat the Registered Holder of this Warrant as the absolute owner
hereof for all purposes; provided, however, that if and when this Warrant is
properly assigned in blank, the Company may (but shall not be obligated to)
treat the bearer hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
12. Mailing of Notices, etc. All notices and other communications from the
Company to the Registered Holder of this Warrant shall be mailed by first-class
certified or registered mail, postage prepaid, to the address furnished to the
Company in writing by the last Registered Holder of this Warrant who shall have
furnished an address to the Company in writing. All notices and other
communications from the Registered Holder of this Warrant or in connection
herewith to the Company shall be mailed by first-class certified or registered
mail, postage prepaid, to the Company at its principal office set forth below.
If the Company should at any time change the location of its principal office to
a place other than as set forth below, it shall give prompt written notice to
the Registered Holder of this Warrant and thereafter all references in this
Warrant to the location of its principal office at the particular time shall be
as so specified in such notice.
13. Registration Rights.
(a) If the Company at any time or from time to time subsequent to the date
hereof proposes to register any securities under the Act either for its own
account or the account of any selling security holders (other than pursuant to:
(i) a registration statement on Forms S-4 or S-8 or any successor or similar
forms, (ii) a registration relating solely to a Securities Exchange
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<PAGE>
Commission Rule 145 offering, or (iii) a registration on any form that does not
permit secondary sales), the Company shall:
(i) give to each holder of Warrant Shares written notice thereof at
least 20 days in advance of the filing of any registration statement in respect
thereof (which notice will include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the applicable blue
sky or other states securities laws, the proposed offering price, and the plan
of distribution);
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein,
all the Warrant Shares specified in a written request or requests, made within
20 days after receipt of such written notice from the Company, by any holder or
holders of Warrant Shares;
(iii) use commercially reasonable efforts to cause the managing
underwriter or underwriters of such proposed underwritten offering to permit the
Warrant Shares requested to be included in the Registration Statement for such
offering to be included on the same terms and conditions as any similar
securities of the Company included therein. Notwithstanding the foregoing, if
the managing underwriter or underwriters of such offering deliver a written
opinion to the holders of such Warrant Shares that marketing considerations
require a limitation on the number of Warrant Shares offered pursuant to any
Registration Statement subject to this Section, then subject to the advice of
said managing underwriter or underwriters as to the size and composition of the
offering, the Company will include Warrant Shares in such registration pursuant
to, and in accordance with the terms of, Section 4(c)(v) of the Registration
Rights Agreement, dated as of June 30, 1999, by and among the Company and the
stockholders signatory thereto, as amended from time to time. The Company will
bear all registration expenses in connection with a registration hereunder.
Notwithstanding the foregoing, if at any time after giving written
notice of its intention to register its equity securities and before the
effectiveness of the Registration Statement filed in connection with such
registration, the Company determines for any reason either not to effect such
registration or to delay such registration, the Company may, at its election, by
delivery of written notice to each holder of Warrant Shares (A) in the case of a
determination not to effect registration, relieve itself of its obligation to
register the Warrant Shares in connection with such registration or (B) in the
case of a determination to delay registration, delay the registration of such
Warrant Shares for the same period as the delay in the registration of such
other equity securities.
Holders of Warrant Shares may exercise registration rights under this
Section 13 at any time or from time to time, so long as such holders continue to
hold Warrant Shares which have not previously been sold pursuant to a valid
registration statement under the Act.
(b) In connection with the Company's registration obligations pursuant to
Section 13(a) hereof, the Company will use commercially reasonable efforts to
effect such registration to permit the sale of such Warrant Shares in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
the Company will as expeditiously as possible but in no
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<PAGE>
event later than 30 days after receipt of a request for registration pursuant to
the terms of Section 13(a):
(i) before filing a Registration Statement (as defined below) or
Prospectus (as defined below) or any amendments or supplements thereto, furnish
to the counsel selected by the holders of securities covered by such
Registration Statement and the underwriters, if any, copies of all such
documents proposed to be filed, which documents will be made available for prior
review and comment by such counsel;
(ii) prepare and file with the Securities and Exchange Commission (the
"SEC") a Registration Statement and such amendments and post-effective
amendments to any Registration Statement, and such supplements to the
Prospectus, as may be required by the rules, regulations or instructions
applicable to the registration form utilized by the Company or by the Act or
otherwise necessary to keep such Registration Statement continuously effective;
and comply with the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during the one-year period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement or supplement to the Prospectus;
(iii) notify the selling holders of Warrant Shares and the managing
underwriters, if any, promptly, and (if requested by any such person or entity)
confirm such advice in writing,
a) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same
has become effective,
b) of any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus or for additional
information,
c) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation or
threatening of any proceedings for that purpose,
d) if at any time the representations and warranties of the
Company contemplated by paragraph (xiv) below cease to be true and
correct,
e) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Warrant Shares for sale
in any jurisdiction or the initiation or threatening of any proceeding
for such purpose, and
f) of the existence of any fact which results in the Registration
Statement, the Prospectus or any document incorporated therein by
reference containing an untrue statement of material fact or omitting
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
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<PAGE>
(iv) use reasonable efforts to prevent the issuance of any stop order
or to obtain the withdrawal of any order suspending the effectiveness of the
Registration Statement as soon as practicable;
(v) if reasonably requested by the managing underwriter or
underwriters or a holder of Warrant Shares being sold in connection with an
underwritten offering, immediately incorporate in a Prospectus supplement or
post-effective amendment such necessary information as the managing underwriters
or the holders of a majority in number of the securities being sold reasonably
request to have included therein relating to the plan of distribution with
respect to such Warrant Shares, including, without limitation, information with
respect to the amount of Warrant Shares being sold to such underwriters, the
purchase price being paid therefor by such underwriters and with respect to any
other terms of the underwritten (or best efforts underwritten) offering of the
Warrant Shares to be sold in such offering; and make all required filings of
such Prospectus supplement or post-effective amendment as soon as notified of
the matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(vi) at the request of any selling holder of Warrant Shares, furnish
to such selling holder of Warrant Shares and each managing underwriter, without
charge, at least one copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference);
(vii) deliver to each selling holder of Warrant Shares and the
underwriters, if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such persons or entities may reasonably request; the Company consents to the
use of the Prospectus or any amendment or supplement thereto by each of the
selling holders of Warrant Shares and the underwriters, if any, in connection
with the offering and sale of the Warrant Shares covered by the Prospectus or
any amendment or supplement thereto;
(viii) prior to any public offering of Warrant Shares, use
commercially reasonable efforts to register or qualify or cooperate with the
selling holders of Warrant Shares, the underwriters, if any, and their
respective counsel in connection with the registration or qualification of such
Warrant Shares for offer and sale under the securities or blue sky laws of such
jurisdictions as any seller or underwriter reasonably requests in writing and do
any and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Warrant Shares covered by the
Registration Statement; provided that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process or taxation in any such jurisdiction where it is not then so subject;
(ix) cooperate with the selling holders of Warrant Shares and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Warrant Shares to be sold and not bearing any
restrictive legends; and enable such Warrant Shares to be in such denominations
and registered in such names as the managing underwriters may request at least
two business days prior to any sale of Warrant Shares to the underwriters;
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<PAGE>
(x) use commercially reasonable efforts to cause the Warrant Shares
covered by the applicable Registration Statement to be registered with or
approved by such other United States federal or state governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof and the
underwriters, if any, to consummate the disposition of such Warrant Shares;
(xi) if any fact contemplated by paragraph (iii)(f) above shall exist,
prepare a supplement or post-effective amendment to the Registration Statement
or the related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of the Warrant Shares, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(xii) use commercially reasonable efforts to cause all Warrant Shares
covered by the Registration Statement to be listed on each securities exchange
or automated quotation system on which similar securities issued by the Company
are then listed, if requested by the holders of a majority in number of such
Warrant Shares or by the managing underwriters, if any;
(xiii) not later than the effective date of the applicable
Registration Statement, provide a CUSIP number for all Warrant Shares and
provide the applicable trustee(s) or transfer agent(s) with printed certificates
for the Warrant Shares which are in a form eligible for deposit with The
Depositary Trust Company;
(xiv) enter into customary agreements (including underwriting
agreements) and take all other appropriate actions in order to expedite or
facilitate the disposition of such Warrant Shares and in such connection,
whether or not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration:
a) make such representations and warranties and indemnities to
the holders of such Warrant Shares and the underwriters, if any, in
form, scope and substance as are customarily made by issuers to
underwriters in primary underwritten offerings;
b) obtain opinions of counsel to the Company and updates thereof
addressed to each selling holder of Warrant Shares and the
underwriters, if any, covering the matters customarily covered in
opinions requested in underwritten offerings;
c) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the
selling holders of Warrant Shares and the underwriters, if any, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters to underwriters in
connection with primary underwritten offerings (provided that the
Warrant Shares constitute at least 10% of the securities covered by
such Registration Statement);
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d) deliver such documents and certificates as may be reasonably
requested by the holders of a majority of the securities of the
Company being sold and the managing underwriters, if any, to evidence
compliance with paragraph (xi) above and with any customary conditions
contained in the underwriting agreement or other agreement entered
into by the Company.
(xv) subject to the execution of confidentiality agreements in form
and substance satisfactory to the Company, make available to a representative of
the holders of a majority in number of the securities of the Company being
registered pursuant to such Registration Statement, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney or accountant retained by the sellers or underwriter all financial
and other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with the registration, with respect to each
at such time or times as the Company shall reasonably determine; provided that
any records, information or documents that are designated by the Company in
writing as confidential shall be kept confidential by such individuals or
entities unless disclosure of such records, information or documents (a) is
required by court or administrative order; (b) becomes generally available to
the public other than as a result of a disclosure by such individuals or
entities; (c) was available to such individuals or entities on a
non-confidential basis prior to its disclosure by the Company, as shown by prior
written record, or (d) becomes available to such individuals or entities on a
non-confidential basis from a source other than the Company or its
representatives, provided that such source is not known by such individuals or
entities to be bound by a confidentiality agreement with or other obligation of
secrecy to the Company.
(xvi) otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make generally available to its
security holders earnings statements satisfying the provisions of Section 11(a)
of the Act, no later than 45 days after the end of any 12-month period (or 90
days, if such a period is a fiscal year) (1) commencing at the end of any month
in which Warrant Shares are sold to underwriters in an underwritten offering,
or, if not sold to underwriters in such an offering, (2) beginning with the
first month commencing after the effective date of the Registration Statement,
which statements shall cover said 12-month periods;
(xvii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter" that is required
to be retained in accordance with the rules and regulations of the NASD); and
(xviii) promptly prior to the filing of any document which is to be
incorporated by reference into the Registration Statement or the Prospectus
(after initial filing of the Registration Statement) provide copies of such
document for review and comment to counsel to the selling holders of securities
of the Company and to the managing underwriters, if any, and make the Company's
representatives available for discussion of such document.
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The Company may require each seller of Warrant Shares as to which any
registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
Each holder of Warrant Shares agrees that to avail itself of the
rights afforded hereby, upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraph (xi) above, such
holder will forthwith discontinue disposition of Warrant Shares registered in a
Registration Statement until such holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by paragraph (xi) above, or
until it is advised in writing by the Company that the use of the Prospectus may
be resumed, and has received copies of any additional or supplemental filings
which are incorporated by reference in the Prospectus, and, if so directed by
the Company, such holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such holder's possession,
of the Prospectus covering such Warrant Shares current at the time of receipt of
such notice.
Each holder of Warrant Shares agrees that to avail itself of the
rights afforded hereby, such holder shall (i) make such representations and
warranties and indemnities to the Company and the underwriters in form, scope
and substance as are customarily made by selling shareholders in primary
underwritten offerings; (ii) obtain opinions of counsel to such holder and
updates thereof (provided that such opinions shall be at the sole expense of the
Company) and addressed to the Company and the underwriter covering the matters
customarily covered in opinions requested in underwritten offerings; and (iii)
deliver such documents and certificates as may be reasonably requested by the
Company and the managing underwriters to ensure the Company's compliance with
Section 13(b)(xi) above.
In the event the Company shall give any such notice, the time periods
mentioned in Section 13(b)(ii) hereof shall be extended by the number of days
during the period from and including the date of the giving of such notice to
and including the date when each seller of Warrant Shares covered by such
Registration Statement either receives the copies of the supplemented or amended
prospectus contemplated by Section 13(b)(xi) hereof or is advised in writing by
the Company that the use of the Prospectus may be resumed.
For the purposes of this Section 13:
"Registration Statement" shall mean any registration statement of the
Company that covers any of the Warrant Shares, including the Prospectus,
amendments and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated by
reference in such Registration Statement, and "Prospectus" shall mean the
prospectus included in any Registration Statement, as amended or supplemented by
any prospectus supplement with respect to the terms of the offering of any
portion of the Warrant Shares covered by the Registration Statement and by all
other amendments and supplements to the prospectus, including post-effective
amendments to the Registration Statement of which such prospectus is a part and
all material incorporated by reference in such prospectus.
12
<PAGE>
14. No Rights as Stockholder. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
15. Change or Waiver. Any term of this Warrant may be changed or waived only by
an instrument in writing signed by the party against which enforcement of the
change or waiver is sought.
16. Headings. The headings in this Warrant are for purposes of reference only
and shall not limit or otherwise affect the meaning of any provision of this
Warrant.
17. Governing Law. This Warrant will be governed by and construed in accordance
with the laws of the State of New York.
REGISTER.COM, INC.
By: _________________________________
[Corporate Seal] Title: ______________________________
ATTEST:
_________________________ Address of principal office:
575 Eighth Avenue, 11th Floor
New York, New York 10018
13
<PAGE>
EXHIBIT I
PURCHASE FORM
To: Register.com, Inc. Dated:______________
The undersigned, pursuant to the provisions set forth in the attached
Warrant hereby irrevocably elects to purchase ________ shares of the Common
Stock covered by such Warrant. The undersigned herewith makes payment of
$____________, representing the full purchase price for such shares at the price
per share provided for in such Warrant. Such payment takes the form of (check
applicable box or boxes):
o $_________ in lawful money of the United States, and/or
o the cancellation of such portion of the attached
Warrant as is exercisable for a total of ______
Warrant Shares (using a Fair Market Value of $_______
per share for purposes of this calculation).
Signature: _____________________________
Address: _______________________________
_______________________________
<PAGE>
EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant with respect to the number of shares of Common Stock covered thereby set
forth below, unto:
Name of Assignee Address No. of Shares
By acceptance of the transfer contemplated hereby and by signing this Assignment
Form, the Assignee hereby agrees to be bound by the terms and provisions of that
certain Amended and Restated Stockholders' Agreement, dated as of ____ __, 199_,
as such agreement shall be amended and in effect from time to time.
Dated: __________________________ Signature: _____________________________
Dated: __________________________ Witness: _______________________________
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
-----------------------------------------------
Warrant No. ___ Number of Shares: _______
(Subject to adjustment)
Date of Issuance: ___________
REGISTER.COM, INC.
------------------
Common Stock Purchase Warrant
-----------------------------
(Void after _________ ___, ____ )
Register.com, Inc. (the "Company"), a Delaware corporation and
successor by merger to Forman Interactive Corp., a New York corporation, for
value received, hereby certifies that __________ ( the "Registered Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company, in
accordance with the vesting schedule set forth in Section 6, and on or before
________ ___, ____ at not later than 5:00 p.m. New York, New York time up to
______ shares of Common Stock, $0.0001 par value per share, of the Company, at a
purchase price of $_____ per share. The shares purchasable upon exercise of this
Warrant, and the purchase price per share, each as adjusted from time to time
pursuant to the provisions of this Warrant, are hereinafter referred to as the
"Warrant Shares" and the "Purchase Price," respectively.
1. Exercise.
--------
(a) This Warrant may be exercised by the Registered Holder, in whole or
in part, by surrendering this Warrant, with the purchase form appended hereto as
Exhibit I duly executed by such Registered Holder or by such Registered Holder's
duly authorized attorney, at the principal office of the Company, or at such
other office or agency as the Company may designate, accompanied by payment in
full, in lawful money of the United States, of the Purchase Price payable in
respect of the number of Warrant Shares purchased upon such exercise.
(b) The Registered Holder may, at its option, elect to pay some or all
of the Purchase Price payable upon an exercise of this Warrant by cancelling a
portion of this Warrant exercisable for such number of Warrant Shares as is
determined by dividing (i) the total Purchase Price payable in respect of the
number of Warrant Shares being purchased upon such exercise by (ii) the excess
of the Fair Market Value (as defined below) per share of Common Stock as of the
effective date of exercise, as determined pursuant to subsection 1(c) below (the
"Exercise Date") over the Purchase Price per share. If the Registered Holder
wishes to exercise this Warrant pursuant to this method of payment with respect
to the maximum number of Warrant Shares purchasable pursuant to this method,
then the number of Warrant Shares so purchasable shall be equal to the number of
Warrant Shares minus the product obtained by multiplying (x) the total number of
Warrant Shares by (y) a fraction, the numerator of which shall be the Purchase
Price per share and the denominator of which shall be the Fair Market Value per
share of Common Stock as of the Exercise Date. The Fair Market Value per share
of Common Stock shall be determined as follows:
<PAGE>
(i) If the Common Stock is listed on a national securities
exchange, the Nasdaq National Market, the Nasdaq system, or another nationally
recognized exchange or quotation system as of the Exercise Date, the Fair Market
Value per share of Common Stock shall be deemed to be the last reported sale
price per share of Common Stock thereon on the trading day immediately preceding
the Exercise Date.
(ii) If the Common Stock is not listed on a national securities
exchange, the Nasdaq National Market, the Nasdaq system, or another nationally
recognized exchange or quotation system as of the Exercise Date, the Fair Market
Value per share of Common Stock shall be deemed to be the amount most recently
determined by the Board of Directors to represent the fair market value per
share of the Common Stock (including, without limitation, a determination for
purposes of granting Common Stock options or issuing Common Stock under an
employee benefit plan of the Company); and, upon request of the Registered
Holder, the Board of Directors (or a representative thereof ) shall promptly
notify the Registered Holder of the Fair Market Value per share of Common Stock.
Notwithstanding the foregoing, if the Board of Directors has not made such a
determination within the three-month period prior to the Exercise Date, then (a)
the Fair Market Value per share of Common Stock shall be amount next determined
by the Board of Directors to represent the fair market value per share of the
Common Stock options or issuing Common Stock under an employee benefit plan of
the Company), (B) the Board of Directors shall make such a determination within
10 days of a request by the Registered Holder that it do so, and (C) the
exercise of this Warrant pursuant to this subsection 1(b) shall be delayed until
such determination is made.
(c) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant
shall have been surrendered to the Company as provided in subsection 1(a) above.
At such time, the person or persons in whose name or names any certificates for
Warrant Shares shall be issuable upon such exercise as provided in subsection
1(d) below shall be deemed to have become the holder or holders of record of the
Warrant Shares represented by such certificates.
(d) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 10 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the sum of (a) the number of such shares purchased by
the Registered Holder upon such exercise plus (b) the number of Warrant Shares
(if any) covered by the portion of this Warrant cancelled in payment of the
Purchase Price payable upon such exercise pursuant to subsection 1(b) above.
2
<PAGE>
2. Adjustments.
-----------
(a) If outstanding share of the Company's Common Stock shall be
subdivided into a greater number of shares or a dividend in Common Stock shall
be paid in respect of Common Stock, the Purchase Price in effect immediately
prior to such subdivision or at the record date of such dividend shall,
simultaneously with the effectiveness of such subdivision or immediately after
the record date of such dividend, be proportionately reduced. If outstanding
shares of Common Stock shall be combined into a smaller number of share, the
Purchase Price in effect immediately prior to such combination shall,
simultaneously with the effectiveness of such combination, be proportionately
increased. When any adjustment is required to be made in the Purchase Price, the
number of Warrant Shares purchasable upon the exercise of this Warrant shall be
changed to the number determined by dividing (i) an amount equal to the number
of shares issuable upon the exercise of this Warrant immediately prior to such
adjustment, multiplied by the Purchase Price in effect immediately prior to such
adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.
(b) If there shall occur any capital reorganization or reclassification
of the Company's Common Stock (other than a change in par value or a subdivision
or combination as provided for in subsection 2(a) above), or any consolidation
or merger of the Company with or into another corporation, or a transfer of all
or substantially all of the assets of the Company, then, as part of any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Registered Holder of this Warrant
shall have the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such Registered
Holder would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number of shares of Common Stock which
were then purchasable upon the exercise of this Warrant. In any such case,
appropriate adjustment (as reasonably determined in good faith by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect tot he rights and interest thereafter of the
Registered Holder of this Warrant, such that the provisions set forth in this
Section 2 (including provision with respect to adjustment of the Purchase Price)
shall thereafter be applicable, as nearly as is reasonably practicable, in
relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.
(c) When any adjustment is required to be made in Purchase Price, the
Company shall promptly mail to the Registered Holder a certificate setting forth
the Purchase Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Such certificate shall also set forth the
kind and amount of stock or other securities or property into which this Warrant
shall be exercisable following the occurrence of any of the events specified in
subsection 2(a) or (b) above.
3
<PAGE>
3. Fractional Shares. The Company shall not be required upon the exercise
of this Warrant to issue any factional shares, but shall make an adjustment
therefor in cash on the basis of the Fair Market Value per share of Common
Stock, as determined pursuant to subsection 1(b) above.
4. Requirements for Transfer.
-------------------------
(a) This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act of 1933, as amended (the "Act"), (ii) the Company first shall
have been furnished with an opinion of legal counsel, reasonably satisfactory to
the Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Act, or (iii) the transfer is a bona fide gift
to a trust for the direct or indirect benefit of the Registered Holder or to the
immediate family of the Registered Holder, provided that the Registered Holder
provides written notice to the Company stating that such transfer was effected
as a bona fide gift.
(b) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered
under such Act or an opinion of counsel satisfactory to the
Company is obtained to the effect that such registration is
not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
5. No Impairment. The Company will not, by amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and the taking of all such actions as may be
reasonably necessary or appropriate in order to protect the rights of the holder
of this Warrant against impairment.
6. Vesting. This Warrant shall initially be unvested. The Registered Holder of
this Warrant shall acquire a vested interest in the Warrant with respect to: (a)
fifty percent (50%) of the Warrant Shares purchasable under this Warrant upon
the one (1) year anniversary of the date hereof and (b) the remaining fifty
percent (50%) of the Warrant Shares purchasable under this Warrant upon the
second (2) year anniversary of the date hereof.
7. Notices of Record Date, etc.
----------------------------
In case:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right; or
4
<PAGE>
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the surviving entity); or any transfer of all or substantially
all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
(d) then, and in each such case, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up. Such notice shall be mailed at least ten (10) days
prior to the record date or effective date for the event specified in such
notice.
9. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
10. Exchange of Warrants. Upon the surrender by the Registered Holder of any
Warrant or Warrants, properly endorsed, to the Company at the principal office
of the Company, the Company will, subject to the provisions of Section 4 hereof,
issue and deliver to or upon the order of such Holder, at the Company's expense,
a new Warrant or Warrants of like tenor, in the name of such Registered Holder
or as such Registered Holder (upon payment by such Registered Holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
5
<PAGE>
12. Transfer, etc.
-------------
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its or his address as shown on the warrant register by written notice to
the Company requesting such change.
(b) Subject to the provisions of Section 4 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, upon surrender of this
Warrant with a properly executed assignment (in the form of Exhibit II hereto)
at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant register,
the Company may treat the Registered Holder of this Warrant as the absolute
owner hereof for all purposes; provided, however, that if and when this Warrant
is properly assigned in blank, the Company may (but shall not be obligated to)
treat the bearer hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
13. Mailing of Notices, etc. All notices and other communications from the
Company to the Registered Holder of this Warrant shall be mailed by first-class
certified or registered mail, postage prepaid, to the address furnished to the
Company in writing by the last Registered Holder of this Warrant who shall have
furnished an address to the Company in writing. All notices and other
communications from the Registered Holder of this Warrant or in connection
herewith to the Company shall be mailed by first-class certified or registered
mail, postage prepaid, to the Company at its principal office set forth below.
If the Company should at any time change the location of its principal office to
a place other than as set forth below, it shall give prompt written notice to
the Registered Holder of this Warrant and thereafter all references in this
Warrant to the location of its principal office at the particular time shall be
as so specified in such notice.
14. No Rights as Stockholder. Until the exercise of this Warrant, the Registered
Holder of this Warrant shall not have or exercise any rights by virtue hereof as
a stockholder of the Company.
15. Change or Waiver. Any term of this Warrant may be changed or waived only by
an instrument in writing signed by the party against which enforcement of the
change or waiver is sought.
16. Headings. The headings in this Warrant are for purposes of reference only
and shall not limit or otherwise affect the meaning of any provision of this
Warrant.
17. Law. This Warrant will be governed by and construed in accordance with the
laws of the State of Delaware.
6
<PAGE>
IN WITNESS WHEREOF, this Warrant was issued as of the date first
written above.
REGISTER.COM, INC.
By:________________________________
Title:_____________________________
ATTEST:
__________________________________
Address of principal office:
575 Eighth Avenue, 11th Floor
New York, New York 10018
7
<PAGE>
EXHIBIT I
PURCHASE FORM
-------------
To: Register.com, Inc. Date:__________________
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.___), hereby irrevocably elects to purchase___________ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$__________, representing the full purchase price of such shares at the price
per share provided for in such Warrant. Such payment takes the form of (check
applicable box or boxes):
$____________ in lawful money of the United States, and/or
the cancellation of such portion of the attached Warrant as is
exercisable for a total of ______ Warrant Shares (using a Fair
Market Value of $_________ per share for purposes of this
calculations).
Signature: ___________________________
Address: ___________________________
___________________________
8
<PAGE>
EXHIBIT II
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, ____________________________________________ hereby
sells, assigns and transfer all of the rights of the undersigned under the
attached Warrant (No._____) with respect to the number of shares of Common Stock
covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
9
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
Warrant No.___ Number of Shares:____
Date of Issuance: _______________________
REGISTER.COM, INC.
Common Stock Purchase Warrant
(Void after ________________)
Register.com, Inc. (the "Company"), a Delaware corporation and
successor by merger to Forman Interactive Corp., a New York corporation, for
value received, hereby certifies that _______ ( the "Registered Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company, at
any time or from time to time on or after the date of issuance and on or before
_______________ at not later than 5:00 p.m. New York, New York time up to ______
shares of Common Stock, $0.0001 par value per share, of the Company, at a
purchase price of $____ per share. The shares purchasable upon exercise of this
Warrant, and the purchase price per share, each as adjusted from time to time
pursuant to the provisions of this Warrant, are hereinafter referred to as the
"Warrant Shares" and the "Purchase Price," respectively.
1. Exercise.
(a) This Warrant may be exercised by the Registered Holder, in whole or in
part, by surrendering this Warrant, with the purchase form appended hereto as
Exhibit I duly executed by such Registered Holder or by such Registered Holder's
duly authorized attorney, at the principal office of the Company, or at such
other office or agency as the Company may designate, accompanied by payment in
full, in lawful money of the United States, of the Purchase Price payable in
respect of the number of Warrant Shares purchased upon such exercise.
(b) The Registered Holder may, at its option, elect to pay some or all of
the Purchase Price payable upon an exercise of this Warrant by cancelling a
portion of this Warrant exercisable for such number of Warrant Shares as is
determined by dividing (i) the total Purchase Price payable in respect of the
number of Warrant Shares being purchased upon such exercise by (ii) the excess
of the Fair Market Value (as defined below) per share of Common Stock as of the
effective date of exercise, as determined pursuant to subsection 1(c) below (the
"Exercise Date") over the Purchase Price per share. If the Registered Holder
wishes to exercise this Warrant pursuant to this method of payment with respect
to the maximum number of Warrant Shares purchasable pursuant to this method,
then the number of Warrant Shares so purchasable shall be equal to the number of
Warrant Shares minus the product obtained by multiplying (x) the total number of
Warrant Shares by (y) a fraction, the numerator of which shall be the Purchase
Price per share and the denominator of which shall be the Fair Market Value per
share of Common Stock as of the Exercise Date. The Fair Market Value per share
of Common Stock shall be determined as follows:
<PAGE>
(i) If the Common Stock is listed on a national securities exchange, the
Nasdaq National Market, the Nasdaq system, or another nationally recognized
exchange or quotation system as of the Exercise Date, the Fair Market Value per
share of Common Stock shall be deemed to be the last reported sale price per
share of Common Stock thereon on the trading day immediately preceding the
Exercise Date.
(ii) If the Common Stock is not listed on a national securities
exchange, the Nasdaq National Market, the Nasdaq system, or another nationally
recognized exchange or quotation system as of the Exercise Date, the Fair Market
Value per share of Common Stock shall be deemed to be the amount most recently
determined by the Board of Directors to represent the fair market value per
share of the Common Stock (including, without limitation, a determination for
purposes of granting Common Stock options or issuing Common Stock under an
employee benefit plan of the Company); and, upon request of the Registered
Holder, the Board of Directors (or a representative thereof) shall promptly
notify the Registered Holder of the Fair Market Value per share of Common Stock.
Notwithstanding the foregoing, if the Board of Directors has not made such a
determination within the three-month period prior to the Exercise Date, then (a)
the Fair Market Value per share of Common Stock shall be amount next determined
by the Board of Directors to represent the fair market value per share of the
Common Stock options or issuing Common Stock under an employee benefit plan of
the Company), (B) the Board of Directors shall make such a determination within
10 days of a request by the Registered Holder that it do so, and (C) the
exercise of this Warrant pursuant to this subsection 1(b) shall be delayed until
such determination is made.
(c) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant
shall have been surrendered to the Company as provided in subsection 1(a) above.
At such time, the person or persons in whose name or names any certificates for
Warrant Shares shall be issuable upon such exercise as provided in subsection
1(d) below shall be deemed to have become the holder or holders of record of the
Warrant Shares represented by such certificates.
(d) As soon as practicable after the exercise of this Warrant in full or in
part, and in any event within 10 days thereafter, the Company, at its expense,
will cause to be issued in the name of, and delivered to, the Registered Holder,
or as such Holder (upon payment by such Holder of any applicable transfer taxes)
may direct:
(i) a certificate or certificates for the number of full Warrant Shares
to which such Registered Holder shall be entitled upon such exercise plus, in
lieu of any fractional share to which such Registered Holder would otherwise be
entitled, cash in an amount determined pursuant to Section 3 hereof; and
(ii) in case such exercise is in part only, a new warrant or warrants
(dated the date hereof) of like tenor, calling in the aggregate on the face or
faces thereof for the number of Warrant Shares equal (without giving effect to
any adjustment therein) to the number of such shares called for on the face of
this Warrant minus the sum of (a) the number of such shares purchased by the
2
<PAGE>
Registered Holder upon such exercise plus (b) the number of Warrant Shares (if
any) covered by the portion of this Warrant cancelled in payment of the Purchase
Price payable upon such exercise pursuant to subsection 1(b) above.
2. Adjustments.
(a) If outstanding share of the Company's Common Stock shall be subdivided
into a greater number of shares or a dividend in Common Stock shall be paid in
respect of Common Stock, the Purchase Price in effect immediately prior to such
subdivision or at the record date of such dividend shall, simultaneously with
the effectiveness of such subdivision or immediately after the record date of
such dividend, be proportionately reduced. If outstanding shares of Common Stock
shall be combined into a smaller number of share, the Purchase Price in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. When any
adjustment is required to be made in the Purchase Price, the number of Warrant
Shares purchasable upon the exercise of this Warrant shall be changed to the
number determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such adjustment,
multiplied by the Purchase Price in effect immediately prior to such adjustment,
by (ii) the Purchase Price in effect immediately after such adjustment.
(b) If there shall occur any capital reorganization or reclassification of
the Company's Common Stock (other than a change in par value or a subdivision or
combination as provided for in subsection 2(a) above), or any consolidation or
merger of the Company with or into another corporation, or a transfer of all or
substantially all of the assets of the Company, then, as part of any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Registered Holder of this Warrant
shall have the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such Registered
Holder would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number of shares of Common Stock which
were then purchasable upon the exercise of this Warrant. In any such case,
appropriate adjustment (as reasonably determined in good faith by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect tot he rights and interest thereafter of the
Registered Holder of this Warrant, such that the provisions set forth in this
Section 2 (including provision with respect to adjustment of the Purchase Price)
shall thereafter be applicable, as nearly as is reasonably practicable, in
relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.
(c) When any adjustment is required to be made in Purchase Price, the
Company shall promptly mail to the Registered Holder a certificate setting forth
the Purchase Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Such certificate shall also set forth the
kind and amount of stock or other securities or property into which this Warrant
shall be exercisable following the occurrence of any of the events specified in
subsection 2(a) or (b) above.
3
<PAGE>
3. Fractional Shares. The Company shall not be required upon the exercise of
this Warrant to issue any factional shares, but shall make an adjustment
therefor in cash on the basis of the Fair Market Value per share of Common
Stock, as determined pursuant to subsection 1(b) above.
4. Requirements for Transfer.
(a) This Warrant and the Warrant Shares shall not be sold or transferred
unless either (i) they first shall have been registered under the Securities Act
of 1933, as amended (the "Act"), (ii) the Company first shall have been
furnished with an opinion of legal counsel, reasonably satisfactory to the
Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Act, or (iii) the transfer is a bona fide gift
to a trust for the direct or indirect benefit of the Registered Holder or to the
immediate family of the Registered Holder, provided that the Registered Holder
provides written notice to the Company stating that such transfer was effected
as a bona fide gift.
(b) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be offered,
sold or otherwise transferred, pledged or hypothecated unless and until
such securities are registered under such Act or an opinion of counsel
satisfactory to the Company is obtained to the effect that such
registration is not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
5. No Impairment. The Company will not, by amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and the taking of all such actions as may be
reasonably necessary or appropriate in order to protect the rights of the holder
of this Warrant against impairment.
6. Notices of Record Date, etc.
In case:
(a) the Company shall take a record of the holders of its Common Stock (or
other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right; or
(b) of any capital reorganization of the Company, any reclassification of
the capital stock of the Company, any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the surviving entity); or any transfer of all or substantially
all of the assets of the Company; or
4
<PAGE>
(c) of the voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
(d) then, and in each such case, the Company will mail or cause to be mailed
to the Registered Holder of this Warrant a notice specifying, as the case may
be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up. Such notice shall be mailed at least ten (10) days
prior to the record date or effective date for the event specified in such
notice.
8. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
9. Exchange of Warrants. Upon the surrender by the Registered Holder of any
Warrant or Warrants, properly endorsed, to the Company at the principal office
of the Company, the Company will, subject to the provisions of Section 4 hereof,
issue and deliver to or upon the order of such Holder, at the Company's expense,
a new Warrant or Warrants of like tenor, in the name of such Registered Holder
or as such Registered Holder (upon payment by such Registered Holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant or Warrants so surrendered.
10. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
11. Transfer, etc.
(a) The Company will maintain a register containing the names and addresses
of the Registered Holders of this Warrant. Any Registered Holder may change its
or his address as shown on the warrant register by written notice to the Company
requesting such change.
5
<PAGE>
(b) Subject to the provisions of Section 4 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, upon surrender of this
Warrant with a properly executed assignment (in the form of Exhibit II hereto)
at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant register, the
Company may treat the Registered Holder of this Warrant as the absolute owner
hereof for all purposes; provided, however, that if and when this Warrant is
properly assigned in blank, the Company may (but shall not be obligated to)
treat the bearer hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
12. Mailing of Notices, etc. All notices and other communications from the
Company to the Registered Holder of this Warrant shall be mailed by first-class
certified or registered mail, postage prepaid, to the address furnished to the
Company in writing by the last Registered Holder of this Warrant who shall have
furnished an address to the Company in writing. All notices and other
communications from the Registered Holder of this Warrant or in connection
herewith to the Company shall be mailed by first-class certified or registered
mail, postage prepaid, to the Company at its principal office set forth below.
If the Company should at any time change the location of its principal office to
a place other than as set forth below, it shall give prompt written notice to
the Registered Holder of this Warrant and thereafter all references in this
Warrant to the location of its principal office at the particular time shall be
as so specified in such notice.
13. No Rights as Stockholder. Until the exercise of this Warrant, the Registered
Holder of this Warrant shall not have or exercise any rights by virtue hereof as
a stockholder of the Company.
14. Change or Waiver. Any term of this Warrant may be changed or waived only by
an instrument in writing signed by the party against which enforcement of the
change or waiver is sought.
15. Headings. The headings in this Warrant are for purposes of reference only
and shall not limit or otherwise affect the meaning of any provision of this
Warrant.
16. Law. This Warrant will be governed by and construed in accordance with the
laws of the State of Delaware.
6
<PAGE>
IN WITNESS WHEREOF, this Warrant was issued as of the date first
written above.
REGISTER.COM, INC.
By:__________________________
Title:_______________________
ATTEST:
- ------------------------------------------
Address of principal office:
575 Eighth Avenue, 11th Floor
New York, New York 10018
7
<PAGE>
EXHIBIT I
PURCHASE FORM
To: Register.com, Inc. Date:__________________
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.___), hereby irrevocably elects to purchase __________ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$__________, representing the full purchase price of such shares at the price
per share provided for in such Warrant. Such payment takes the form of (check
applicable box or boxes):
$____________ in lawful money of the United States, and/or
the cancellation of such portion of the attached Warrant as is
exercisable for a total of ______ Warrant Shares (using a Fair
Market Value of $_________ per share for purposes of this
calculations).
Signature:_____________________________
Address: _____________________________
_____________________________
8
<PAGE>
EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________________________________________
hereby sells, assigns and transfer all of the rights of the undersigned under
the attached Warrant (No._____) with respect to the number of shares of Common
Stock covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
9
<PAGE>
EMPLOYEE STOCK OPTION CERTIFICATE
THIS OPTION is granted as of January 5, 1998, by FORMAN INTERACTIVE CORP.,
a New York corporation (the "Company"), to Richard D. Forman ("Optionee").
WHEREAS, the Company employs Optionee and considers it desirable and in its
best interests to induce Optionee to acquire an increased proprietary interest
in the Company, thereby creating additional incentive for Optionee to advance
the interests of the Company, and
WHEREAS, the Company's Board of Directors (the ("Board") has determined to
grant to Optionee a stock option to purchase shares of the Company's capital
stock,
NOW, THEREFORE, the Company agrees with Optionee as follows:
1. Grant of Option. The Company hereby grants to Optionee an option (the
"Option") to purchase up to 500,000 shares (the "Option Shares") of the
Company's common stock, $.0001 par value per share, at exercise prices of (i)
$.60 per share for the first 150,000 shares purchased upon the exercise hereof,
(ii) $1.60 per share for the next 100,000 shares purchased upon the exercise
hereof, (iii) $3.00 per share for the next 100,000 shares purchased upon the
exercise hereof, (iv) $6.00 per share for the last 150,000 shares purchased upon
the exercise hereof, all in the manner and subject to the conditions hereinafter
provided.
2. Time of exercise of option and vesting. The Option may be exercised by
Optionee at any time after the date hereof and prior to expiration of the Option
Term (as hereinafter defined). Options with respect to 150,000 Option Shares
shall vest and be immediately exercisable on January 6, 1998. Except as
otherwise stated in this Agreement, Options with respect to the remaining Option
Shares shall vest as to 100,000 Option Shares six (6) months after the date
hereof, as to an additional 100,000 Option Shares twelve (12) months after date,
as to an additional 100,000 Option Shares eighteen (18) months after date, and
as to the remaining 50,000 Option Shares twenty-four (24) months after date.
Lowest priced Options shall vest first.
3. Method of exercise. The Option shall be exercised by written notice
directed to the Company at its principal place of business, accompanied by this
Option Agreement and Optionee's check in payment of the full option price for
the number of Option Shares specified in such notice of exercise. The Company
shall make or cause to be made reasonably prompt delivery to Optionee of a stock
certificate or certificates evidencing such Option Shares, provided that if any
law or regulation requires the Company to take any action with respect to the
shares specified in such notice before the issuance thereof, then the date of
delivery of such share certificate or certificates shall be extended for the
period necessary to take such action. Notwithstanding the foregoing, at any time
at which the Company's common stock is registered under Section 12 of the
Securities Exchange Act of 1934, as amended, payment of the purchase price for
the Option Shares that are the subject of such exercise may be made in cash or
by delivery to the Company of shares of the Company's common stock, which shall
be deemed valued at their fair market value on the date of such exercise, as
determined by the Board in its
<PAGE>
sole discretion, provided that any such shares being presented for payment shall
have been held by Optionee, as beneficial owner thereof, for at least six months
prior to the option exercise in connection with which such shares are tendered
as payment. In the event that any such exercise is for less than all of the
Option Shares, the Company also shall deliver to Optionee, in addition to stock
certificates evidencing the Option shares with respect to which such exercise is
made, a new option agreement, in replacement for the option agreement
surrendered at the time of the exercise, indicating the number of Option Shares
with respect to which this Option remains available for exercise; alternatively,
the Company may endorse the original Option Agreement to give effect to the
partial exercise thereof.
4. Termination of option. Except as otherwise states in this Agreement, the
period during which the Option shall be exercisable (the "Option Term") shall
commence on the date hereof and shall terminate at 5:00 pm, New York time, on
January 4, 2003.
5. Reclassification, consolidation, or merger. (i) If the Company shall
declare and pay a distribution payable in shares of the Company's capital stock,
or if the Company's shares shall be split up, converted, exchanged,
reclassified, or in any way substituted for, then if and whenever the Company
shall effect a stock split, stock dividend, subdivision, recapitalization or
combination of Shares or other changes in the Company's capital stock, the
exercise price hereunder and the number and class of shares and/or other
securities with respect to which this Option thereafter may be exercised shall
be proportionately adjusted upward or downward, as the case may be, by the
Board. The Board may also make such other adjustments as it deems necessary to
take into consideration any other event (including, without limitation,
accounting changes), if the Board determines that such adjustment is
appropriate.
(ii) Subject to subparagraph (iii) below, if the Company merges or
consolidates with one or more corporations, then from and after the effective
date of such merger or consolidation, upon exercise of this Option, Optionee
shall be entitled to purchase, in lieu of the number of Option Shares as to
which this Option shall then be exercisable but on the same terms and conditions
of exercise set forth in herein, the number and class of shares and/or other
securities or property (including cash) to which Optionee would have been
entitled pursuant to the terms of the agreement of merger or consolidation, if,
immediately prior to such merger or consolidation, Optionee had been the holder
or record of the total number of Option Shares issuable upon exercise of this
Option.
(iii) In the event of a merger or consolidation in which the Company
is not the surviving entity or in the event of any transaction that results in
the acquisition of all or substantially all of the Company's outstanding common
stock by a single person or entity or by a group of persons and/or entities
acting in concert, or in the event of the sale or transfer of all or
substantially all of the Company's assets (the foregoing being referred to as
"Acquisition Events"), then the Board may in its sole discretion terminate this
Option by delivering notice of termination to Optionee at least 20 days prior to
the date of consummation of the Acquisition Event; provided that, during the
period from the date on which such notice of termination is delivered to the
consummation of the Acquisition Event, Optionee shall have the right to exercise
this Option in
-2-
<PAGE>
full (without regard to limitations on exercise otherwise contained herein), but
contingent on occurrence of the Acquisition Event, and provided that, if the
Acquisition Event does not take place within a specified period after giving
such notice for any reason whatsoever, the notice and exercise shall be null and
void. If an Acquisition Event occurs and the Board does not terminate this
Option pursuant to the preceding sentence, then the provisions of subparagraph
(ii) above shall apply.
(iv) If, as a result of any adjustment made pursuant to the preceding
paragraphs of this Section 5, Optionee shall become entitled upon exercise of
this Option to receive any securities other than the Option Shares, then the
number and class of securities so receivable therafter shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Options Shares set forth in
this Section 5, as determined by the Board in its discretion.
(v) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash, property, labor or services, upon direct sale,
upon the exercise of rights or are warrants to subscribe therefor or upon
conversion of shares or other securities, and in any case whether or not for
fair value, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number and class of shares and/or other securities or
property subject to this Option or the exercise price hereunder.
6. Death, Disability, Retirement, etc. Except as otherwise provided in this
Agreement, upon termination of Optionee's employment, this Option, to the extent
not exercised by Optionee prior thereto shall remain exercsable by Optionee, or
his legal representative, for the following time periods:
(a) In the event of Optionee's death, any unvested portion of the
Option shall immediately vest and this Option, as to all unexercised Option
Shares, shall remain exercisable (by the legal representative of his estate or
by the person given authority to exercise this Option by Optionee's will or by
operation of law) for a period of one year from the date of Optionee's death,
provided that the Board, in its discretion, may at any time extend such time
period to up to three years from the date of Optionee's death.
(b) In the event of Optinee's permanent disability, or if Optionee
retires at or after age 65 (or, with the consent of the Board or under an early
retirement policy of the Company, before age 65), or if Optinee's employment is
terminated by the Company without Cause (as defined in Section 7), any unvested
portion of the Option shall immediately vest and this Option, as to all
unexercised Option Shars, shall remain exercisable for one year form the date of
Optionee's termination of empoloyment, provided that the Board, in its
discretion, may at any time extend such time period to up to three years from
the date of Optionee's termination of employment.
-3-
<PAGE>
7. Cause. Upon the termination of employment of Optionee by the Company for
Cause or by Optionee in violation of an employment agreement between Optionee
and the Company or any Board resolution expressly governing Optionee's conduct
adopted by the Board on or prior to the date hereof, or by Optionee's
resignation without cause prior to the expiration of the then current term of
any such employment agreement, or if it is discovered after termination of
Optionee's employment that he had engaged in conduct that would have justified a
termination of employment by the Company for Cause, this Option shall
immediately be canceled as to any Option Shares which have not vested as of the
date of termination and may be exercised as to any vested but unexercised
portion of the Option for one (1) year from the date of Optionee's termination
of employment. Termination of employment by the Company for "Cause" means (i)
Optionee's willful and continued failure after notice substantially to perform
his duties with the Company, (ii) fraud, misappropriation or intentional
material damage to the property or business of the Company or (iii) commission
of a misdemeanor or felony.
8. Rights prior to exercise of option. The Option is nontransferably by
Optionee except as otherwise provided herein, and during Optinee's lifetime is
exercisable only by Optionee, and Optionee shall have no rights as a shareholder
in the Option Shares until payment of the option price and delivery to Optionee
of a stock certificate or certificates evidencing such shares.
9. Listing of Shares and Related Matters. If at any time the Board shall
determine in its sole discretion that the listing, registration or qualification
of the shares issuable hereunder upon any national securities exchange or under
any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the sale or issuance of shares hereunder, no shares will be delivered
unless and until such listing, registration, qualification, consent or approval
shall have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Board.
10. Binding effect. This Agreement shall be binding upon the heirs,
executors, administrators, and successors of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Option to be
executed the day and year above written.
FORMAN INTERACTIVE CORP.
By: /s/ Peter A. Forman
--------------------------
Peter A. Forman, President
Accepted by Optionee:
/s/ Richard D. Forman
- ---------------------
Richard D. Forman
-4-
<PAGE>
STOCK OPTION CERTIFICATE
THIS OPTION is granted as of October 1, 1998 by FORMAN INTERACTIVE CORP., a
New York corporation (the "Company"), to PONDFIELD ASSOCIATES, INC.
("Optionee").
WHEREAS, the Company contracted with Optionee for consulting services
during an important start-up period for the Company and considers it desirable
and in its best interests to reward Optionee by enabling it to acquire a
proprietary interest in the Company, thereby creating additional incentive for
Optionee to advance the interests of the Company, and
WHEREAS, the Company's Board of Directors (the "Board") has determined to
grant to Optionee a stock option to purchase shares of the Company's capital
stock,
NOW, THEREFORE, the Company agrees with Optionee as follows:
1. Grant of Option. The Company hereby grants to Optionee an option (the
"Option") to purchase up to 10,000 shares (the "Option Shares") of the Company's
common stock $.0001 par value per share, at an exercise price of $.60 per share
for the first 5,000 shares and $1.25 for the second 5,000 shares, all in the
manner and subject to the conditions hereinafter provided.
2. Time of exercise of option and vesting. The Option may be exercised by
Optionee at any time after the date hereof and prior to expiration of the Option
Term (as hereinafter defined). Options with respect to all 10,000 Option Shares
shall fully vest and be immediately exercisable on October 1, 1998.
3. Method of exercise. The Option shall be exercised by written notice
directed to the Company at its principal place of business, accompanied by this
Option Agreement and Optionee's check in payment of the full option price for
the number of Option Shares specified in such notice of exercise. The Company
shall make or cause to be made reasonably prompt delivery to Optionee of a stock
certificate or certificates evidencing such Option Shares, provided that if any
law or regulation requires the Company to take any action with respect to the
shares specified in such notice before the issuance thereof, then the date of
delivery of such share certificate or certificates shall be extended for the
period necessary to take such action.
Notwithstanding the foregoing, at the discretion of the Company's Stock
Option Committee, (i) payment of any portion of the exercise price payable on
the exercise hereof that is in excess of the par value of the shares to be
issued upon such exercise may be payable by the delivery of Optionee's
promissory note in favor of the Company, and (ii) at any time at which the
Company's common stock is registered under Section 12 of the Securities Exchange
Act of 1934, as amended, payment of all or any portion of the purchase price for
the Option Shares that are the subject of such exercise may be made by delivery
to the Company of shares of the Company's common stock, which shall be deemed
valued at their fair market value on the date of such exercise, as determined by
the Board in its sole discretion, provided that any such shares being presented
for payment shall have been held by Optionee, as beneficial owner thereof, for
at least six months prior to the option exercise in connection with which such
shares are tendered as payment. In the event that any such exercise is for less
than all of the Option Shares, the Company also shall deliver to Optionee, in
addition to stock certificates evidencing the Option Shares with respect to
which such exercise is made, a new option agreement, in replacement for the
option agreement surrendered at the time of the exercise, indicating the number
of Option Shares with respect to which this Option remains available for
exercise; alternatively, the Company may endorse the original Option Agreement
to give effect to the partial exercise thereof.
<PAGE>
4. Termination of option. Except as otherwise stated in this Agreement, the
period during which the Option shall be exercisable (the "Option Term") shall
commence on the date hereof and shall terminate at 5:00 pm, New York time, on
December 31, 2002.
5. Reclassification, consolidation, or merger. (i) If the company shall
declare and pay a distribution payable in shares of the Company's capital stock,
or if the Company's shares shall be split up, converted, exchanged,
reclassified, or in any way substituted for, then if and whenever the Company
shall effect a stock split, stock dividend, subdivision, recapitalization or
combination of Shares or other changes in the Company's capital stock, the
exercise price hereunder and the number and class of shares and/or other
securities with respect to which this Option thereafter may be exercised shall
be proportionately adjusted upward or downward, as the case may be, by the
Board. The Board may also make such other adjustments as it deems necessary to
take into consideration any other event (including, without limitation,
accounting changes), if the Board determines that such adjustments are
appropriate.
(ii) Subject to subparagraph (iii) below, if the Company merges or
consolidates with one or more corporations, then from and after the effective
date of such merger or consolidation, upon exercise of this Option, Optionee
shall be entitled to purchase, in lieu of the number of Option Shares as to
which this Option shall then be exercisable but on the same terms and conditions
of exercise set forth in herein, the number and class of shares and/or other
securities or property (including cash) to which Optionee would have been
entitled pursuant to the terms of the agreement of merger or consolidation, if,
immediately prior to such merger or consolidation, Optionee had been the holder
of record of the total number of Option Shares issuable upon exercise of this
Option.
(iii) In the event of a merger or consolidation in which the Company is not
the surviving entity or in the event of any transaction that results in the
acquisition of all or substantially all of the Company's outstanding common
stock by a single person or entity or by a group of persons and/or entities
acting in concert, or in the event of the sale or transfer of all or
substantially all of the Company's assets (the foregoing being referred to as
"Acquisition Events"), then the Board may in its sole discretion terminate this
Option by delivering notice of termination to Optionee at least 20 days prior to
the date of consummation of the Acquisition Event; provided that, during the
period from the date on which such notice of termination is delivered to the
consummation of the Acquisition Event, Optionee shall have the right to exercise
this Option in full (without regard to limitations on exercise otherwise
contained herein), but contingent on occurrence of the Acquisition Event, and
provided that (x) if the Acquisition Event does not take place within a
specified period after giving such notice for any reason whatsoever, the notice
and exercise shall be null and void, and (y) Optionee may, in lieu of exercising
the Option in full, exercise the Option partially, in which case the unexercised
balance of the Option shall expire and be deemed null and void immediately upon
such partial exercise. If an Acquisition Event occurs and the Board does not
terminate this Option pursuant to the preceding sentence, then the provisions of
subparagraph (ii) above shall apply.
<PAGE>
(iv) If, as a result of any adjustment made pursuant to the preceding
paragraphs of this Section 5, Optionee shall become entitled upon exercise of
this Option to receive any securities other than the Option Shares, then the
number and class of securities so receivable thereafter shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Option Shares set forth in
this Section 5, as determined by the Board in its discretion.
(v) Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor or upon conversion of
shares or other securities, and in any case whether or not for fair value, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number and class of shares and/or other securities or property subject to
this Option or the exercise price hereunder.
6. Rights prior to exercise of option. The Option is transferable by
Optionee only to Patricia H. Messick or Wayne D. Messick, and Optionee shall
have no rights as a shareholder in the Option Shares until payment of the option
price and delivery to Optionee of a stock certificate or certificates evidencing
such shares.
7. Listing of Shares and Related Matters. If at any time the Board shall
determine in its sole discretion that the listing, registration or qualification
of the shares issuable hereunder upon any national securities exchange or under
any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the sale or issuance of shares hereunder, no shares will be delivered
unless and until such listing, registration, qualification, consent or approval
shall have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Board.
8. Binding effect. This Agreement shall be binding upon the heirs,
executors, administrators, and successors of the parties hereto.
9. It is a condition of this stock option certificate that Wayne Messick
shall not be employed, either directly or indirectly, by a competitor of Forman
prior to June 30, 2001.
IN WITNESS WHEREOF, the parties hereto have caused this Option to be
executed the day and year first above written.
FORMAN INTERACTIVE CORP.
By: /s/ Richard D. Forman
---------------------------
Richard D. Forman, CEO
Accepted by Optionee:
PONDFIELD ASSOCIATES, INC.
By: /s/ Patricia H. Messick
--------------------------
Patricia H. Messick, Pres.
<PAGE>
FORMAN INTERACTIVE CORP.
1997 STOCK OPTION PLAN
<PAGE>
FOREMAN INTERACTIVE CORP.
1997 STOCK OPTION PLAN
1. Purposes of the Plan
The purposes of this Forman Interactive Corp. 1997 Stock
Option Plan (the "Plan") are to enable Forman Interactive Corp. ("the Company")
to attract, retain, and motivate the employees who are important to the success
and growth of the business of the Company and to create a long-term mutuality of
interest between those employees and the stockholders of the Company by granting
those employees options (which may be either Incentive Stock Options (as defined
herein) or Non-Qualified Stock Options (as defined herein) to purchase Common
Stock (as defined herein).
2. Definitions
(a) "Act" means the Securities Exchange Act of 1934.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended. Any reference to any section of the Code shall also be a reference to
any successor provision.
(d) "Committee" means such committee, if any, appointed by
the Board to administer the Plan, consisting of three or more directors as may
be appointed from time to time by the Board. If the Board does not appoint a
committee for this purpose, "Committee" means the Board.
(e) "Common Stock" means the common stock of the Company,
par value $.0001 per share, any Common Stock into which the Common Stock may be
converted and any Common Stock resulting from any reclassification of the Common
Stock.
(f) "Company" means Forman Interactive Corp. and any of its
Subsidiaries whose employees are Participants in the Plan.
(g) "Disability" means a permanent and total disability, as
determined by the Committee in its sole discretion. A Disability shall be deemed
to occur at the time of the determination of the Disability by the Committee.
(h) "Fair Market Value" means, for purposes of this Plan,
unless otherwise required by any applicable provision of the Code or any
regulations thereunder, the value of a Share (as defined herein) on a particular
date, determined as follows:
(i) if the Common Stock is listed or admitted to
trading on such date on a national securities exchange or quoted through the
Nasdaq National Market ("Nasdaq"), the closing sale price of a Share as reported
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on the relevant composite transaction tape, if applicable, or on the principal
such exchange (determined by trading value in the Common Stock) or through the
National Market System, as the case may be, on such date, or in the absence of
reported sales on such date, the mean between the highest reported bid and
lowest reported asked prices reported on such composite transaction tape or
exchange or through the National Market System, as the case may be, on such
date; or
(ii) if the Common Stock is not listed or quoted
as described in the preceding clause, but bid and asked prices are quoted
through Nasdaq, the mean between the highest reported bid and lowest reported
asked prices as quoted through Nasdaq on such date; or
(iii) if the Common Stock is not listed or quoted
on a national securities exchange or through Nasdaq or, if pursuant to (i) and
(ii) above the Fair Market Value is to be determined based upon the mean of the
highest reported bid and lowest reported asked prices and the Committee
determines that such mean does not properly reflect the Fair Market Value, by
such other method as the Committee determines to be reasonable and consistent
with applicable law; or
(iv) if the Common Stock is not publicly traded,
such amount as set by the Committee in good faith.
(i) "Incentive Stock Option" means any Option intended to
qualify as an "incentive" stock option," as defined in Section 422 of the Code.
(j) "Non-Qualified Stock Option" shall mean any option
awarded under this Plan that is not an Incentive Stock Option."
(k) "Option" means the right to purchase one Share at a
prescribed purchase price on the terms specified in the Plan. An Option may be
an Incentive Stock Option or a Non Qualified Stock Option.
(l) "Participant" means an employee of the Company who is
granted Options under the Plan.
(m) "Share" means a share of Common Stock.
(n) "Subsidiary" means any corporation more than 50% of the
voting stock of which is directly or indirectly beneficially owned by the
Company. An entity shall be deemed a Subsidiary of the Company only for such
periods as the requisite ownership relationship is maintained.
(o) "Substantial Stockholder" means any Participant who at
the time of grant owns directly (or is deemed to own by reason of the
attribution rules set forth in Section 424(d) of the Code) Shares possessing
more than 10% of the total combined voting power of all classes of stock of the
Company as determined under Section 422 of the Code.
(p) "Termination of Employment" with respect to an
individual means that individual is no longer an employee of the Company or any
of its Subsidiaries. In the event an entity shall cease to be a Subsidiary of
the Company, there shall be deemed a Termination of Employment of any individual
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who is not otherwise an employee of the Company or another Subsidiary of the
Company at the time the entity ceases to be a Subsidiary. A Termination of
Employment shall not include a leave of absence approved for purposes of the
Plan by the Committee.
(q) "Transfer" or "Transferred" shall mean attach, sell,
assign, pledge, encumber, charged or otherwise transfer.
3. Effective Date/Expiration of Plan
The Plan shall become effective upon its adoption by the Board
and approval by the stockholders of the Company (the "Effective Date"). Grants
of Options under the Plan may be made after adoption of the Plan by the Board,
subject to stockholder approval to the extent required by law. No Option shall
be granted under the Plan on or after the tenth anniversary of the Effective
Date (the "Termination Date"), but Options granted prior to the Termination Date
may be exercised after the Termination Date.
4. Administration
(a) Duties of the Committee. The Plan shall be administered
by the Committee. The Committee shall have full authority to interpret the Plan
and to decide any questions and settle all controversies and disputes that may
arise in connection with the Plan; to establish, amend and rescind rules for
carrying out the Plan; to administer the Plan, subject to its provisions; to
select Participants in, and grant Options under, the Plan; to determine the
terms, exercise price and form of exercise payment of each Option granted under
the plan; to determine which Options granted under the Plan shall be Incentive
Stock Options; to prescribe the form or forms of instruments evidencing Options
and any other instruments required under the Plan (which need not be uniform)
and to change such forms from time to time; and to make all other determinations
and to take all such steps in connection with the Plan and the Options as the
Committee, in its sole discretion, deems necessary or desirable. The Committee
shall not be bound to any standards of uniformity or similarity of action,
interpretation or conduct in the discharge of its duties hereunder, regardless
of the apparent similarity of the matters coming before it. Any determination,
interpretation or other action made or taken by the Company, the Board or the
Committee arising out of or in connection with the Plan shall be final,
conclusive and binding on all parties.
(b) Advisors. The Committee may designate the Secretary of
The Company, other employees of the Company or competent professional advisors
to assist the Committee in the administration of the Plan, and may grant
authority to such persons to execute Option Agreements (as defined herein) or
other documents on behalf of the Committee. The Committee may employ such legal
counsel, consultants and agents as it may deem desirable for the administration
of the Plan, and may rely upon any advice received from any such counsel or
consultant and any computation received from any such consultant or agent, and
the Committee shall not be liable with respect to any action taken or omitted by
it in good faith pursuant to the advice or counsel. Expenses incurred by the
Committee in the engagement of such counsel, consultant or agent shall be paid
by the Company.
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(c) Indemnification. No officer or former officer of the
Company, member or former member of the Board or the Committee, or person
designated pursuant to paragraph (b) shall be liable for any action or
determination made in good faith with respect to the Plan or any Option granted
under it. To the maximum extent permitted by applicable law or the Certificate
of Incorporation or By-Laws of the Company and to the extent not covered by the
Company's insurance, each officer or former office and member or former member
of the Committee or of the Board shall be indemnified and held harmless by the
Company against any cost or expense (including reasonable fees of counsel
reasonably acceptable to the Company) or liability (including any sum paid in
settlement of a claim with the approval of the Company), and advanced amounts
necessary to pay the foregoing at the earliest time and to the fullest extent
permitted, arising out of any act or omission to act in connection with the
Plan, except to the extent arising out of such officer's former officer's ,
member's or former member's own fraud or bad faith. Such indemnification shall
be in addition to any rights of indemnification the officers, former officers,
members or former members may have as directors under applicable law or under
the Certificate of Incorporation or By-Laws of the Company or any Subsidiary of
the Company.
(d) Meetings of the Committee. The Committee shall select
one of its members as a Chairman and shall adopt such rules and regulations,
subject to the By-Laws of the Company, as it shall deem appropriate concerning
the holding of its meetings and the transaction of its business. Any member of
the Committee may be removed at any time either with or without cause by
resolution adopted by the Board, and any vacancy on the Committee may at any
time be filled by resolution adopted by the Board. A majority of the Committee
members shall constitute a quorum. All determinations by the Committee shall be
made by the affirmative vote of a majority of its members. Any such
determination may be made at a meeting duly called and held at which a majority
of the members of the Committee are in attendance in person or through telephone
communication. Any determination set forth in writing and signed by all the
members of the Committee shall be as fully effective as if it had been made by a
majority vote of the members at a meeting duly called and held.
5. Shares: Adjustment Upon Certain Events
(a) Shares to be Delivered: Fractional Shares. Shares to be
issued under the Plan shall be made available, at the discretion of the Board,
either from authorized but unissued Shares or from issued Shares reacquired by
the Company and held in treasury. No fractional shares will be issued or
transferred upon the exercise of any Option. In lieu thereof, the Company shall
pay a cash adjustment equal to the same fraction of the Fair Market Value of one
Share on the date of exercise.
(b) Number of Shares. Subject to adjustment as provided in
this Section 5, the maximum aggregate number of Shares that may be issued under
the Plan shall be 500,000. If Options are for any reason canceled, or expire or
terminate unexercised, the Shares covered by such Options shall again be
available for the grant of Options, subject to the foregoing limit.
(c) Adjustments: Recapitalization, etc. The existence of
the Plan and the Options granted hereunder shall not affect in any way the right
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or power of the Board or the stockholders of the Company to make or authorize
any adjustment, recapitalization, reorganization or other change in the
Company's capital structure or its business, any merger or consolidation of the
Company, any issue of bonds, debentures, preferred or prior preference stocks
ahead of or affecting Common Stock, the dissolution or liquidation of the
Company or any of its Subsidiaries, any sale or transfer of all or part of its
assets or business or any other corporate act or proceeding. If and whenever the
Company takes any such action, however, the following provisions, to the extent
applicable, shall govern:
(i) If and whenever the Company shall effect a
stock split, stock dividend, subdivision, recapitalization or combination of
Shares or other changes in the Company's capital stock, (x) the Purchase Price
(as defined herein) per Share and the number and class of Shares and/or other
securities with respect to which outstanding Options thereafter may be
exercised, and (y) the total number and class of Shares and/or other securities
that may be issued under this Plan shall be proportionately adjusted by the
Committee. The Committee may also make such other adjustments as it deems
necessary to take into consideration any other event (including, without
limitation, accounting changes), if the Committee determines that such
adjustment is appropriate to avoid distortion in the operation of the Plan.
(ii) Subject to Section 5(c)(iii) if the Company
merges or consolidates with one or more corporations, then from and after the
effective date of such merger or consolidation, upon exercise of Options
theretofore granted, the Participant shall be entitled to purchase under such
Options, in lieu of the number of Shares as to which such Options shall then be
exercisable but on the same terms and conditions of exercise set forth in such
Options, the number and class of Shares and/or other securities or property
(including) cash) to which the Participant would have been entitled pursuant to
the terms of the agreement of merger or consolidation, if, immediately prior to
such merger or consolidation, the Participant had been the holder of record of
the total number of Shares receivable upon exercise of such Options (whether or
not then exercisable).
(iii) In the event of a merger or consolidation
in which the Company is not the surviving entity or in the event of any
transaction that results in the acquisition of all or substantially all of the
Company's outstanding Common Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of all or substantially all of the Company's assets (the foregoing
being referred to as "Acquisition Events"), then the Committee may in its sole
discretion terminate all outstanding Options effective as of the consummation of
the Acquisition Event by delivering notice of termination to each Participant at
least 20 days prior to the date of consummation of the Acquisition Event;
provided that, during the period from the date on which such notice of
termination is delivered to the consummation of the Acquisition Event, each
Participant shall have the right to exercise in full all the Options that are
then outstanding (without regard to limitations on exercise otherwise contained
in the Option Agreement), but contingent on occurrence of the Acquisition Event,
and provided that, if the Acquisition Event does not take place within a
specified period after giving such notice for any reason whatsoever, the notice
and exercise of such options shall be null and void, and further provided that
each Participant may elect to exercise his or her option in part rather than in
full, in which case the unexercised balance of such option shall immediately
terminate and be deemed cancelled upon such partial exercise. If an Acquisition
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Event occurs and the Committee does not terminate the outstanding Options
pursuant to the preceding sentence, then the provisions of Section 5(c)(ii)
shall apply.
(iv) Subject to Section 5(b), the Committee may
grant Options under the Plan in substitution for options held by employees of
another corporation who concurrently become employees of the Company as a the
result of a merger or consolidation of the employing corporation with the
Company, or as the result of the acquisition by the Company of property or stock
of the employing corporation. The Company may direct that substitute awards be
granted on such terms and conditions as the Committee considers appropriate
under the circumstances.
(v) If, as a result of any adjustment made
pursuant to the preceding paragraphs of this Section 5, any Participant shall
become entitled upon exercise of an Option to receive any securities other than
Common Stock, then the number and class of securities so receivable thereafter
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Common
Stock set forth in this Section 5, as determined by the Committee in its
discretion.
(vi) Except as hereinbefore expressly provided,
the issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to subscribe
therefor or upon conversion of shares or other securities, and in any case
whether or not for fair value, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number and class of shares and/or
other securities or property subject to Options theretofore granted or the
Purchase Price.
6. Awards and Terms of Options
(a) Grant. The Committee may grant Options, including
Options intended to be Incentive Stock Options, to employees of the Company.
Each Option shall be evidenced by an Option agreement (the "Option Agreement")
in such form as the Committee shall approve from time to time. To the extent
that any Option does not qualify as an Incentive Stock Option (whether because
of its provisions or the time or manner of its exercise or otherwise), such
Option or the portion thereof which does not qualify shall constitute a separate
Non-Qualified Stock Option.
(b) Exercise Price. The purchase price per Share (the
"Purchase Price") deliverable upon the exercise of an Option shall be determined
by the Committee, subject to the following: (i) the Purchase Price shall not be
less than the par value of a Share and (ii) in the case of Incentive Stock
Options, the Purchase Price shall not be less than 100% (110% for an Incentive
Stock Option granted to a Substantial Stockholder) of the Fair Market Value per
share on the date the Incentive Stock Option is granted.
(c) Number of Shares. The Option Agreement shall specify
the number of Options granted to the Participant, as determined by the Committee
in its sole discretion.
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(d) Exercisability. At the time of grant, the Committee
shall specify when and on what terms the Options granted shall be exercisable.
In the case of Options not immediately exercisable in full, the Committee may at
any time accelerate the time as to which all or any part of the Options may be
exercised and may waive any other conditions to exercise, subject to terms of
the Option Agreement and the Plan. No option shall be exercisable after the
expiration of ten years from the date of grant (five years, in the case of
Incentive Stock Option granted to a Substantial Stockholder). Each Option shall
be subject to earlier termination as provided in Section 7 below.
(e) Special Rule for Incentive Options. If required by
Section 422 of the Code, to the extent the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year (under all plans of his
or her employer corporation and its parent and subsidiary corporations) exceeds
$100,000, such Options shall not be treated as Incentive Stock Options. Nothing
in this special rule shall be construed as limiting the exercisability of any
Option, unless the Committee expressly provides for such a limitation at time of
grant. Should the foregoing provision not be necessary in order for the Options
to qualify as Incentive Stock Options, or should any additional provisions be
required, the Committee may amend the Plan accordingly, without the necessity of
obtaining the approval of the stockholders of the Company.
(f) Exercise of Options.
(i) A participant may elect to exercise one or
more Options by giving written notice to the Committee of such election and of
the number of Shares with respect to which the Options are being exercised,
accompanied by payment in full of the aggregate Purchase Price for such Shares.
(ii) Shares purchased pursuant to the exercise of
Options shall be paid for at the time of exercise as follows:
(1) in cash or by check, bank draft or money
order payable to the order of the Company;
(2) if so permitted by the Committee: (1)
through the delivery of unencumbered Shares (including Shares being acquired
pursuant to the Options then being exercised), provided such Shares (or such
Options) have been owned by the Participant for such period as may be required
by applicable accounting standards to avoid a charge to earnings, (II) through a
combination of Shares and cash as provided above, (III) by delivery of a
promissory note of the Participant to the Company, such promissory note to be
payable, in the case of an Incentive Stock Option, on such terms as are
specified in the Option Agreement (except that, in lieu of a stated rate of
interest, the Option Agreement may provide that the rate of interest on the
promissory note will be such rate as is sufficient, at the time the note is
given, to avoid the imputation of interest under the applicable provisions of
the Code), or (IV) by a combination of cash (or cash and Shares) and the
Participant's promissory note; provided, that, if the Shares delivered upon
exercise of the Option is an original issue of authorized Shares, at least so
much of the exercise price as represents the par value of such Shares shall be
paid in cash or by a combination of cash and Shares;
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(3) through the delivery of irrevocable
instructions to a broker to deliver promptly to the Company an amount equal to
the aggregate Purchase Price; or
(4) On such other terms and conditions as
may be acceptable to the Committee and in accordance with applicable law.
(iii) Upon receipt of payment and satisfaction of
the requirements, if any, as to withholding of taxes as set forth herein, the
Company shall deliver to the Participant as soon as practicable a certificate or
certificates for the Shares then purchased. No Shares shall be issued until
payment therefor, as provided herein, has been made or provided for.
(g) Buy Out and Settlement Provisions. The Committee may at
any time on behalf of the Company offer to buy out an Option previously granted,
based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made, and the
Participant shall be entitled to accept or reject such offer in his or her sole
discretion.
(h) Modification, Extension and Renewal of Options. Subject
to the terms and conditions and within the limitations of the Plan, the
Committee may modify, extend or renew outstanding Options granted under the Plan
(provided that the rights of a Participant are not reduced without his or her
consent, or accept the surrender of outstanding Options (up to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
therefor (to the extent not theretofore exercised).
(i) Other Terms and Conditions. Options may contain such
other provisions, which shall not be inconsistent with any of the foregoing
terms of the Plan, as the Committee shall deem appropriate including, without
limitation, permitting "reloads" such that the same number of Options are
granted as the number of (i) Options exercised, (ii) shares used to pay for the
exercise price of Options or (iii) shares used to pay withholding taxes
("Reloads"). With respect to Reloads, the exercise price of the new Option shall
be the Fair Market Value on the date of the Reload and the term of the Option
shall be the same as the remaining term of the Options that are exercised, if
applicable, or such other exercise price and term as determined by the
Committee.
7. Effect of Termination of Employment
(a) Death, Disability, Retirement, etc. Except as otherwise
provided in the Participant's Option Agreement, upon Termination of Employment,
all outstanding Options then exercisable and not exercised by the Participant
prior to such Termination of Employment (and any Options not previously
exercisable but made exercisable by the Committee at or after the Termination of
Employment) shall remain exercisable by the Participant to the extent not
exercised for the following time periods (subject to Section 6(d)):
(i) In the event of the Participant's death, such Options
shall remain exercisable (by the legal representative of the Participant's
estate or by the person given authority to exercise such Options by the
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Participant's will or by operation of law) for a period of one year from the
date of the Participant's death, provided that the Committee, in its discretion,
may at any time extend such time period to up to three years from the date of
the Participant's death.
(ii) In the event of the Participant's
Disability, or if the Participant retires at or after age 65 (or, with the
consent of the Committee or under and early retirement policy of the Company,
before age 65) or, if the Participant's employment is terminated by the Company
without Cause, such Options shall remain exercisable for one year from the date
of the Participant's Termination of Employment, provided that the Committee, in
its discretion, may at any time extend such time period to up to three years
from the date of the Participant's Termination of Employment.
(b) Cause. Upon the Termination of Employment of a
Participant for Cause or by the Participant in violation of an agreement between
the Participant and the Company or any of its Subsidiaries, or if it is
discovered after such Termination of Employment that such Participant had
engaged in conduct that would have justified a Termination of Employment for
Cause, all outstanding Options shall immediately be canceled. Termination of
Employment for "Cause" means (i) the Participant's willful and continued failure
substantially to perform his or her duties with the Company, (ii) fraud,
misappropriation or intentional material damage to the property or business of
the Company or (iii) commission of a felony.
(c) Other Termination. In the event of Termination of
Employment for any reason other than as provided in Section 7(a) or 7(b), all
outstanding Options not excised by the Participant prior to such Termination of
Employment shall remain exercisable (to the extent exercisable by such
Participant immediately before such termination) for a period of three months
after such termination, provided that the Committee in its discretion may extend
such time period to up to one year from the date of the Participant's
Termination of Employment, and provided further that no Options that were not
exercisable during the period of employment shall thereafter become exercisable,
unless the Committee determines that such Options shall be exercisable.
8. Nontransferability of Options
No Option shall be Transferable by the Participant otherwise
than by will or under applicable laws of descent and distribution, and during
the lifetime of the Participant may be exercised only by the Participant or his
or her guardian or legal representative. In addition, no Option shall, except as
otherwise provided herein, be Transferable in any way (whether by operation of
law or otherwise), and any attempt to Transfer shall be void, and no such Option
shall in any manner be subject to the debts, contracts, liabilities, engagements
or torts of any person who shall be entitled to such Option, nor shall it be
subject to attachment or legal process for or against such person.
9. Rights as a Stockholder
A Participant (or a permitted transferee of an Option) shall
have no rights as a stockholder with respect to any Shares covered by such
Participant's Option until such Participant (or permitted transferee) shall have
become the holder of record of such Shares, and no adjustments shall be made for
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dividends in cash or other property or distributions or other rights in respect
to any such Shares, except as otherwise specifically provided in this Plan.
10. Determinations
Each determination, interpretation or other action made or
taken pursuant to the provisions of this Plan by the Company, the Board or the
Committee shall be final, conclusive, and binding for all purposes and upon all
persons, including, without limitation, the Participants, the Company and its
Subsidiaries, directors, officers, and other employees of the Company and its
Subsidiaries, and the respective heirs, executors, administrators, personal
representatives and other successors in interest of each of the foregoing.
11. Termination, Amendment and Modification
The plan shall terminate at the close of business on the tenth
anniversary of the Effective Date, unless terminated sooner as hereinafter
provided, and no Option shall be granted under the Plan on or after that date.
The termination of the Plan shall not terminate any outstanding Options that by
their terms continue beyond the termination date of the Plan. At any time prior
to the tenth anniversary of the Effective Date, the Board or the Committee may
amend or terminate the Plan or suspend the Plan in whole or in part.
Notwithstanding the foregoing, however, no such amendment may, without the
approval of the stockholders of the Company, effect any change that would
require stockholder approval under applicable law.
Nothing contained in this Section 11 shall be deemed to
prevent the Board or the Committee from authorizing amendments of outstanding
Options of Participants, including, without limitations, the reduction of the
Purchase Price specified therein (or the granting or issuance of new Options at
a Lower Purchase Price upon cancellation of outstanding Options), as long as all
Options outstanding at any one time shall not call for issuance of more Shares
than the remaining number provided for under the Plan and as long as the
provisions of any amended Options would have been permissible under the Plan if
such Option had been originally granted or issued as of the date of such
amendment with such amended terms.
Notwithstanding anything to the contrary contained in this
Section 11, no termination, amendment or modification of the Plan may, without
the consent of the Participant or the permitted transferee of such Participant's
Option, alter or impair the rights and obligations arising under any then
outstanding Option.
12. Non-Exclusivity
Neither the adoption of the Plan by the Board nor the
submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable, including, without
limitation, the granting or issuance of stock options, Shares and/or other
incentives otherwise than under the Plan, and such arrangements may be either
generally applicable or limited in application.
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13. Use of Proceeds
The proceeds of the sale of Shares subject to Options under
the Plan are to be added to the general funds of the Company and used for its
general corporate purposes as the Board shall determine.
14. General Provisions
(a) Right to Terminate Employment. Neither the adoption of
the Plan nor the grant of Options shall impose any obligation on the Company to
continue the employment of any participant, nor shall it impose any obligation
on the part of any Participant to remain in the employ of the Company, subject
however to the provisions of any agreement between the Company and the
Participant.
(b) Purchase for Investment. If the Board determines that
the law so requires, the holder of an option granted hereunder shall, upon any
exercise or conversion thereof, executive and deliver to the Company a written
statement, in form satisfactory to the Company, representing and warranting that
such Participant is purchasing or accepting the Shares then acquired for such
Participant's own account and not with a view to the resale or distribution
thereof, that any subsequent offer for sale or sale of any such Shares shall be
made either pursuant to (i) a Registration Statement on an appropriate form
under the Securities Act of 1933 (the "Securities Act"), which Registration
Statement shall have become effective and shall be current with respect to the
Shares being offered and sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, and that in claiming such
exemption the holder will, prior to any offer for sale or sale of such Shares,
obtain a favorable written opinion, satisfactory in form and substance to the
Company, from counsel approved by the Company as to the availability of such
exception. In addition to any legend required by this Plan, the certificates for
such shares may include any legend with the Committee deems appropriate to
reflect any restriction on Transfer.
(c) Trusts, etc., This Plan is intended to be an "unfunded"
deferred compensation plan. Nothing contained in the Plan and no action taken
pursuant to the Plan (including, without limitation, the grant of any Option
thereunder) shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between the Company and any Participant or the executor,
administrator or other personal representative or designated beneficiary of such
Participant, or any other persons.
(d) Notices. Each Participant shall be responsible for
furnishing the Committee with the current and proper address for the mailing to
such Participant of notices and the delivery to such Participant of agreements,
Shares and payments. Any notices required or permitted to be given shall be
deemed given if directed to the person to whom addressed at such address and
mailed by regular United States mail, first class and prepaid. If any item
mailed to such address is returned as undeliverable to the addressee, mailing
will be suspended until the Participant furnishes the proper address.
(e) Severability of Provisions. If any provisions of the
Plan shall be held invalid or unenforceable, such invalidity or unenforceability
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shall not affect any other provisions of the Plan, and the Plan shall be
construed and enforced as if such provisions had not been included.
(f) Payment to Minors, etc. Any benefit payable to or for
the benefit of a minor, an incompetent person or other person incapable of
receipting therefor shall be deemed paid when paid to such person's guardian or
to the party providing or reasonably appearing to provide for the care of such
person, and such payment shall fully discharge the Committee, the Company and
their employees, agents and representatives with respect thereto.
(g) Headings and Captions. The headings and captions herein
are provided for reference and convenience only. They shall not be considered
part of the Plan and shall not be employed in the construction of the Plan.
(h) Controlling Law. The Plan shall be construed and
enforced according to the laws of the State of New York (regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws).
15. Issuance of Stock Certificates; Legends; Payment of
Expenses
(a) Stock Certificates. Upon any exercise of an Option and
payment of the exercise price as provided in such Option, a certificate or
certificates for the Shares as to which such Option has been exercised shall be
issued by the Company in the name of the person or persons exercising such
Option and shall be delivered to or upon the order of such person or persons.
(b) Legends. Certificates for Shares issued upon exercise
of an Option shall bear such legend or legends as the Committee, in its
discretion, determines to be necessary or appropriate to prevent a violation of,
or to perfect an exemption from, the registration requirements of the Securities
Act or to implement the provisions of any documents between the Company and the
Participant with respect to such Shares, including, without limitation, any
right of the Company to purchase Shares issued to the participant upon the
exercise of Options as contained in the Option Agreement.
(c) Payment of Expenses. The Company shall pay all issue or
transfer taxes with respect to the issuance or transfer of Shares, as well as
all fees and expenses necessarily incurred by the Company in connection with
such issuance or transfer and with the administration of the Plan.
(d) Other Benefits. No Option granted under this Plan shall
be deemed compensation for purposes of computing benefits under any retirement
plan of the Company nor affect any benefits under any other benefit plan now or
subsequently in effect under which the availability or amount of benefits is
related to the level of compensation.
(e) No Right to Same Benefits. The provisions of Options
need not be the same with respect to each Participant, and such Options to
individual Participants need not be the same under subsequent grants.
-13-
<PAGE>
(f) Death/Disability. The Committee may in its discretion
require the transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as the Committee
deems necessary to establish the validity of the transfer of an Option. The
Committee may also require the agreement of the transferee to be bound by all of
the terms and conditions of the Plan.
(g) Section 16(b) of the Act. In the event that the Company
becomes publicly held, all elections and transactions under the Plan by persons
subject to Section 16 of the Act involving shares of Common Stock are intended
to comply with any applicable exemptive condition under Rule 16b-3 under Section
16(b) of the Act. To the extent applicable, the Committee may establish and
adopt written administrative guidelines, designed to facilitate compliance with
Section 16(b) of the Act, as it may deem necessary or proper for the
administration and operation of the Plan and the transaction of business
thereunder. For purposes of this paragraph, the Company shall be deemed publicly
held when and if the Company has a class of common equity securities registered
under Section 12 of the Act.
16. Listing of Shares and Related Matters
If at any time the Board shall determine in its sole
discretion that the listing, registration or qualification of the Shares covered
by the Plan upon any national securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the award or
sale of Shares under the Plan, no Shares will be delivered unless and until such
listing, registration, qualification, consent or approval shall have been
effected or obtained, or otherwise provided for, free of any conditions not
acceptable to the Board.
17. Withholding Taxes
The Company shall be entitled to withhold (or secure payment
from the Participant in cash or other property, including Shares already owned
by the Participant for six months or more (valued at the Fair Market Value
thereof on the date of delivery) in lieu of withholding) the amount of any
Federal, state or local taxes required by law to be withheld by the Company for
any Shares or cash payments deliverable under this Plan, and the Company may
defer such delivery unless such withholding requirement is satisfied. The
Committee may permit any such withholding obligation with regard to any
Participant to be satisfied by reducing the number of Shares otherwise
deliverable or by delivering Shares already owned. Any fraction of a Share
required to satisfy such tax obligations shall be disregarded and the amount due
shall be paid instead in cash by the Participant.
<PAGE>
[1997 Stock Option Plan Agreement -- Vesting
in 4 equal installments over 4 years]
REGISTER.COM, INC.
575 8TH AVENUE
NEW YORK, NEW YORK 10011
(212) 594-9880
_______ __, 199_
Dear _______:
You are hereby granted the option to purchase ____ shares of the Common Stock of
Register.com, Inc., a Delaware corporation (the "Company"), at an exercise price
of $___ per share, pursuant to the Company's 1997 Stock Option Plan (the
"Plan"), a copy of which is attached to this letter.
These options may be exercised in whole or in part, from time to time, in
accordance with the vesting schedule below, and expire ten years from the date
hereof, except as otherwise provided in the Plan. These options may terminate,
accelerate, adjust or be substituted upon the occurrence of certain events
described in the Plan. The vesting schedule is as follows:
o ___ are exercisable ______
o ___ are exercisable ______
o ___ are exercisable ______
o ___ are exercisable ______
To buy shares of Common Stock pursuant to this agreement you must deliver to the
Company a completed exercise notice in the form attached and accompanied by
payment of the exercise price. No fractional shares will be issued or
transferred upon exercise of these options.
You may not sell, give or otherwise transfer, to any person or entity any of
your rights under this agreement, except that you may transfer them under a will
or otherwise under the laws of descent and distribution. During your lifetime,
only you or your legal representative may exercise these options.
Securities laws limit whether and how you may sell the Common Stock you acquire
upon exercise of your options. The Plan also contains certain other restrictions
on the transferability of the stock that you purchase upon exercise of your
options. The stock certificates issued to you may bear an appropriate legend
reflecting those restrictions and that the Common Stock represented by the
certificate is subject to the terms and conditions of this agreement and the
Plan. When any option is exercised, the Company may require you to confirm that
you are buying the Common Stock for investment purposes without the intent to
distribute or sell it, if the Company determines that such a representation is
advisable under applicable securities laws, and to obtain a favorable written
opinion satisfactory in form and substance to the Company
<PAGE>
from counsel approved by the Company as to the availability of a specific
exemption from the registration requirements of the Securities Act of 1933, as
amended.
These options are granted to you pursuant to the Plan and are intended to be
incentive stock options as described in the Internal Revenue Code of 1986, as
amended. You should consult your tax advisor now to determine factors that may
impact the tax consequence of this option, as well as prior to each exercise of
this option. This is not an employment agreement and does not increase or
decrease the Company's obligation, if any, to employ you as in effect prior
hereto. This agreement shall be governed by the internal laws of the State of
New York.
If any tax withholding required by law to be withheld by the Company is not
otherwise satisfied by the terms of the Plan, then the Company may permit any
such withholding obligation to be satisfied by reducing the number of shares of
common stock otherwise deliverable to you pursuant to an exercise of these
options or by acceptance of shares of common stock already owned by you.
Your signature in the space below will signify your acceptance of the terms of
this agreement.
Sincerely,
Richard D. Forman
President and CEO
ACCEPTED, AGREED TO AND ACKNOWLEDGED,
THIS ____ DAY OF __________, 199_
2
<PAGE>
EXERCISE NOTICE
_______ __, 199_
To: REGISTER.COM, INC.
Attention: Chief Financial Officer
The undersigned hereby irrevocably elects to exercise _______________ options to
purchase ___________ shares of common stock of Register.com, Inc., a Delaware
Corporation, under a Stock Option Agreement dated ______________, 199_, and to
purchase the common stock issuable upon exercise thereof for a total of
$_____________ ($____ share). Stock certificates should be issued in the name of
the undersigned and delivered to the address set forth below.
- -------------------------------- ---------------------------------------
[Please Sign Name] [Please provide Social Security Number]
- --------------------------------
[Please Sign Name]
- --------------------------------
- --------------------------------
- --------------------------------
[Please Print Address]
<PAGE>
[1997 Stock Option Plan Agreement - Vesting in 42 equal installments over 42
months]
REGISTER.COM, INC.
575 8TH AVENUE, 11TH FLOOR
NEW YORK, NEW YORK 10018
_______ __, 2000
Dear ____________:
You are hereby granted the option to purchase ___ shares of the Common Stock of
register.com, Inc., a Delaware corporation (the "Company"), at an exercise price
of $____ per share, pursuant to the Company's 1997 Stock Option Plan (the
"Plan") which has been assumed by the Company, as it is currently exists or may
be adjusted.
These options may be exercised in whole or in part, and form time to time, in
accordance with the vesting schedule below, and expire ten years from the date
hereof, except as otherwise provided in the Plan. These options may terminate,
accelerate, adjust or be substituted upon the occurrence of certain events
described in the Plan. These options will vest in 42 equal installments over a
forty-two month period commencing on _______.
By way of example, if the grant date is January 1, 2010, and the grant
amount is 84 shares, then these shares shall vest as follows:
- -------------------------------------- ------------------------------
Date Total Amount Vested
- ---- -------------------
January 1, 2010 0
July 1, 2010 2
August 1, 2010 4
September 1, 2010 6
o o
o o
o o
November 1, 2013 82
December 1, 2013 84
- -------------------------------------- ------------------------------
To buy shares of Common Stock pursuant to this agreement you must
deliver to the Company a completed exercise notice in the form attached
and accompanied by payment of the exercise price. No fractional shares
will be issued or transferred upon exercise of these options.
You may not sell, give or otherwise transfer, to any person or entity
any of your rights under this agreement, except that you may transfer
them under a will or otherwise under the laws of descent and
distribution. During your lifetime, only you or your legal
representative may exercise these options.
<PAGE>
Securities laws limit whether and how you may sell the Common Stock you
acquire upon exercise of your options. The Plan also contains certain
other restrictions on the transferability of the stock that you
purchase upon exercise of your options. The stock certificates issued
to you may bear an appropriate legend reflecting those restrictions and
that the Common Stock represented by the certificate is subject to the
terms and conditions of this agreement and the Plan. When any option is
exercised, the Company may require you to confirm that you are buying
the Common Stock for investment purposes without the intent to
distribute or sell it, if the Company determines that such a
representation is advisable under applicable securities laws, and to
obtain a favorable written opinion satisfactory in form and substance
to the Company from counsel approved by the Company as to the
availability of a specific exemption from the registration requirements
of the Securities Act of 1933, as amended.
These options are granted to you pursuant to the Plan and are intended
to be incentive stock options as described in the Internal Revenue Code
of 1986, as amended (the "Code"). Nonetheless, there is no guarantee
that these options will receive ISO treatment under the code. These
options will not receive ISO treatment to the extent they do not comply
or cease to comply with the ISO qualifications set forth in Section 422
of the Code. You should consult your tax advisor now to determine
factors that may impact the tax consequences of this option, as well as
prior to each exercise of this option. This is not an employment
agreement and does not increase or decrease the Company's obligation,
if any, to employ you as in effect prior hereto. This agreement shall
be governed by the internal laws of the State of New York.
If any tax withholding required by law to be withheld by the Company is
not otherwise satisfied by the terms of the Plan, then the Company may
permit any such withholding obligation to be satisfied by reducing the
number of shares of common stock otherwise deliverable to you pursuant
to an exercise of these options or by acceptance of shares of common
stock already owned by you.
Your signature in the space below will signify your receipt of a copy
of the plan and acceptance of the terms of this agreement.
Sincerely,
-----------------
Richard D. Forman
President and CEO
ACCEPTED, AGREED TO AND ACKNOWLEDGED,
THIS __TH DAY OF _________, ____.
- ----------------
2
<PAGE>
EXERCISE NOTICE
To: Register.com, Inc.
Attention: Chief Financial Officer
The undersigned hereby irrevocably elects to exercise _______________ options to
purchase ___________ shares of common stock of Register.com, Inc., a Delaware
Corporation, under a Stock Option Agreement dated ______________, 199_, and to
purchase the common stock issuable upon exercise thereof for a total fo
$_____________ ($____ share). Stock certificates should be issued in the name of
the undersigned and delivered to the address set forth below.
- -------------------------------- ---------------------------------------
[Please Sign Name] [Please provide Social Security Number]
- --------------------------------
[Please Sign Name]
- --------------------------------
- --------------------------------
- --------------------------------
[Please Print Address]
<PAGE>
REGISTER.COM, INC.
1999 STOCK OPTION PLAN
1. Purpose. Register.com, Inc., a Delaware corporation ("Register"),
desires to attract and retain the best available talent and to encourage the
highest level of performance. The Register.com, Inc. 1999 Stock Option Plan (the
"Plan") is intended to contribute significantly to the attainment of these
objectives by affording eligible employees, directors, advisors and independent
contractors of Register and, if in the future it should have any subsidiaries or
other affiliates (whether or not incorporated) eligible employees directors,
advisors and independent contractors of such subsidiaries and affiliates
(collectively, with Register, the "Company") the opportunity to acquire a
proprietary interest in Register through the grant of stock options ("Options")
to purchase shares of Common Stock, $0.0001 par value per share, of Register
(the "Common Stock").
2. Administration.
(a) Committee. The Plan shall be administered by the Compensation Committee
(the "Committee") of the Board of Directors of Register (the "Board"), which
shall consist of not fewer than three members of the Board. The Board may from
time to time appoint members of the Committee in substitution for members
previously appointed and may fill vacancies, however caused, in the Committee.
Notwithstanding the foregoing, if and when the Common Stock is registered under
Section 12 of the Securities Exchange Act of 1934 as amended from time to time
(the "Act"), each member of the Committee shall be a "non-employee director"
within the meaning of Rule 16b-3 under the Act and, to the extent necessary to
exclude Options granted under the Plan from calculation of the income tax
deduction limit under Section 162(m) of the Internal Revenue Code, as amended
from time to time (the "Code"), each member of the Committee shall be an
"outside director" within the meaning of Code Section 162(m).
(b) Authority of the Committee. Subject to paragraph (c) hereof, the
Committee shall have plenary authority in its discretion, to the maximum extent
permissible by law, subject to and not inconsistent with the express provisions
of the Plan, to make all awards of Options under the Plan, to select from among
the persons eligible for grants under the Plan those individuals who will be
awarded Options, to determine the number of shares of Common Stock covered by
each Option, the Option exercise price per share of Common Stock covered by each
Option (and, in connection therewith, determine the fair market value of the
Common Stock for purposes of the Plan), and the restrictions, if any, which
shall apply to the Common Stock subject to an Option, to determine the terms and
conditions of each Option, to approve the form of each Option Agreement (an
"Option Agreement"), to amend any such Option Agreement from time to time, to
construe and interpret the Plan and all Option Agreements executed thereunder
and to make all other determinations necessary or advisable for the
administration of the Plan. In exercising its authority to set the terms and
conditions of Options, and subject only to the limits of applicable law, the
Committee shall be under no obligation or duty to treat similarly situated
grantees of an Option Agreement ("Optionees") in the same manner, and any action
taken by the Committee with respect to the grant of an Option to one Optionee
shall in no way obligate the Committee to take the same or similar action with
respect to any other Optionee. The Committee may exercise its discretion in a
manner such that Options which are granted to individuals who are foreign
nationals or are employed outside the United States contain terms and conditions
which are different from the provisions otherwise specified in the Plan but
which are consistent with the tax and other laws of foreign jurisdictions
applicable to the Optionee and which are designed to provide the Optionee with
benefits which are consistent with the Company's objectives in establishing the
Plan. The Committee may adopt such rules as it deems necessary or advisable in
order to carry out the purpose of the Plan. All questions of interpretation,
administration and application of the Plan shall be determined by a majority of
the members of the Committee then in office, except that the Committee may
authorize any one or more of its members, or any officer of the Company, to
execute and deliver documents (including any applicable Option Agreement) on
behalf of the Committee or Register. Any interpretation or determination made by
the Committee pursuant to the foregoing shall be conclusive and binding upon any
person having or claiming any interest under the Plan.
<PAGE>
(c) Authority of Board. Notwithstanding the foregoing, (i) if the Board
does not appoint a Committee, the Board shall have all of the authority of and
fulfill all of the functions of the Committee hereunder; and (ii) if the Board
does appoint a Committee, the Board (and not the Committee unless the Board
specifically resolves to the contrary) shall have plenary authority in its
discretion, to the maximum extent permissible by law, subject to and not
inconsistent with the express provisions of the Plan, (1) to make all awards of
Options under the Plan, to select from among the persons eligible for grants
under the Plan those individuals who will be awarded Options, to determine the
number of shares of Common Stock covered by each Option, the Option exercise
price per share of Common Stock covered by each Option (and, in connection
therewith, determine the fair market value of the Common Stock for purposes of
the Plan) and the restrictions, if any, which shall apply to the Common Stock
subject to an Option, and (2) to the extent it so elects, to determine other
principal terms and conditions of each Option granted. If the Board appoints a
Committee, to the extent that the Board does not elect to determine a principal
term and condition of an Option granted, such determination shall be made by the
Committee in accordance with paragraph (b). To the extent necessary to be
consistent with the provisions of this paragraph (c), any reference in the Plan
and/or an Option Agreement to a decision, determination or action of the
Committee shall be read and understood as referring to a decision, determination
or action of the Board.
(d) Liability of Board and Committee Members. No member of the Board or
Committee shall be liable for anything whatsoever in connection with the
administration of the Plan except such member's own willful misconduct. Under no
circumstances shall any member of the Board or Committee be liable for any act
or omission of any other member of the Board or Committee. In the performance of
its functions with respect to the Plan, the Board and Committee shall be
entitled to rely upon information and advice furnished by Register's officers,
Register's accountants, Register's legal counsel and any other party the Board
and Committee deems necessary, and no member of the Board or Committee shall be
liable for any action taken or not taken in reliance upon any such advice.
3. Type of Options. Options granted under the Plan may be either incentive
stock options ("ISOs") intended to meet the requirements of Code Section 422 or
nonqualified stock options ("NSOs") which are not intended to meet such Code
requirements.
4. Eligible Persons. Subject in the case of ISOs to Section 18(a), Options
may be awarded only to employees and independent contractors of the Company. For
purposes hereof, independent contractors shall include consultants, advisors and
directors of the Company. In determining the persons to whom awards shall be
made and the number of shares to be covered by each Option, the Committee shall
take into account the duties of the respective persons, their present and
potential contributions to the success of the Company and such other factors as
the Committee, in its discretion, shall deem relevant in connection with
accomplishing the purposes of the Plan.
2
<PAGE>
5. Shares Subject to the Plan. No more than [Six Hundred Fifty Thousand
(650,000)] shares of Common Stock shall be issued pursuant to the exercise of
Options granted under the Plan. The maximum aggregate number of shares of Common
Stock for which Options may be granted to any one individual within one fiscal
year shall be Five Hundred Thousand (500,000) shares. Such aggregate numbers
shall be subject to adjustment as provided in Section 16. If an Option is
forfeited or expires without being exercised, the shares of Common Stock subject
to the Option shall be available for additional Option grants under the Plan. If
an Option is exercised in whole or in part by an Optionee by tendering
previously owned shares of Common Stock, or if any shares are withheld in
connection with the exercise of its Option to satisfy the Optionee's tax
liability, the full number of shares in respect of which the Option has been
exercised shall be applied against the limit set forth in this Section 5.
6. Term of Options. Unless otherwise fixed by the Committee and specified
in the applicable Option Agreement, the term of each Option shall be ten years
from the date of grant, subject to earlier termination as provided in Section 8;
provided, that in no event shall it be more than ten years from the date of
grant. Subject in the case of ISOs to Section 18, the term of an Option may be
extended from time to time by the Committee, provided that no such extension
shall extend the term beyond ten years from the date of grant.
7. Vesting. Options shall first become exercisable, i.e., shall vest, in
accordance with a vesting schedule determined by the Committee and specified in
the applicable Option Agreement.
8. Termination of Relationship to the Company.
(a) Options Granted To Employees. With respect to an Option granted to an
individual who is an employee of the Company at the time of Option grant, unless
the Option Agreement expressly provides to the contrary, (i) the Option shall
terminate immediately upon the Optionee's termination of employment for "Cause"
(as defined in Section 24(b)), and (ii) the Option shall terminate three months
(but shall not continue to vest during such three month period) after the
Optionee's termination of employment for any other reason; provided, however,
that if an Optionee who terminates his employment with the Company immediately
thereafter becomes a consultant to the Company pursuant to a written agreement
which so specifies, the Optionee will be deemed to satisfy the requirements of
this Section 8(a) during the period of the Optionee's consultancy; provided,
further, that the Committee may (and shall not be required) to further extend
the three month period referred to in clause (ii) hereof. Any Option Agreement
may contain such provisions as the Committee shall approve with reference to the
determination of the date employment terminates for purposes of the Plan and the
effect of leaves of absence, which provisions may vary from one another.
Notwithstanding the foregoing, in the event that an individual's employment with
the Company terminates by reason of death or "disability" (as hereinafter
defined), the Option shall remain exercisable for a period of one year following
such termination but only to the extent such Option is vested at the time of
such death or "disability" (but in no event shall the Option remain exercisable
beyond the date of expiration specified in the applicable Option Agreement). For
purposes hereof, the Optionee shall be deemed to have a "disability" if the
Optionee is unable to engage in the activities required by the job by reason of
any medically determined physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months, as reasonably determined by the
Board of Directors of the Company in good faith and in its discretion.
3
<PAGE>
(b) Options Granted to Consultants. With respect to an Option granted to an
individual who is not an employee of the Company at the time of Option grant,
the applicable Option Agreement shall specify the consequences, if any, of the
termination of the Optionee's relationship with the Company.
9. Option Exercise Price. Subject in the case of ISOs to Section 18, the
Option exercise price per share of Common Stock covered by an Option shall be
established by the Committee.
10. Exercise of Options; Withholding.
(a) An Option may be exercised at any time and from time to time, in whole
or in part, as to any or all full shares as to which the Option is then
exercisable; provided, however, that if so specified in the Option Agreement,
the Option may not, in a single exercise, be exercised for fewer than the
minimum number of shares specified in the Option Agreement, unless the exercise
is for all of the shares as to which the Option is then exercisable. An Option
may not be exercised with respect to a fractional share. If an Option is
exercised with respect to all of the whole shares as to which the Option is then
exercisable, and the Option remains exercisable with respect to less than one
share of Common Stock, the Company shall pay the Optionee the excess of (i) the
fair market value of such remaining fractional share, over (ii) the Option
exercise price for such remaining fractional share, and the Option shall
terminate with respect to such fractional share. An Optionee (or other person
who, pursuant to Section 13, may exercise the Option) shall exercise the Option
by delivering to Register at the address provided in the Option Agreement a
written, signed notice of exercise, stating the number of shares of Common Stock
with respect to which the option exercise is being made, and satisfy the
requirements of paragraphs (b) and (c) of this Section 10. Upon receipt by
Register of any notice of exercise, the exercise of the Option as set forth in
that notice shall be irrevocable.
(b) Upon exercise of an Option the Optionee shall pay to Register the
Option exercise price per share of Common Stock multiplied by the number of full
shares as to which the Option is then exercised. An Optionee may pay the Option
exercise price by tendering or causing to be tendered to Register cash, shares
of Common Stock owned by the Optionee for at least 6 months (or such shorter
period as is approved by the Committee) or other property permitted by law and
acceptable to the Committee, or any combination thereof. If so specified in the
applicable Option Agreement, an Option may be exercised on a cashless basis,
whereby the number of shares of Common Stock to be delivered upon Option
exercise shall equal (x) the number of shares of Common Stock with respect to
which the Option is then being exercised, less (y) the number of shares of
Common Stock having a cumulative fair market value equal to the total exercise
price for the number of shares of Common Stock described in clause (x).
4
<PAGE>
(c) An Optionee shall, upon notification of the amount due and prior to or
concurrently with delivery of the certificate representing the shares as to
which the Option has been exercised, promptly pay or cause to be paid the amount
determined by the Committee as necessary to satisfy all applicable tax
withholding requirements. An Optionee may satisfy his or her tax withholding
requirement in any manner satisfactory to the Committee.
(d) The certificate representing the shares as to which an Option has been
exercised shall bear an appropriate legend setting forth the restrictions
applicable to such shares.
(e) Each Optionee shall pay to the Company, or make provision satisfactory
to the Board for payment of, any taxes required by law to be withheld in respect
of Options granted under the Plan no later than the date of the event creating
the tax liability. In the Board's discretion, and subject to such conditions as
the Committee may establish, such tax obligations may be paid in whole or in
part in shares of Common Stock, including shares retained from the Option grant
creating the tax obligation, valued at their Fair Market Value. The Company may,
to the extent permitted by law, deduct any such tax obligations from any payment
of any kind otherwise due to Optionee.
11. Option Agreement. The terms and conditions of each Option shall be set
forth in an Option Agreement in the form approved by the Committee. Each Option
Agreement shall be executed by Register and the Optionee. Each Option Agreement
shall, at a minimum, specify (i) the number of shares of Common Stock subject to
the Option, (ii) in case of the grants to employees, whether the Option is
intended to be an ISO or NSO, and (iii) the provisions related to vesting and
exercisability of the Option, including the Option exercise price. The Option
Agreement may also contain such other terms and conditions as the Committee
determines to be necessary or advisable. Option Agreements may vary from one
another.
12. No Stockholder Rights. No Optionee shall have the rights of a
stockholder with respect to shares covered by an Option until such person
becomes the holder of record of such shares.
13. Nontransferability.
(a) Except as provided in paragraph (b) below, Options granted under the
Plan shall not be assignable or transferable other than by will or the laws of
descent and distribution and Options may be exercised during the lifetime of the
Optionee only by the Optionee or by the Optionee's guardian or legal
representative.
(b) Notwithstanding paragraph (a), if (and on the terms) so provided in the
applicable Option Agreement, an Optionee shall be permitted to transfer a NSO to
a member of such Optionee's immediate family, to the spouse of any such family
member or to a trust, family limited partnership or similar estate planning
device for the benefit of one or more of such family members. If an NSO is
transferred in accordance with this paragraph, the Option shall be exercisable
solely by the transferee, but the determination of the exercisability of the
Option shall be based solely on the activities and state of affairs of the
Optionee. Thus, for example, if after a transfer the Optionee ceases to be an
employee of the Company, such termination shall trigger the provisions of
Section 8 hereof. Conversely, if after a transfer the transferee ceases to be an
employee of the Company, such termination shall not trigger the provisions of
Section 8 hereof.
5
<PAGE>
14. Compliance with Law; Registration of Shares.
(a) The Plan and any grant hereunder shall be subject to all applicable
laws, rules, and regulations of any applicable jurisdiction or authority or
agency thereof and to such approvals by any regulatory or governmental agency
which, in the opinion of Company's counsel, may be required or appropriate.
(b) Notwithstanding any other provision of this Plan or Option Agreements
made pursuant hereto, the Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock under this Plan prior to
fulfillment of all of the following conditions:
(i) Effectiveness of any registration or other qualification of such shares
of the Company under any law or regulation of any applicable
jurisdiction or authority or agency thereof which the Committee shall,
in its absolute discretion or upon the advice of counsel, deem
necessary or advisable; and
(ii) Grant of any other consent, approval or permit from any applicable
jurisdiction or authority or agency thereof or securities exchange
which the Committee shall, in its absolute discretion or upon the
advice of counsel, deem necessary or advisable.
The Company shall use all reasonable efforts to obtain any consent,
approval or permit described above; provided, however, that except to the extent
as may be specified in an Option Agreement with respect to any particular Option
grant, the Company shall be under no obligation to register or qualify any
shares subject to an Option under any federal or state securities law or on any
exchange.
15. No Restriction on the Right of Register to Effect Corporate Changes.
The Plan and the Options granted hereunder shall not affect in any way the right
or power of Register or its shareholders to make or authorize any or all
adjustments, recapitalization, reorganizations or other changes in Register's or
the Company's capital structure or its business, or any merger or consolidation
of Register or the Company, or any issue of stock or of options, warrants or
rights to purchase stock or of bonds, debentures, preferred or prior preference
stocks whose rights are superior to or affect the Common Stock or the rights of
holders thereof or which are convertible into or exchangeable for Common Stock,
or the dissolution or liquidation of Register or the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
6
<PAGE>
16. Certain Adjustments.
(a) In the event that the Company or the division, subsidiary or other
affiliated entity for which an Optionee performs services is sold, merged,
consolidated, reorganized or liquidated, the Board shall make such equitable
adjustments, if any, as it deems appropriate. Without limiting the foregoing,
the Board may determine that (i) the Option shall be assumed, or a substantially
equivalent Option shall be substituted, by an acquiring or succeeding
corporation (or an affiliate thereof) on such terms as the Board determines to
be appropriate; or (ii) upon written notice to the Optionee, provide that the
Option shall terminate immediately prior to the consummation of the transaction
unless exercised by the Optionee within a specified period following the date of
the notice.
(b) In the event of any stock dividend or split, recapitalization,
combination, exchange or similar change affecting the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company, the Board shall make any or all
of the following adjustments as it deems appropriate to equitably reflect such
event: (i) adjust the aggregate number of shares (or such other security as is
designated by the Board) which may be acquired pursuant to the Plan, (ii) adjust
the option price to be paid for any or all such shares subject to the then
outstanding Options, (iii) adjust the number of shares of Common Stock (or such
other security as is designated by the Board) subject to any or all of the then
outstanding Options and (iv) make any other equitable adjustments or take such
other equitable action as the Board, in its discretion, shall deem appropriate.
For purposes hereof, the conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
(c) Any and all adjustments or actions taken by the Board pursuant to this
Section shall be conclusive and binding for all purposes.
17. Lock-Up Restrictions. Unless stated otherwise in the Option Agreement,
in connection with an underwritten public offering of Common Stock, upon the
request of the Company or the principal underwriter managing such public
offering, each Option and the shares of Common Stock acquired upon exercise of
each Option may not be sold, offered for sale or otherwise disposed of without
the prior written consent of the Company or such underwriter, as the case may
be, for at least 180 days after the effectiveness of the registration statement
filed in connection with such offering, or such longer period of time as the
Board may determine if all of the Company's directors agree to be bound. The
lock-up agreement established by this Section 17 should have perpetual duration.
7
<PAGE>
18. ISO Provisions.
(a) Employment Requirement. ISOs may only be awarded to employees of
Register or a corporation which, with respect to Register, is a "parent
corporation" or "subsidiary corporation" within the meaning of Code Sections
424(e) and (f). Furthermore, except as otherwise provided in Code Section 422,
if an Optionee is no longer employed by Register or a parent corporation or
subsidiary corporation of Register, the Optionee's Option shall cease to be
treated as an ISO.
(b) Option Exercise Price. Subject to paragraph (c), the Option exercise
price per share of Common Stock covered by an ISO shall be no less than the fair
market value of a share of Common Stock on the date of grant of the Option.
(c) 10% Shareholders. In the case of an individual who at the time the
Option is granted owns stock possessing more than 10% of the total combined
voting power of all classes of the stock of Register or of a parent or
subsidiary corporation of Register (a "10% Holder"), (i) the Option exercise
price of the Common Stock covered by any ISO granted to such person shall in no
event be less than 110% of the fair market value of the Common Stock on the date
the ISO is granted and (ii) the term of an ISO granted to such person may not
exceed five years from the date of grant.
(d) $100,000 Limit. The aggregate fair market value (determined at the time
an ISO is granted) of the Common Stock covered by ISOs exercisable for the first
time by an employee during any calendar year (under all plans of the Company)
may not exceed $100,000.
19. No Right to Continued Employment. Neither the Plan nor any action taken
hereunder shall be construed as giving any employee, any independent contractor
or any service provider any right to continue in the employ of or to be engaged
as an independent contractor or service provider by the Company or affect the
right of the Company to terminate such person's employment or other relationship
with the Company at any time.
20. Amendment; Early Termination. The Board may at any time and from time
to time alter, amend, suspend or terminate the Plan in whole or in part;
provided, however, that no amendment requiring stockholder approval by law or by
the rules of any stock exchange, inter-dealer quotation system, or other market
in which shares of Common Stock are traded, shall be effective unless and until
such stockholder approval has been obtained in compliance with such rule or law;
and provided, further, that no such amendment shall adversely affect the rights
of an Optionee in any Option previously granted under the Plan (including an
amendment which would cause an ISO to become a NSO) without the Optionee's
written consent.
8
<PAGE>
21. Effective Date. The Plan shall be effective as of the date of its
adoption by the Board (the "Effective Date"), subject to the approval thereof by
the shareholders of Register entitled to vote thereon within 12 months of such
date. In the event that such shareholder approval is not obtained within such
time period, the Plan and any Options granted under the Plan on or prior to the
expiration of such 12 month period shall be void and of no further force and
effect. Any Options granted under the Plan on or prior to the date of such
shareholder approval shall expressly provide that such Options are subject to
the approval of the Plan by the shareholders of Register within 12 months of the
Effective Date.
22. Termination of Plan. Unless terminated earlier by the Board in
accordance with Section 19 above, the Plan shall terminate on, and no further
Options may be granted after, the tenth anniversary of the Effective Date.
23. Severability. In the event that any one or more provisions of the Plan
or an Option Agreement, or any action taken pursuant to the Plan or an Option
Agreement, should, for any reason, be unenforceable or invalid in any respect
under the laws of the United States, any state of the United States or any other
jurisdiction, such unenforceability or invalidity shall not affect any other
provision of the Plan or Option Agreement, but in such particular jurisdiction
and instance the Plan and/or Option Agreement, as applicable, shall be construed
as if such unenforceable or invalid provision had not been contained therein or
if the action in question had not been taken thereunder.
24. Definitions.
(a) Fair Market Value. For all purposes of the Plan, the term "fair market
value" of Common Stock on any given date shall be: (i) if the Common Stock is
listed for trading on one or more national securities exchanges, the mean of the
high and low sales prices on the principal such exchange on the date in
question, or, if the Common Stock shall not have been traded on such principal
exchange on such date, the mean of the high and low sales prices on such
principal exchange on the first day prior thereto on which the Common Stock was
so traded; (ii) if the Common Stock is not listed for trading on a national
securities exchange but is traded on the over-the-counter market, the mean of
the highest and lowest bid prices for the Common Stock on the date in question,
or, if there are no such bid prices for the Common Stock on such date, the mean
of the highest and lowest bid prices on the first day prior thereto on which
such prices appear; or (iii) such other amount as may be determined by the Board
or the Committee by any fair and reasonable means.
(b) Cause. The term "Cause" when used in conjunction with termination of
employment shall mean (i) if the Optionee is a party to an employment agreement
with the Company which defines "cause" (or a similar term), the meaning set
forth in such agreement (other than death or disability), or (ii) otherwise,
termination by the Company of the employment of the Optionee by reason of the
Optionee's (1) willful refusal to perform his or her obligations to the Company,
(2) willful misconduct, contrary to the interests of the Company, or (3)
commission of a serious criminal act, whether denominated a felony, misdemeanor
or otherwise. In the event of any dispute as to whether a termination for Cause
has occurred, the Board may resolve such dispute and such resolution shall be
final and conclusive on all parties.
25. Headings. The headings of sections and subsections herein are included
solely for convenience of reference and shall not affect the meaning of any of
the provisions of the Plan.
26. Governing Law. This Plan and all rights hereunder shall be construed in
accordance with and governed by the laws of the State of New York.
9
<PAGE>
[1999 Stock Option Plan Agreement--Vesting in 4 equal installments over 4 years]
Register.com, Inc.
134 Fifth Avenue
New York, New York 10011
(212) 627-4988
Fax (212) 627-6477
_______________, 199_
M__.
You are hereby granted the option to purchase ___ shares of the Common Stock of
Register.com, Inc., a Delaware corporation (the "Company"), at an exercise price
of $____ per share, pursuant to and subject to the terms of the Company's 1999
Stock Option Plan (the "Plan"), a copy of which is attached to this letter.
These options may be exercised in whole or in part, and from time to time, in
accordance with the vesting schedule specified below, and expire ten years from
the date hereof, except as otherwise provided in the Plan [language for
non-employees: ; provided that this option shall terminate and expire upon
_________________________ but in any event shall expire no later than ten years
from the date hereof]. These options may terminate, accelerate, adjust or be
substituted upon the occurrence of certain events described in the Plan. The
vesting schedule is as follows:
o _________ are exercisable ___________
o _________ are exercisable ___________
o _________ are exercisable ___________
o _________ are exercisable ___________
To buy shares of Common Stock pursuant to this agreement you must deliver to the
Company a completed exercise notice in the form attached and accompanied by
payment of the exercise price. No fractional shares will be issued or
transferred upon exercise of these options.
You may not sell, give or otherwise transfer, to any person or entity any of
your rights under this agreement, except that you may transfer them under a will
or otherwise under the laws of descent and distribution. During your lifetime,
only you or your legal representative may exercise these options.
<PAGE>
Securities laws limit whether and how you may sell the Common Stock you acquire
upon exercise of your options. The Plan also contains certain other restrictions
on the transferability of the stock that you purchase upon exercise of your
options. The stock certificates issued to you may bear an appropriate legend
reflecting those restrictions and that the Common Stock represented by the
certificate is subject to the terms and conditions of this agreement and the
Plan. When any option is exercised, the Company may require you to confirm that
you are buying the Common Stock for investment purposes without the intent to
distribute or sell it, if the Company determines that such a representation is
advisable under applicable securities laws, and to obtain a favorable written
opinion satisfactory in form and substance to the Company from counsel approved
by the Company as to the availability of a specific exemption from the
registration requirements of the Securities Act of 1933, as amended.
The language next to the box checked below shall be effective:
[ ] These options are intended to be incentive stock options ("ISO") as
described in Section 422 of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"). Nonetheless, there is no guarantee that these options
will receive ISO treatment under the Code These options will not receive ISO
treatment to the extent that they do not comply or cease to comply with the ISO
qualifications set forth in Section 422 of the Code.
[ ] These options are intended to be nonqualified stock options and do not meet
the ISO requirements as described in Section 422 of the Code.
You should consult your tax advisor now to determine factors that may impact the
tax consequence of this option, as well as prior to each exercise of this
option. This is not an employment agreement and does not increase or decrease
the Company's obligation, if any, to employ you as in effect prior hereto. This
agreement shall be governed by the internal laws of the State of New York.
If any tax withholding required by law to be withheld by the Company is not
otherwise satisfied in accordance with the terms of the Plan, the Company may
satisfy its withholding obligation by reducing the number of shares of common
stock otherwise deliverable to you pursuant to an exercise of these options or
by acceptance of shares of common stock already owned by you for a period of at
least six months.
2
<PAGE>
Your signature in the space below will signify your acceptance of the terms of
this agreement.
Sincerely,
Richard D. Forman
President and CEO
ACCEPTED, AGREED TO AND ACKNOWLEDGED,
THIS ____ DAY OF ______________, 199_
- -----------------------------------------------------
3
<PAGE>
EXERCISE NOTICE
To: Register.com, Inc.
Attention: Chief Financial Officer
The undersigned hereby irrevocably elects to exercise __________ options to
purchase _______ shares of common stock of Register.com, Inc., a Delaware
corporation, under a Stock Option Agreement dated __________________, 199_, and
to purchase the common stock issuable upon exercise thereof for a total of
$____________ ($____ share). Stock certificates should be issued in the name of
the undersigned and delivered to the address set forth below.
- ---------------------------------- ---------------------------------------
[Please Sign Name] [Please provide Social Security Number]
- ----------------------------------
[Please Print Name]
- ----------------------------------
- ----------------------------------
- ----------------------------------
[Please Print Address]
4
<PAGE>
[1999 Stock Option Plan Agreement--Vesting in 42 equal installments
over 42 months]
Register.com, Inc.
134 Fifth Avenue
New York, New York 10011
(212) 627-4988
Fax (212) 627-6477
_______________, 199_
M__.
You are hereby granted the option to purchase ___ shares of the Common Stock of
Register.com., Inc., a Delaware corporation (the "Company"), at an exercise
price of $____ per share, pursuant to and subject to the terms of the Company's
1999 Stock Option Plan (the "Plan"), a copy of which is attached to this letter.
These options may be exercised in whole or in part, and from time to time, in
accordance with the vesting schedule specified below, and expire ten years from
the date hereof, except as otherwise provided in the Plan [language for
non-employees: ; provided that this option shall terminate and expire upon
_________________________ but in any event shall expire no later than ten years
from the date hereof]. These options may terminate, accelerate, adjust or be
substituted upon the occurrence of certain events described in the Plan. These
options will vest on a monthly basis for a period of 42 months with the first
monthly vesting date beginning on the third month anniversary of the
commencement date of your employment.
To buy shares of Common Stock pursuant to this agreement you must deliver to the
Company a completed exercise notice in the form attached and accompanied by
payment of the exercise price. No fractional shares will be issued or
transferred upon exercise of these options.
You may not sell, give or otherwise transfer, to any person or entity any of
your rights under this agreement, except that you may transfer them under a will
or otherwise under the laws of descent and distribution. During your lifetime,
only you or your legal representative may exercise these options.
<PAGE>
Securities laws limit whether and how you may sell the Common Stock you acquire
upon exercise of your options. The Plan also contains certain other restrictions
on the transferability of the stock that you purchase upon exercise of your
options. The stock certificates issued to you may bear an appropriate legend
reflecting those restrictions and that the Common Stock represented by the
certificate is subject to the terms and conditions of this agreement and the
Plan. When any option is exercised, the Company may require you to confirm that
you are buying the Common Stock for investment purposes without the intent to
distribute or sell it, if the Company determines that such a representation is
advisable under applicable securities laws, and to obtain a favorable written
opinion satisfactory in form and substance to the Company from counsel approved
by the Company as to the availability of a specific exemption from the
registration requirements of the Securities Act of 1933, as amended.
The language next to the box checked below shall be effective:
[ ] These options are intended to be incentive stock options ("ISO") as
described in Section 422 of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"). Nonetheless, there is no guarantee that these options
will receive ISO treatment under the Code These options will not receive ISO
treatment to the extent that they do not comply or cease to comply with the ISO
qualifications set forth in Section 422 of the Code.
[ ] These options are intended to be nonqualified stock options and do not meet
the ISO requirements as described in Section 422 of the Code.
You should consult your tax advisor now to determine factors that may impact the
tax consequence of this option, as well as prior to each exercise of this
option. This is not an employment agreement and does not increase or decrease
the Company's obligation, if any, to employ you as in effect prior hereto. This
agreement shall be governed by the internal laws of the State of New York.
If any tax withholding required by law to be withheld by the Company is not
otherwise satisfied in accordance with the terms of the Plan, the Company may
satisfy its withholding obligation by reducing the number of shares of common
stock otherwise deliverable to you pursuant to an exercise of these options or
by acceptance of shares of common stock already owned by you for a period of at
least six months.
2
<PAGE>
Your signature in the space below will signify your acceptance of the terms of
this agreement.
Sincerely,
Richard D. Forman
President and CEO
ACCEPTED, AGREED TO AND ACKNOWLEDGED,
THIS ____ DAY OF ______________, 199_
- -----------------------------------------------------
3
<PAGE>
EXERCISE NOTICE
To: Register.com, Inc.
Attention: Chief Financial Officer
The undersigned hereby irrevocably elects to exercise __________ options to
purchase _______ shares of common stock of Register.com, Inc., a New York
corporation, under a Stock Option Agreement dated __________________, 199_, and
to purchase the common stock issuable upon exercise thereof for a total of
$____________ ($____ share). Stock certificates should be issued in the name of
the undersigned and delivered to the address set forth below.
- ---------------------------------- ---------------------------------------
[Please Sign Name] [Please provide Social Security Number]
- ----------------------------------
[Please Print Name]
- ----------------------------------
- ----------------------------------
- ----------------------------------
[Please Print Address]
4
<PAGE>
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
(c)Copyright 1962, All Rights Reserved.
Reproduction in whole or in part prohibited.
Agreement of Lease, made as of this day of March 1999, between
Pennbus Realties, Inc. c/o Olmstead Properties, Inc.,
575 Eighth Avenue, Suite 2400,
New York, New York 10018
party of the first part, hereinafter referred to as Landlord OWNER, and
FORMAN INTERACTIVE CORP., with an address at
134 Fifth Avenue, New York, New York
party of the second part, hereinafter referred to as TENANT.
------------------------------------
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner
The Entire rentable portion of the Eleventh (11th) Floor
(the "Demised Premises")
in the building known as 575 Eighth Avenue (the "Building") in the Borough of
Manhattan, City of New York, for the term of Ten (10) Years, Six and one-half
(6 1/2) months (or until such term shall sooner cease and expire as hereinafter
provided) to commence on the Fifteenth day of March nineteen hundred and
Ninety-Nine, and to end on the Thirtieth day of September Two Thousand and Nine
and both dates inclusive, at an annual rental rate of See Clause 41 (a) (i)
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first _____ monthly installment(s) on the execution hereof (unless this
lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
Rent:
1. Tenant shall pay the rent as above and as hereinafter provided.
Occupancy:
2. Tenant shall use and occupy demised premises for GENERAL OFFICES
provided such use is in accordance with the certificate of occupancy for the
building, if any, and for no other purpose.
Alterations:
3. Tenant shall make no changes in or to the demised premises of any nature
without Owner's prior written consent. Subject to the prior written consent of
Owner, and to the provisions of this article, Tenant at Tenant's expense, may
make alterations, installations, additions or improvements which are
non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises using
contractors or mechanics first approved in each instance by Owner which approval
shall not be unreasonably withheld. Tenant shall, at its expense, before making
any alterations, additions, installations or improvements obtain all permits,
approval and certificates required by any governmental or quasi-govermental
bodies and (upon completion) certificates of final approval thereof and shall
deliver promptly duplicates of all such permits, approvals and certificates to
Owner. Tenant agrees to carry and will cause Tenant's contractors and
sub-contractors to carry such workman's compensation, general liability,
personal and property damage insurance as Owner may require. If any mechanic's
lien is filed against the demised premises, or the building of which the same
forms a part, for work claimed to have been done for, or materials furnished to,
Tenant, whether or not done pursuant to this article, the same shall be
<PAGE>
discharged by Tenant within thirty days thereafter, at Tenant's expense, by
filing the bond required by law or otherwise. All fixtures and all paneling,
partitions, railings and like installations, installed in the premises at any
time, either by Tenant or by Owner on Tenant's behalf, shall, upon installation,
become the property of Owner and shall remain upon and be surrendered with the
demised premises unless, Owner, by notice to Tenant no later than twenty days
prior to the date fixed as the termination of this lease, elects to relinquish
Owner's rights there to and have them removed by Tenant, in which event the same
shall be removed from the demised premises by Tenant prior to the expiration of
the lease, at Tenant's expense. Nothing in this Article shall be construed to
give Owner title to or to prevent Tenant's removal of trade fixtures, moveable
office furniture and equipment, but upon removal of any such from the premises
or upon removal of other installations as may be required by Owner, Tenant shall
immediately and at its expense, repair and restore the premises to the condition
existing prior to installation and repair any damage to the demised premises or
the building due to such removal. All property permitted or required to be
removed, by Tenant at the end of the term remaining in the premises after
Tenant's removal shall be deemed abandoned and may, at the election of Owner,
either be retained as Owner's property or removed from the premises by Owner, at
Tenant's expense.
<PAGE>
Repairs:
4. Owner shall maintain and repair the exterior of structure and the public
portions of the building. Tenant shall, throughout the term of this lease, take
good care of the demised premises including the bathrooms and lavatory
facilities (if the demised premises encompass the entire floor of the building)
and the windows and window frames and, the fixtures and appurtenances therein
and at Tenant's sole cost and expense promptly make all repairs thereto and to
the building, whether structural or non-structural in nature, caused by or
resulting from the carelessness, omission, neglect or improper conduct of
Tenant, Tenant servants, employees, invitees, or licensees, and whether or not
arising from such Tenant conduct or omissions, when required by other provisions
of this lease, including Article 6. Tenant shall also repair all damage to the
building and the demised premises caused by the moving of Tenant's fixtures,
furniture and equipment. All the aforesaid repairs shall be of quality or class
equal to the original work or construction. If Tenant fails, after ten days
notice, to proceed with due diligence to make repairs required to be made by
Tenant, the same may be made by the Owner at the expense of Tenant, and the
expenses thereof incurred by Owner shall be collectible, as additional rent,
after rendition of a bill or statement therefor. If the demised premises be or
become infested with vermin; Tenant shall, at its expense, cause the same to be
exterminated. Tenant shall give Owner prompt notice of any defective condition
in any plumbing, heating system or electrical lines located in the demised
premises and following such notice. Owner shall remedy the condition with due
diligence, but at the expense of Tenant, if repairs are necessitated by damage
or injury attributable to Tenant, Tenant's servants, agents, employees, invitees
or licenses as aforesaid. Except as specifically provided in Article 9 or
elsewhere in this lease, there shall be no allowance to the Tenant for a
diminuation of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner, Tenant or
others making or failing to make any repairs, alterations, additions or
improvements in or to any portion of the building or the demised premises or in
and to the fixtures, appurtenances or equipment thereof. It is specifically
agreed that Tenant shall not be entitled to any set off or reduction of rent by
reason of any failure of Owner to comply with covenants of this or any other
articles of this lease. Tenant agrees that Tenant's sole remedy at law in such
instances will be by way of any action for damages for breach of contract. The
provisions of this Article 4 with respect to the making of repairs shall not
apply in the case of fire or other casualty with regard to which Article 9
hereof shall apply.
Window Cleaning:
5. Tenant will not clean nor require, permit, suffer or allow any window in
the demised premises to be cleaned from the outside in violation of Section 202
of the New York State Labor Law or any other applicable law or of the Rules of
the Board of Standards and Appeals, or of any other Board or body having or
asserting jurisdiction.
Requirements of Law, Fire Insurance
6. Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter. Tenant shall, at Tenant's sole cost and
expense, promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer pursuant to law,
and all orders, rules and regulations of the New York Board of Fire
Underwriters, or the Insurance Services Office, or any similar body which shall
impose any violations, order or duty upon Owner or Tenant with respect to the
demised premises, whether or not arising out of Tenant's use or manner of use
thereof, or, with respect to the building, if arising out of Tenant's use or
manner of use of the demised premises or the building (including the use
- --------------------------------------------------------------------------------
<PAGE>
permitted under the leases. Except as provided in Article 30 hereof, nothing
herein shall require Tenant to make structural repairs or alterations unless
Tenant has, by its manner of use of the demised premises or method of operation
therein violated any such laws, ordinances, orders, rules, regulations or
requirements with respect thereto. Tenant shall not do or permit any act or
thing to be done in or to the demised premises which is contrary to law, or
which will invalidate or be in conflict with public liability, fire or other
policies of insurance at any time carried by or for the benefit of Owner. Tenant
shall not keep anything in the demised premises except as now or hereafter
permitted by the Fire Department. Board of Fire Underwriters, Fire Insurance
Rating Organization and other authority having jurisdiction, and then only in
such manner and such quantity so as not to increase the rate for fire insurance
applicable to the building, nor use the premises in a manner which will increase
the insurance rate for the building or any property located therein over that in
effect prior to the commencement of Tenant's occupancy. If by reason of failure
to comply with the foregoing the fire insurance rate shall, at the beginning of
this lease or at any time thereafter, be higher than it otherwise would be, then
Tenant shall reimburse Owner, as additional rent hereunder, for that portion of
all fire insurance premiums thereafter paid by Owner which shall have been
charged because of such failure by Tenant. In any action or proceeding wherein
Owner and Tenant are parties, a schedule or "make-up" or rate for the building
or demised premises issued by a body making fire insurance rates applicable to
said premises shall be conclusive evidence of the facts therein stated and of
the several items and charges in the fire insurance rates then applicable to
said premises. Tenant shall not place a load upon any floor of the demised
premises exceeding the floor load per square foot area which it was designed to
carry and which is allowed by law. Owner reserves the right to prescribe the
weight and position of all safes, business machines and mechanical equipment.
Such installations shall be placed and maintained by Tenant, at Tenant's
expense, in settings sufficient, in Owner's judgment, to absorb and prevent
vibration, noise and annoyance.
Subordination:
7. This lease is subject and subordinate to all ground or underlying leases
and to all mortgages which may now or hereafter affect such leases or the real
property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument or subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination.
Tenant shall execute promptly any certificate that Owner may request.
Tenants's Liability Insurance Property Loss, Damage, Indemnity:
8. Owner or its agents shall not be liable for any damage to property of
Tenant or of others entrusted to employees of the building, nor for loss of or
damage to any property of Tenant by theft or otherwise, nor for any injury or
damage to persons or property resulting from any cause or willful act of
whatsoever nature, unless caused by or due to the negligence or willful act of
Owner, its agents, servants or employees; Owner or its agents shall not be
liable for any damage caused by other tenants or persons in, upon or about said
building or caused by operations in connection of any private, public or quasi
public work. If at any time any windows of the demised premises are temporarily
closed, darkened or bricked up (or permanently closed, darkened or bricked up,
if required by law) for any reason whatsoever including, but not limited to
Owner's own acts. Owner shall not be liable for any damage Tenant may sustain
thereby and Tenant shall not be entitled to any compensation therefor nor
abatement or diminution of rent nor shall the same release Tenant from its
obligations hereunder nor constitute an eviction. Tenant shall indemnify and
save harmless Owner against and from all liabilities, obligations, damages,
penalties, claims, costs and expenses for which Owner shall not be reimbursed by
insurance, including reasonable attorney's fees, paid, suffered or incurred as a
result of any breach by Tenant, Tenant's agents, contractors, employees,
invitees, or licensees, of any covenant or condition of this lease, or the
carelessness, negligence or improper conduct of the Tenant, Tenant's agents,
contractors, employees, invitees or licensees. Tenant's liability under this
lease extends to the acts and omissions of any sub-tenant, and any agent,
contractor, employee, invitee or licensee of any sub-tenant. In case any action
or proceeding is brought against Owner by reason of any such claim, Tenant, upon
written notice from Owner, will, at Tenant's expense, resist or defend such
action or proceeding by counsel approved by Owner in writing, such approval not
be unreasonably withheld.
<PAGE>
Destruction, Fire and Other Casualty:
9. (a) If the demised premises or any part thereof shall be damaged by fire
or other casualty, Tenant shall give immediate notice thereof to Owner and this
lease shall continue in full force and effect except as hereinafter set forth,
(b) If the demised premises are partially damaged or rendered partially unusable
by fire or other casualty, the damages thereto shall be repaired by and at the
expense of Owner and the rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises which is usable. (c) If the demised premises are
totally damaged or rendered wholly unusable by fire or other casualty, then the
rent and other items of additional rent as hereinafter expressly provided shall
be proportionately paid up to the time of the casualty and thenceforth shall
cease until the date when the premises shall have repaired and restored by
Owner, subhject to Owner's right to elect not to restore the same as hereinafter
provided. (d) If the demised premises are rendered wholly unusable or (whether
or not the demised premises are damaged in whole or in part) if the building
shall be so damaged that Owner shall decide to demolish it or to rebuild it,
then, in any of such events, Owner may elect to terminate this lease by written
notice to Tenant, given within 90 days after such fire or casualty, or 30 days
after adjustment of the insurance claim for such fire or casualty whichsoever is
sooner, specifying a date for the expiration of the lease, which date shall not
be more than 60 days after giving of such notice, and upon the date specified in
such notice the term of this lease shall expire as fully and completely as if
such date were the date set forth above for the termination of this lease and
Tenant shall forthwith quit, surrender and vacate the premises without prejudice
however, to Owner's rights and remedies against Tenant under the lease
provisions in effect prior to such termination, and any rent owing shall be paid
up to such date and any payments of rent made by Tenant which were on account of
any period subsequent to such date shall be returned to Tenant. Unless Owner
shall serve a termination notice as provided for herein. Owner shall make the
repairs and restorations under the conditions of (b) and (c) hereof, with all
reasonable expedition, subject to delays due to adjustment of insurance claims,
labor troubles and causes beyond Owner's control. After any such casualty,
Tenant shall cooperate with Owner's restoration by removing from the premises as
promptly as reasonably possible, all of Tenant's salvageable inventory and
movable equipment, furniture, and other property. Tenant's liability for rent
shall resume (5) days after written notice from Owner that the premises are
substantially ready for Tenant's occupancy, (c) Nothing contained hereinabove
shall relieve Tenant from liability that may exist as a result of damage from
fire or other casualty. Notwithstanding the foregoing, including Owner's
obligation to restore under subparagraph (b) above, each party shall look first
to any insurance in its favor before making any claim against the other party
for recovery for loss or damage resulting from fire or other casualty, and to
the extent that such insurance is in force and collectible and to the extent
permitted by law, Owner and Tenant each hereby releases and waives all right of
recovery with respect to subparagraphs (b), (d) and (e) above against the other
or any one claiming through or under each of them by way of subrogation or
otherwise. The release and waiver herein refered to shall be deemed to include
any loss or damage to the demised premises and/or any personal property,
equipment, trade fixtures, goods and merchandise located therein. The foregoing
release and waiver shall be in force only if both relessors' insurance policies
contain a clause providing that such a release or waiver shall not invalidate
the insurance, if, and to the extent, that such waiver can be obtained only by
the payment of additional premiums, then the party benefitting from the waiver
shall pay such premium within ten days after written demand or shall be deemed
to have agreed that the party obtaining insurance coverage shall be free of any
further obligation under the provisions hereof with respect to waiver of
subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's
furniture and or furnishings or any fixtures or equipment, improvements, or
appurtenances removable by Tenant and agrees that Owner will not be obligated to
repair any damage thereto or replace the same. (f) Tenant hereby waives the
provisions of Section 227 of the Real Property Law and agrees that the
provisions of this article shall govern and control in lieu thereof.
Eminent Domain:
10. If the whole or any part of the demised premises shall be acquired or
condemned by Eminent Domain for any public or quasi public use or purpose, then
and in that event, the term of this lease shall cease and terminate from the
date of title vesting in such proceeding and Tenant shall have no claim for the
value of any unexpired term of said lease. Tenant shall have the right to make
an independent claim to the condemning authority for the value of Tenant's
moving expenses and personal property, trade fixtures and equipment, provided
Tenant is entitled pursuant to the terms of the lease to remove such property,
trade fixtures and equipment at the end of the term and provided further such
claim does not reduce Owner's award.
<PAGE>
Assignment, Mortgage, Etc.:
11. Tenant, for itself, its heirs, distributees, executors, administrators,
legal representatives, successors and assigns, expressly covenants that is shall
not assign, mortgage or encumber this agreement, nor underlet, or suffer or
permit the demised premises or any part thereof to be used by others, without
the prior written consent of Owner in each instance. Transfer of the majority of
the stock of a corporate Tenant or a majority partnership interest of a
partnership Tenant shall be deemed an assignment. If this lease be assigned, or
if the demised premises or any part thereof be underlet or occupied by anybody
other than Tenant, Owner may, after default by Tenant, collect rent from it;
assignee, under-tenant or occupant, and apply the net amount collected to the
rent herein reserved, but no such assignment, underletting, occupancy or
collection shall be deemed a waiver of this covenant, or the acceptance of the
assignee, under-tenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained. The consent by Owner to an assignment or underletting shall not in
any wise construed to relieve Tenant from obtaining the express consent in
writing of Owner to any further assignment or underletting.
Electric Current:
12. Rates and conditions in respect to submetering of rent inclusion, as
the case may be, to be added in RIDER attached hereto. Tenant covenants and
agrees that at all times its use of electric current shall not exceed the
capacity of existing lenders to the building or the risers of wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
Access to Premises:
13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and at,
other reasonable times, and at other reasonable times, to examine the same and
to make such repairs, replacements and improvements as Owner may deem necessary
and reasonably desirable to any portion of the building or which Owner may elect
to perform in the premises after Tenant's failure to make repairs or perform any
work which Tenant is obligated to perform under this lease, or for the purpose
of complying with laws, regulations and other directions of governmental
authorities. Tenant shall permit Owner to use and maintain and replace pipes and
conduits in and through the demised premises and to erect new pipes and conduits
therein provided, wherever possible, they are within walls or otherwise
concealed. Owner may during the progress of any work in the demised premises,
take all necessary materials and equipment into said premises without the same
constituting an eviction, nor shall the Tenant be entitled to any abatement of
rent which such work is in progress not to any damages by reason of loss or
interruption of business or otherwise. Throughout the term hereof Owner shall
have the right to enter the demised premises at reasonable hours on reasonable
notice, for the purpose of showing the same to prospective purchasers or
mortgagees of the building, and during the last six months of the term for the
purpose of showing the same to prospective tenants and may, during said six
months period, place upon the demised premises the usual notices "To Let" and
"For Sale" which notices Tenant shall permit to remain thereon without
molestation. If Tenant is not present to open and permit any entry into the
premises, Owner or Owner's agents may enter the same whenever such entry may be
necessary or permissible by master key or forcibly and provided reasonable care
is exercised to safeguard Tenant's property, such entry shall not render Owner
or its agents liable therefor, nor in any event shall the obligations of Tenant
hereunder be affected. If during the last month of the term Tenant shall have
removed all or substantially all of Tenant's property therefrom. Owner may
immediately enter, alter, renovate or redecorate the demised premises without
limitation or abatement of rent, or incurring liability to Tenant for any
compensation and such act shall have not effect on this lease or Tenant's
obligations hereunder.
<PAGE>
Vault, Vault Space, Area:
14. No Vaults, vault space or area, whether or not reclosed or covered, not
within the property line of the building is leased hereunder, anything contained
in or indicated on any sketch, blue print or plan, or anything contained
elsewhere in this lease to the contrary notwithstanding. Owner makes no
representation as to the location of the property line of the building. All
vaults and vault space and all such areas not within the property line of the
building, which Tenant may be permitted to use and/or occupy, is to be used
and/or occupied under a revocable license, and if any such license be revoked,
or if the amount of such space or area be diminished or required by any federal,
state or municipal authority or public utility, Owner shall not be subject to
any liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such revocation, diminution or requisition be
deemed constructive or actual eviction. Any tax, fee or charge of municipal
authorities for such vault or area shall be paid by Tenant, if used by Tenant,
whether or not specifically leased hereunder.
Occupancy:
15. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the building of which the
demised premises are a part. Tenant has inspected the premises and accepts them
as is, subject to the riders annexed hereto with respect to Owner's work, if
any. In any event, Owner makes no representation as to the condition of the
premises and Tenant agrees to accept the same subject to violations, whether or
not of record. If any governmental license or permit shall be required for the
proper and lawful conduct of Tenant's business. Tenant shall be responsible for
and shall procure and maintain such license or permit.
Bankruptcy:
16. (a) Anything elsewhere in this lease to the contrary notwithstanding,
this lease may be cancelled by Owner by sending of a written notice to Tenant
within a reasonable time after the happening of any one or more of the following
events: (1) the commencement of a case in bankruptcy or under the laws of any
state naming Tenant as the debtor; or (2) the making by Tenant of an assignment
or any other arrangement for the benefit of creditors under any state statute.
Neither Tenant nor any person claiming through or under Tenant, or by reason of
any statute or order of court, shall thereafter be entitled to possession of the
premises demised but shall forthwith quit and surrender the premises. If this
lease shall be assigned in accordance with its terms, the provisions of this
Article 16 shall be applicable only to the party then owning Tenant's interest
in this lease.
(b) It is stipulated and agreed that in the event of the termination of
this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rental reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the difference between any
installment of rent becoming due hereunder after the date of termination and the
fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such reletting
shall be deemed to be the fair and reasonable rental value for the part or the
whole of the premises so re-let during the term of the re-letting. Nothing
herein contained shall limit or prejudice the right of the Owner to prove for
and obtain as liquidated damages by reason of such termination, an amount equal
to the maximum allowed by any statute or rule of law in effect as 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.
<PAGE>
17. (1) If Tenant defaults in fulfilling any of the covenants of this Lease
other than the covenants for the payment of rent or additional rent: Anything
contained herein to the contrary notwithstanding. Owner shall give Tenant two
five (5) day notices in any twelve consecutive month period of Tenant's failure
to pay rent or Additional Rent; "or if this lease be rejected under ss.235 of
Title 11 of the U.S. Code (bankruptcy code);" or if any execution or attachment
shall be issued against Tenant or any of Tenant's property whereupon the demised
premises shall be taken or occupied by someone other than Tenant; or if Tenant
shall make default with respect to any other lease between Owner and Tenant; or
if Tenant shall have failed after five (5) days written notice, to redeposit
with Owner any portion of the security deposited hereunder which Owner has
applied to the payment of any rent and additional rent due and payable
hereunder; then in any one or more of such events upon Owner serving a written
fifteen (15) days notice upon Tenant specifying the nature of said default and
upon the aspiration of said fifteen (15) days, if Tenant shall have failed to
comply with or remedy such default, or if the said default or omissions
complained or shall be of a nature that the same cannot be completely cured or
remedied within said fifteen (15) day period, and if Tenant shall not have
diligently commenced during such default within such fifteen (15) day period,
and shall not thereafter with reasonable diligence and in good faith, proceed to
remedy or cure such default, then Owner may serve a written five (5) days'
notice of cancellation of this lease upon Tenant, and upon the expiration of
said five (5) days this lease and the term thereunder shall end and expire as
fully and completely as if the expiration of such five (5) day period were the
day herein definitely fixed for the end and expiration of this lease and the
term thereof and Tenant shall then quit and surrender the demised premises to
Owner but Tenant shall remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given,
and the term shall expire as aforesaid: or if Tenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required:
then and in any of such events Owner may without notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease had never been made, and Tenant hereby waives the service of
source of intention; re-enter or to institute legal proceedings to that end. If
Tenant shall make default hereunder prior to the date fixed as the commencement
of an renewal or extension of this lease, Owner may cancel and terminate such
renewal or extension agreement by written notice.
Remedies of Owner and Waiver of Redemption:
18. In case of any such default, re-entry, expiration and/or dispossess by
summary proceedings or otherwise, (a) the rent, and additional rent, shall
become due thereupon and be paid up to the time of such re-entry, dispossess
and/or expiration, (b) Owner may re-let the premises or any part or parts
thereof, either in the name of Owner; otherwise, for a term or terms, which may
at Owner's option be less than or exceed the period which would otherwise have
constituted the balance of the term of this lease and may grant concessions or
free rent or charge higher rental than that in this lease, (c) Tenant or the
legal representative of Tenant shall also pay Owner as liquidated damages for
the failure of Tenant to observe and perform said Tenant's convenants herein
contained, any deficiency between the rent hereby reserved and covenanted to be
paid and the net amount, if any, of the rents collected on account of the
subsequent lease or leases of the demised premises for each month of the period
which would otherwise have constituted the balance of the term of this lease.
The failure of Owner to re-let the premises or any part or parts thereof shall
not release or affect Tenant's liability for damages. Computing such liquidated
damages there shall be added to the said deficiency such expenses as Owner may
incur in connection with re-letting, such as legal expenses, attorneys' fees,
brokerage, advertising and for keeping the demised premises in good order or for
prepaing the same for re-letting. Any such liquidated damages shall be paid in
monthly installments by Tenant on the rent day specified in this lease and any
suit brought to collect the amounts of the deficiency for any month shall be
prejudice in any way the rights of Owner to collect the deficiency for any
subsequent month by a similar proceeding. Owner, in putting the demised premises
in good order or preparing the same for re-rental may, at Owner's option, make
such alterations, repairs, replacements, and/or decorations in the demised
premises as Owner, in Owner's sole judgment, considers advisable and necessary
for the purpose of re-letting demised premises, and the making of such
alterations, repairs, replacements and/or decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Owner shall
in no event be liable in any way whatsoever for failure to re-let the demised
premises, or in the event that the demised premises are re-let, for failure to
collect the rent thereof under such re-letting, and in no event shall Tenant be
entitled to receive any excess. If any, of such net rents collected over the
sums payable by Tenant to Owner hereunder. In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions hereof, Owner
shall have the right of injunction and the right to invoke any remedy allowed at
law or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for. Mention in the lease of any particular remedy, shall not
preclude Owner from any other remedy, in law or in equity, Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws.
<PAGE>
Fees and Expenses:
19. If Tenant shall default in the observance or performance of any term or
covenant on Tenant's part to be observed or performed under or by virtue of any
of the terms or provisions in any article of this lease, after notice if
required and upon expiration of any applicable grace period if any (except in an
emergency), then, unless otherwise provided elsewhere in this lease, Owner may
immediately or at any time thereafter and without notice perform the obligation
of Tenant thereunder. If Owner, in connection with the foregoing or in
connection with any default by Tenant in the covenant to pay rent hereunder,
makes any expenditures or incurs any obligations for the payment of money,
including but not limited to attorney's fees, in instituting, prosecuting or
defending any action or proceedings, and prevails in any such action or
proceeding, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within ten (10) days of rendition of any bill
or statement to Tenant therefor. If the Tenant's lease term shall have expired
at the time of making of such expenditures or incurring of such obligations,
such sums shall be recoverable by Owner as damages.
Building Alterations and Management:
20. Owner shall have the right at any time without the same constituting an
eviction and without incurring liability to Tenant therefor to change the
arrangement and or location of public entrances, passageways, doors, doorways,
corridors, elevators, stairs, toilets or other public parts of the building and
to change the name, number of designation by which the building may be known.
There shall be no allowance to Tenant for diminution of rental value and no
liability on the part of Owner by reason of inconvenience, annoyance or injury
to business arising from Owner or other Tenant making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition of
any controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem reasonably necessary for the security of
the building and its occupants.
No Representations by Owner:
21. Neither Owner nor Owner's agents have made any representations or
promises with respect to the physical condition of the building, the land upon
which it is erected or the demised premises, the rents, leases, expenses of
operation or any other matter or thing affecting or related to the demised
premises or the building except as herein expressly set forth and 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 has inspected the
building and the demised premises and is thoroughly acquainted with their
condition and agrees to take the same "as is" on the date possession is tendered
and acknowledges that the taking of possession of the demised premises by Tenant
shall be conclusive evidence that the said premises and the building of which
the same form a part were in good and satisfactory condition at the time such
possession was so taken, except as to latent defects. All understandings and
agreements heretofore made between the parties hereto are merged in this
contract, which alone fully and completely expresses the agreement between Owner
and Tenant and any executory agreement hereafter made shall be ineffective to
<PAGE>
change, modify, discharges or effect an abandonment of it in whole or in part,
unless such executory agreement is in writing and signed by the party against
whom enforcement of the change, modification, discharge or abandonment is
sought.
End of Term:
22. Upon the expiration or other termination of the term of this lease.
Tenant shall quit and surrender to Owner the demised premises, broom clean, in
good order and condition, ordinary wear and damages which Tenant is not required
to repair as provided elsewhere in this lease excepted, and Tenant shall remove
all its property from the demised premises. Tenant's obligation to observe or
perform this covenant shall survive the expiration or other termination of this
lease. If the last day of the term of this Lease or any renewal thereof, falls
on Sunday, this lease shall expire at noon on the preceding Saturday unless it
be a legal holiday in which case it shall expire at noon on the preceding
business day.
Quiet Enjoyment:
23. Owner covenants and agrees with Tenant that upon Tenant paying the rent
and additional rent and observing and performing all the terms, covenants and
conditions, on Tenant's part to be observed and performed, Tenant may peaceably
and quietly enjoy the premises hereby demised, subject nevertheless, to the
terms and condtions of this lease including, but not limited to, Article 34
hereof and to the ground leases, underlying leases and mortgages hereinbefore
mentioned.
Failure to Give Possession:
24. If Owner is unable to give possession of the demised premises on the
date of the commencement of the term hereof, because of the holding-over or
retention of possession of any tenant, undertenant or occupants or if the
demised premises are located in a building being constructed, because such
building has not been sufficiently completed to make the premises ready for
occupancy or because of the fact that a certificate of occupancy has not been
procured or if Owner has not completed any work required to be performed by
Owner, or for any other reason. Owner shall not be subject to any liability for
failure to give possession on said date and the validity of the lease shall not
be impaired under such circumstances, nor shall the same be construed in any
wise to extent the term of this lease, but the rent payable hereunder shall be
abated (provided Tenant is not responsible for Owner's inability to obtain
possession or complete any work required) until after Owner shall have given
Tenant notice that the premises are substantially ready for Tenant's occupancy.
If permission is given to Tenant to enter into the possession of the demised
premises or to occupy premises other than the demised premises prior to the date
specified as the commencement of the term of this lease. Tenant covenants and
agrees that such possession and/or occupancy shall be deemed to be under all the
terms, covenants, conditions and provisions of this lease, except the obligation
to pay the fixed annual rent set forth in page one of this lease. The provisions
of this article are intended to continue "an express provision to the contrary"
within the meaning of Section 223-a of the New York Real Property Law.
No Waiver:
25. The failure of Owner to seek redress for violation of, or to insist
upon the strict performance of any covenant or condition of this lease or of any
of the Rules or Regulations, set forth or hereafter adopted by Owner, shall not
prevent a subsequent act which would have originally constituted a violation
from having all the force and effect of an original violation. The receipt by
Owner of rent with knowledge of the breach of any covenant of this lease shall
not be deemed a waiver of such breach and no provision of this lease shall be
deemed to have been waived by Owner unless such waiver be in writing signed by
Owner. No payment by Tenant or receipt by Owner of a lesser amount than the
monthly rent herein stipulated shall be deemed to be other than an account of
the earliest stipulated rent, nor shall any endorsement or statement of any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Owner may accept such check or payment without
prejudice to Owner's right to recover the balance of such rent or pursue any
other remedy in his lease provided. All checks tendered to Owner as and for the
rent of the demised premises shall be deemed payments for the account of Tenant.
Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to
operate as an attornment to Owner by the payor of such rent or as a consent by
Owner to an assignment or subletting by Tenant of the demised premises to such
payor, or as a modification of the provisions of this lease. No act or thing
done by Owner or Owner's agents during the term hereby demised shall be deemed
an acceptance of a surrender of said premises and no agreement to accept such
surrender shall be valid unless in writing signed by Owner. No employee of Owner
or Owner's agent shall have any power to accept the keys of said premises prior
to the termination of the lease and the delivery of keys to any such agent or
employee shall not operate as a termination of the lease or a surrender of the
premises.
<PAGE>
Waiver of Trial by Jury:
26. It is mutually agreed by and between Owner and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any matters
whatsoever arising out of or in any way connected with this lease, the
relationship of Owner and Tenant, Tenant's use of or occupancy of said premises,
and any emergency statutory or any other statutory remedy. It is further
mutually agreed that in the event Owner commences any proceeding or action for
possession including a summary proceeding for possession of the premises. Tenant
will not interpose any counterclaim of whatever nature or description in any
such proceeding including a counterclaim under Article 4 except for statutory
mandatory counterclaims.
Inability to Perform:
27. This Lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of Tenant to
be performed shall in no wise be affected, impaired or excused because Owner is
unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if Owner is prevented or delayed from so doing by reason of strike or
labor troubles or any cause whatsoever beyond Owner's sole control including,
but not limited to, government preemption or restrictions or by reason of any
rule, order or regulation of any department or subdivision thereof of any
government agency or by reason of the conditions which have been or are
affected, either directly or indirectly by war or other emergency.
Bills and Notices:
28. Except as otherwise in this lease provided, a bill statement, notice of
communication which Owner may desire or be required to give to Tenant, shall be
deemed sufficiently given or rendered, in writing, or sent by registered or
certified mail or recognized overnight courier, next day service addressed to
Tenant at the building of which the demised premises form a part and the time of
the rendition of such bill or statement and of the giving of such notice or
communication shall be deemed to be the time when the same is delivered to
Tenant. Any notice by Tenant to Owner must be served by registered or certified
mail shall be addressed to Owner at the address first hereinabove given or at
such other address as Owner shall designate by written notice.
Water Charges:
29. If Tenant requires, uses or consumes water for any purpose in addition
to ordinary lavatory purpose (of which fact Tenant constitutes Owner to be the
the sole judge) Owner may install a water meter and thereby measure Tenant's
water consumption for all purposes. Tenant shall pay Owner for the cost of the
meter and the cost of the installation, thereof and throughout the duration of
Tenant's occupancy Tenant shall keep said meter and installation equipment
in good working order and repair at Tenant's own cost and expense in default of
which Owner may cause such meter and equipment to be replaced or repaired and
collect the cost thereof from Tenant, as additional rent. Tenant agrees to pay
for water consumed, as shown on said meter as and when bills are rendered, and
on default in making such payment Owner may pay such charges and collect the
same from Tenant, as additional rent. Tenant covenants and agrees to pay, as
additional rent, the sewer rent, charge or any other tax, rent, levy or charge
which now or hereafter is assessed, imposed or a lien upon the demised premises
or the realty of which they are part pursuant to law, order or regulation made
or issued in connection with the use, consumption, maintenance or supply of
water, water system or sewage or sewage connection or system. If the building or
the demised premises or any part thereof is supplied with water through a meter
through which water is also supplied to other premises Tenant shall pay to
Owner, an additional rent, on the first day of each month, ____% ($100.00) of
the total meter charges as Tenant's portion. Independently of and in addition to
any of the remedies reserved to Owner hereinabove or elsewhere in this lease.
Owner may sue for and collect any monies to be paid by Tenant or paid by Owner
for any of the reasons or purposes hereinabove set forth.
Sprinklers:
30. Anything elsewhere in this lease to the contrary so notwithstanding, if
the New York Board of Fire Underwriters or the New York Fire Insurance Exchange
or any bureau, department or official of the federal, state or city government
recommend or require the installation of a sprinkler system or that any changes,
modifications, alterations, or additional sprinkler heads or other equipment be
made or supplied in an existing sprinkler system by reason of Tenant's business,
or the location of partitions, trade fixtures, or other contents of the demised
<PAGE>
premises, or for any other reason, or if any such sprinkler system
installations, modification, alterations, additional sprinkler heads or other
such equipment, become necessary to prevent the imposition of a penalty or
charge against the full allowance for a sprinkler system in the fire insurance
rate set by any said Exchange or by any fire insurance company, Tenant shall, at
Tenant's expense, promptly make such sprinkler system installations, changes
modifications, alterations and supply additional sprinkler heads or other
equipment as required whether the work involved shall be structural or
non-structural in nature. Tenant shall pay to Owner as additional rent the sum
of $100.00, on the first day of each month during the term of the lease, as
Tenant's portion of the contract price for sprinkler supervisory service.
Elevators, Heat, Cleaning:
31. Owner shall: (a) provide necessary passenger elevator facilities on
business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.: (b)
if freight elevator service is provided, same shall be provided only on regular
business days Monday through Friday inclusive, and on those days only
between the hours of 9 a.m. and 12 noon and between 1 p.m. and 5 p.m.;
(c) furnish heat, water and other services supplied by Owner to the demised
premises, when and as required by law, on business days from 8 a.m. to 6 p.m.
and on Saturdays from 8 a.m. to 1 p.m.; (d) clean the public halls and public
portions of the building which are used in common by all tenants. Tenant shall,
at Tenant's expense, keep the demised premises, including the windows, clean and
in order, to the satisfaction of Owner, and for that purpose shall employ the
person or persons, or corporation approved by Owner. Tenant shall pay to Owner
the cost of removal of any to Tenant's refuse and rubbish from the building.
Bills for the same shall be rendered by Owner to Tenant at such time as Owner
may elect and shall be due and payable hereunder, and the amount of such bills
shall be deemed to be, and be paid as additional rent. Tenant shall, however,
have the option of independently contracting for the removal of such rubbish and
refuse in the event that Tenant does not wish to have same done by employees of
Owner. Under such circumstances, however, the removal of such refuse and rubbish
by others shall be subject to such rules and regulations as, in the judgment of
Owner, are necessary for the proper operation of the building. Owner reserves
the right to stop service of the heating, elevator, plumbing and
electricsystems, when necessary, by reason of accident, or emergency, or for
repairs, alterations, replacements or improvements, in the judgment of Owner
desirable or necessary to be made, until said repairs, alterations, replacements
or improvements shall have been completed. If the building of which the demised
premises are a part supplies annually operated elevator services, Owner may
proceed diligently with alterations necessary to substitute automatic control
elevator service without in any way affecting the obligations of Tenant
hereunder.
<PAGE>
Security:
32. Tenant has deposited with Owner the sum of $88,000.00 as security
for the faithful performance and observance by Tenant of the terms, provisions
and conditions of this lease; it is agreed that in the event Tenant defaults in
respect of any of the terms, provisions and conditions of this lease, including,
but not limited to, the payment of rent and additional rent, Owner may use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and additional rent or any other sum as to
which tenant is in default or for any sum which Owner may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this lease, including but not limited to, any
damages or deficiency in the reletting of the premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Owner. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this lease, the security
shall be returned to Tenant after the date fixed as the end of the Lease and
after delivery of entire possession of the demised premises to Owner. In the
event of a sale of the land and building or leasing of the building, of which
the demised premises form a part, Owner shall transfer the security to the
vender or lessee and Owner shall thereupon be released by Tenant from all
liability for the return of such security; and Tenant agrees to look to the new
Owner solely for the return of said security, and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new Owner. Tenant further convenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
See Articles 79 and 83 hereof.
Captions:
33. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provision thereof.
Definitions:
34. The term "Owner" as used in this lease means only the owner of the
fee or of the leasehold of the building, or the mortgages in possession, for the
time being of the land and building (or the owner of a lease of the building or
of the land and building) of which the demised premises form a part, so that in
the event of any sale or sales of said land and building or of said lease, or in
the event of a lease of said building, or of the land and building, the said
Owner shall be and hereby is entirely freed and relieved of all covenants and
obligations of Owner hereunder, and it shall be deemed and construed without
further agreement between the parties or their successors in interest, or
between the parties and the purchaser, at any such sale, or the said lessee of
the building, or of the land and building, that the purchaser or the lessee of
the building has assumed and agreed to carry out any and all covenants and
obligations of Owner hereunder. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning. The term "rent"
includes the annual rental rate whether so-expressed or expressed in monthly
installments, and "additional rent," "Additional rent" means all sums which
shall be due to new Owner from Tenant under this lease, in addition to the
annual rental rate. The term "business days" as used in this lease, shall
exclude Saturdays (except such portion thereof as is covered by specific hours
in Article 31 hereof), Sundays and all days observed by the State or Federal
Government as legal holidays and those designated as holidays by the applicable
building service union employees service contract or by the applicable Operating
Engineers contract with respect to HVAC service. Whenever it is expressly
provided in this lease that consent shall not be unreasonably withheld, such
consent shall not be unreasonably delayed.
Adjacent Excavations Shoring:
35. If an excavation shall be made upon land adjacent to the demised
premises, or shall be authorized to be made, Tenant shall afford to the person
causing or authorized to cause such excavation, license to enter upon the
demised premises for the purpose of doing such work as said person shall deem
necessary to preserve the wall or the building of which demised premises form a
part from injury or damage and to support the same by proper foundations without
any claim for damages or indemnity against Owner, or diminution or abatement of
rent.
<PAGE>
Rules and Regulations:
36. Tenant and Tenant's servants, employees, agents, visitors, and
licensees shall observe, and comply with, the Rules and Regulations annexed
hereto and such other and further reasonable Rules and Regulations as Owner or
Owner's agents may from time to time adopt. Notice of any additional rules or
regulations shall be given in such manner as Owner may elect. In case Tenant
disputes the reasonableness of any additions, Rule or Regulation hereafter made
or adopted by Owner or Owner's agents, the parties hereto agree to submit the
question of the reasonableness of such Rule or Regulation for decision to the
New York office of the American Arbitration Association, whose determination
shall be fact and conclusive upon the parties hereto. The right to dispute the
reasonableness of any additional Rule or Regulation upon Tenant's part shall be
deemed waived unless the same shall be asserted by service of a notice, in
writing upon Owner within fifteen (15) days after the giving of notice thereof.
Nothing in this lease contained shall be construed to impose upon Owner any duty
or obligation to enforce the Rules and Regulations or terms, covenants or
conditions in any other lease, as against any other tenant and Owner shall not
be liable to Tenant for violation of the same by any other tenant, its servants,
employees, agents, visitors or licensees.
Glass:
37. Owner shall replace, at the expense of the Tenant, any and all
plate and other glass damaged or broken from any cause whatsoever in and about
the demised premises. Owner may insure, and keep insured, at Tenant's expense,
all plate and other glass in the demised premises for and in the name of Owner.
Bills for the premiums therefor shall be rendered by Owner to Tenant at such
times as Owner may elect, and shall be due from, and payable by, Tenants when
rendered, and the amount thereof shall be deemed to be, and be paid, as
additional rent.
Estoppel Certificates:
38. Tenant, at any time, and from time to time, open at least ten (10)
days prior notice by Owner, shall execute, acknowledge and deliver to Owner,
and/or to any other person, firm or corporation specified by Owner, a statement
certifying that this Lease is unmodified in full force and effect (or, if there
have been modifications, that the same is in full force and effect as modified
and stating the modifications), stating the dates to which the rent and
additional rent have been paid, and stating whether or not there exists any
default by Owner under this Lease, and, if so, specifying each such default.
Directory Board Listing:
39. If, at the request of and as accommodation to Tenant, Owner shall
place upon the directory board in the lobby of the building, one or more names
of persons other than Tenant, such directory board listing shall not be
construed as the consent by Owner to an assignment or subletting by Tenant to
such person or persons.
Successors and Assignee:
40. The covenants, conditions and agreements contained in this lease
shall bind and inure to the benefit of Owner and Tenant and their respective
heirs, distributees, executors, administrators, successors, and except as
otherwise provided in this lease, their assigns. Tenant shall look only to
Owner's estate and interest in the land and building for the satisfaction of
Tenant's remedies for the collection of a judgement (or other judicial process)
against Owner in the event of any default by Owner hereunder, and no other
property or assets of such Owner (or any partner, member, officer or director
thereof, disclosed or undisclosed), shall be subject to levy, execution or other
enforcement procedure for the satisfaction of Tenant's remedies under or with
respect to this lease, the relationship of Owner and Tenant hereunder, or
Tenant's use and occupancy of the demised premises.
<PAGE>
SEE RIDER ATTACHED HERETO AND MADE A PART HEREOF.
In Witness Whereof, Owner and Tenant have respectively signed and
sealed this lease as of the day and year first above written.
Witness for Owner: PENNBUS REALTIES, INC. CORP. SEAL
------------------------
/s/ [illegible]
- ------------------------------ --------------------------- [L.S.]
Vice President
CORP.
Witness for Tenant: FORMAN INTERACTIVE CORP. SEAL
------------------------
- ------------------------------ --------------------------- [L.S.]
By: /s/ [illegible]
--------------------------------
President
ACKNOWLEDGMENTS
<TABLE>
<CAPTION>
<S> <C>
CORPORATE TENANT INDIVIDUAL TENANT
STATE OF NEW YORK, ss. STATE OF NEW YORK, ss.
County of County of
On this day of , 19 , before me On this day of , 19
personally came . , before me personally came .
to me known, who being by me duly sworn, did depose and say that he resides To me known and known to me to be the individual
in described in and who, as TENANT, executed the
foregoing instrument and acknowledged to me that
that he is the of he executed the same.
the corporation described is and which executed the foregoing instrument, as -------------------------------
TENANT: that he knows the seal of said corporation: that the seal affixed to
said instruments is such corporate seal that it was so affixed by the Board of
Directors of said corporation, and that he signed his name thereto by like
order.
------------------------------------
</TABLE>
<PAGE>
IMPORTANT -- PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 36.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose either than for [Illegible] or egress from
the demised premises and for delivery of merchandise and equipment in a prompt
and efficient manner using elevators and passageways designated for such
delivery by Owner. There shall not be used in any space, or in the public hall
of the building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards.
2. The water and wash closets and plumbing fixtures shall not be used for
any purposes other then those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expenses of any breakage, storage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building: and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the buildings by reasons of noise,
odors, and or vibrations, or interfere in any way, with other Tenants or those
having business therein, nor shall any animals or birds be kept in or about the
building. Smoking or carrying lighted cigars or cigarettes in the elevators of
the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of Owner.
5. No sign, advertisements, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenent on any part of the outside of the
demised premises or the building or on the inside of the demised premises if the
same is visable from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violation of the foregoing by any Tenant,
Owner may remove same without any liability and may charge the expense incurred
by such removal to Tenant or Tenants violating rule. Interior signs on doors and
directory tables shall be inscribed, painted or affixed for each Tenant by Owner
at the expense of such Tenant, and shall be of a size, color and style
reasonably acceptable to Owner.
<PAGE>
6. No boring, cutting or stringing of wires shall be permitted, exept
with the prior written consent of Owner and as Owner may direct. No Tenant shall
lay linoleum, or other similar floor covering, so that the same shall come in
direct contact with the floor of the demised premises, and, if linoleum or other
similar floor covering is desired to be used as [illegible] of builder's
deadening felt shall be first affixed to the floor, by a [illegible] other
material, solubable in water, the use of cement or other similar adhesive
matters being expressly prohibited.
7. Each Tenant must, upon the termination of his Tenancy,return to Owner
all keys of stairs, offices and toilet rooms, either furnished to, otherwise
procured by, such Tenant, and in the event of the loss of any keys, so
furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of
any description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner reasonably approved by Owner. Owner reserves the
right to inspect all freight to be brought into the building and to exclude from
the building all freight which violates any of these Rules and Regulations of
the lease of which these Rules and Regulations are a part.
9. No Tenant shall obtain for use upon the demised premises for, drinking
water, towel and other similar services, or accept barbering or bootblacking
services in the demised premises, except from persons authorized by Owner, and
at hours and under regulations fixed by Owner. Canvassing solicitiong and
peddling in the building is prohibited and each Tenant shall cooperate to
prevent the same.
10. Owner reserves the right to exclude from the building between the hours
of 6 p.m. and 8 a.m. on business days, after 1 p.m. on Saturdays, and at all
hours on Sundays and legal holidays all persons who do not present a pass to the
building signed by Owner. Owner will furnish passes to persons for whom any
Tenant requests same in writing. Each Tenant shall be responsible for all
persons for whom he requests such pass and shall be liable to Owner for all acts
of such persons. Notwithstanding the foregoing, Owner shall not be required to
allow Tenant or any person to enter or remain in the building, except on
business days from 8:00am to 6: p.m. and on Saturdays from 8:00 a.m. to 1:00
p.m. Tenant shall not have a claim against Owner by reason of Owner excluding
from the building any person who does not present such pass.
11. Owner shall have the rights to prohibit any advertising by any Tenant
which in the Owner's reasonable opinion, leads to impair the reputation of the
building or its desirability as a loft building, and upon written notice from
Owner, Tenant shall refraim from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, conbustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processess, or any unusual or other objectionable odors to permeate in or
enamates from the demised premises.
13. Tenant shall not use the demised premises in a manner which disturbs or
interferes with other Tenants in the beneficial use of their premises.
<PAGE>
Address 575 Eighth Avenue
Premises Entire Eleventh (11th) Floor
============================================================
PENNBUS REALTIES, INC.
TO
FORMAN INSTITUTE CORP.
============================================================
STANDARD FORM OF
LOFT LEASE
The Real Estate Board of New York, Inc.
(C)Copyright 1994. All rights Reserved.
Reproduction in whole or in part prohibited.
============================================================
Dated March 1999.
Rent Per Year See Clause 41(a)(i)
Rent Per Month See Clause 41(a)(i)
Term Ten (10) Years, Six and one half (6-1/2) months
From March 15, 1999 half (6-1/2)
To September 30, 2009 months
Drawn by _______________________ Checked by_________________
Entered by _____________________ Approved by________________
============================================================
<PAGE>
RIDER AGREEMENT:
To be attached to and form a part of:
LEASE dated January, 1999 Premises Entire 11th Floor at 575 Eighth Avenue
Between PENNBUS REALTIES, INC., c/o Olmstead Properties, Inc. as Landlord
and FORMAN INTERACTIVE CORP. as Tenant
At the commencement of the term hereof electric current shall be supplied to
Tenant at the demised premises in accordance with the provisions of clause A or
B or F of this Article, subject to the other terms and conditions of this
Article and lease. A. Submetering -- If electric current be supplied by
Landlord, at Landlord's option, pursuant to this clause, Tenant covenants and
agrees to purchase the same from Landlord or Landlord's designated agent, at
charges, taxes, terms and rates set by Landlord from time to time but, except as
hereinafter set forth, nor more than those specified in Service Classification
No. 4 on September 7, 1970, that being the date immediately prior to which the
rates of Consolidated Edison Company of New York, Inc. were adjusted and
consolidated with respect to redistribution of electric current to commercial
buildings. Such charges, taxes, terms and rates may be revised by Landlord, at
its option, from time to time, in the same proportion as any increases after the
aforesaid date in the charges, taxes, terms or rates to Landlord in connection
with the supply of electric current to the building of which the demised
premises are a part (hereinafter referred to as the "building"). When more than
one meter measures the electrical service to the demised premises, the service
rendered through each meter shall be separately computed and billed in
accordance with the charges, taxes, terms and rates stated herein. Bills shall
be rendered at such times as Landlord may elect and, commencing on the earlier
of (i) Tenant's occupancy of all or any portion of the demised premises, or (ii)
the commencement date of the term of this lease, the amounts as computed from
meter readings shall be deemed to be, and be paid as, additional rent without
set-off or deduction. B. Rent Inclusion -- If electric current be supplied by
Landlord, at Landlord's option, pursuant to this clause, Tenant covenants and
agrees to have it supplied to Tenant at the demise premises based on the method
of including the use thereof within the annual rent and the annual rent reserved
herein shall be increased as hereinafter set forth, in consideration of Landlord
supplying electric current as an additional service as hereinafter provided. At
any time after Tenant is in possession of the demised premises, a reputable
electrical consultant selected by Landlord shall (but, if this lease be a
renewal or shall subsequently be extended, or if an electric rent inclusion
modification agreement is being executed in connection with this lease, Landlord
shall have the option, but not the obligation to) make a survey of the
electrical equipment, usage and powerload to ascertain the electric current
consumption and demand in the demised premises on an annual basis, and calculate
the annual rent increase resulting therefrom utilizing charges, taxes, terms and
rates as set by Landlord from time to time, but, except as hereinafter set forth
not more than those specified in Service Classification No. 2 on September 7,
1970, that being the date immediately prior to which the rates of Consolidated
Edison Company of New York, Inc. were adjusted and consolidated with respect to
redistribution of electric current to commercial buildings. Such charges, taxes,
terms and rates may be revised by Landlord, at its option, from time to time, in
the same proportion as any increases after the aforesaid date in the charges,
taxes, terms or rates to Landlord in connection with the supply of electric
current to the building. Following the making of any such survey, the parties
shall execute an agreement prepared by Landlord amending this lease and setting
forth the increase in annual rent calculated as aforesaid, as of the date of the
commencement of the furnishing of electric current to the demised premises
pursuant to this clause B, but such increase shall be effective from that date
even if such agreement is not executed. Notwithstanding the foregoing, (i) if
this lease be a renewal, or shall subsequently be extended, in no event shall
the amount payable by Tenant in consideration of Landlord supplying electric
current be less than the amount by which the annual rent last payable by Tenant
under its prior lease, or this lease, was last increased in consideration of
Landlord supplying electric current to the demised premises, and (ii) if an
electric rent inclusion modification agreement is being executed in connection
with this lease, in no event shall the increase in the annual rent reserved
herein be less than the increase in annual rent as set forth therein. Landlord,
its agent or consultant, is given the right to make surveys, from time to time,
in the demised premises covering the electric equipment and use of electric
current. If, after the date of such initial survey (or if subdivision "(i)" or
"(ii)" above is applicable, after the date on which the annual rent payable by
Tenant was last increased in consideration of Landlord supplying electric
current to the demised premises) there are any additions to or increases in (i)
the equipment or usage in the demised premises, or (ii) in the charges, terms
and/or rates to Landlord by the public utility corporation supplying electric
current to the building, or (iii) in any taxes thereon which Landlord is
<PAGE>
obligated to pay, or (iv) if Tenant shall regularly remain open for business
other than during those hours incorporated in any prior electric survey, then,
and in any such instance or instances, the annual rent reserved herein shall be
further increased in accordance with the provisions of this Article to reflect
such additions, increases or additional use as of the effective date thereof. If
Landlord and Tenant cannot agree on the amount of any such increase, as
hereinbefore described, the same shall be determined by a reputable electric
consultant selected by Landlord and paid equally by both parties. The parties
shall then execute an agreement prepared by Landlord amending this lease and
setting forth the new annual rent resulting from such increase and confirming
the effective date thereof, but such increase shall be effective from such date
even if such agreement is not executed. C. Landlord shall not in any way be
liable or responsible to Tenant for any loss or damage or expense which Tenant
may sustain or incur if either the quantity or character of electric service is
changed or is no longer available or suitable for Tenant's requirements.
Tenant's use of electric current in the demised premises shall not at any time
exceed the capacity of any of the electrical conductors and facilities in or
otherwise serving the demised premises. In order to insure that such capacity is
not exceeded and to avert any possible adverse effect upon the building's
electric service, Tenant shall not, without Landlord's prior written consent in
each instance, connect any fixtures, appliances or equipment (other than a
reasonable number of table or floor lamps, typewriters and similar small office
machines using comparable electric current) to the building's electric
distribution system nor make any alteration or addition to the electric system
of the demised premises. Should Landlord grant such consent, all additional
risers or other equipment required therefor shall be provided by Landlord, and
all costs and expenses in connection therewith, including, without limitation,
those for filing and supervision, shall be paid by Tenant upon Landlord's
demand, as additional rent, without setoff or deduction. As a condition to
granting such consent, Landlord may require Tenant to agree to an increase in
the annual rent by an amount which will reflect the value to Tenant of the
additional service to be furnished by Landlord, to wit: the potential additional
electric current to be made available to Tenant based upon the estimated initial
total capacity of such additional risers or other equipment. If Landlord and
Tenant cannot agree on the amount of such annual rent increase, the same shall
be determined by a reputable electrical consultant, to be selected by Landlord
an paid equally by both parties. The parties shall then execute an agreement
prepared by Landlord amending this lease setting forth the new annual rent
resulting from such increase and confirming the effective date thereof, but such
increase shall be effective from such date even if such agreement is not
executed. D. In all matters relating to an annual rent increase and additional
rent pursuant to this Article the findings of the electrical consultant selected
by Landlord shall be conclusive and binding upon the parties. E. Landlord
reserves the right to discontinue furnishing electric current to Tenant in the
demised premises at any time upon not less than thirty (30) days' notice to
Tenant. F. If Landlord, at Landlord's option, (i) exercises such right of
discontinuance as provided in clause E, or (ii) requires Tenant to initially
obtain its electric current directly from the public utility corporation
supplying electric current to the building, this lease shall continue in full
force and effect and shall be unaffected thereby, except only that, from and
after the effective date of such discontinuance, or the commencement of direct
usage, as the case may be, Landlord shall not be obligated to furnish electric
current to Tenant and except that, if Landlord shall have been furnishing
electric current on a rent inclusion basis, from and after the effective date of
such discontinuance, the annual rent payable under this lease shall be reduced
by an amount equal to the aggregate amount of all increases of the annual rent
reserved herein pursuant to clause B of this Article. In either aforesaid event.
If Landlord is not to furnish electric current to Tenant, Tenant shall arrange
to obtain electric current directly from the public utility corporation
supplying electric current to the building; and in any event, all risers,
equipment and other facilities which may be required for Tenant to obtain
electric current directly from such public utility corporation shall, at
Tenant's expense, payable to Landlord upon demand, as additional rent, without
set-off or deduction, be installed by Landlord, if in Landlord's judgment the
same are necessary and will not cause damage or injury to the building or any
part thereof or create a hazardous condition or entail excessive alterations,
repairs or expense or interfere with or disturb any other building tenants or
occupants; and in any event, any such installation shall be maintained by
Tenant, at its expense, and shall be subject to such conditions as Landlord
and/or the public utility corporation may require. If Landlord shall not furnish
electric current to Tenant, it shall not be liable to Tenant therefor and the
same shall not be deemed to be a lessening or diminution of services within the
meaning of any law, rule or regulation now or hereafter enacted, promulgated or
issued. G. If any taxes or charges are or shall be imposed upon Landlord or its
agent in connection with the sale or resale of electrical energy to Tenant,
Tenant covenants and agrees that, where permitted by law, Tenant's pro-rata
share of such taxes or charges shall be passed on to Tenant and paid by Tenant
to Landlord or its agent upon demand, as additional rent, without set-off or
deduction. At all times during the term of this lease Tenant will comply with
all present and future General Rules, Regulations, Terms and Conditions
applicable to service equipment, wiring and Requirements in accordance with the
regulations of the public utility corporation supplying electric current to the
building. I. Tenant covenants and agrees that at no time will the connected
electrical load for any one full or partial floor of the demised premises exceed
6 watts per square foot of usable area unless the rent has been increased
pursuant to this Article to reflect the additional load. J. It is agreed that
Landlord, from time to time, may change the method of supplying electric current
to Tenant at the demised premises in any manner referred to in this lease or
otherwise, provided that in so doing Landlord shall comply with all applicable
laws.
<PAGE>
Notwithstanding anything to the contrary herein, Tenant shall be charged for
electricity consumed by it for the demised premises based upon submeter readings
applied to the then current Service Classification, billed by the Utility
Company servicing the property, which is commensurable with Tenant's level of
usage, (including all taxes, charges, terms, rates and other fees associated
with landlord providing electrical service) plus twelve and one-half percent
(12.5%). Such taxes, charges, terms and rates may be revised by the Utility
Company servicing the building, from time to time, and any changes after the
aforesaid date in the taxes, charges, terms and rates to Landlord in connection
with the supply of electric current to the Building of which the demised
premises are a part, will be used in the calculation of the Tenant billing.
Anything contained herein to the contrary notwithstanding, in no event shall
Landlord discontinue furnishing electric service to the Demised Premises unless
Landlord elects to do so to substantially all of the tenants in the Building.
Furthermore, as long as Tenant is proceeding diligently and in good faith to
obtain alternative electric service, Landlord shall not discontinue electric
service to the Demised Premises until such time as Tenant is receiving
alternative electric. To the extent the Building's risers, equipment and other
facilities are necessary and available for Tenant's use, Landlord shall make
same available to Tenant.
[FLOOR PLAN]
[graphic omitted]
<PAGE>
ADDITIONAL CLAUSES attached to and forming a part of Lease dated March 11, 1999
between PENNBUS REALTIES, INC., Landlord, c/o OLMSTEAD PROPERTIES, INC., Suite
2400, 575 Eighth Avenue, New York, NY 10018 and FOREMAN INTERACTIVE CORP.,
Tenant.
41. BASIC PROVISIONS AND DEFINITIONS: This Article is an integral part of this
Lease and all of the terms hereof are incorporated into this Lease in all
respects, the following terms, whenever used in this Lease, shall have the
meanings set forth in this Article, and only such meanings unless expressly
contradicted, limited or expanded elsewhere in this Lease.
(a) RENTAL: The payment reserved under this Lease for the term hereof shall
be and consist of the aggregate of:
(i) Minimum Rent, which shall be $160,000.00 per annum ($13,333.33 per
month) from March 15, 1999 to and including September 30, 2000; $164,800.00 per
annum ($13,733.33 per month) from October 1, 2000 to and including September 30,
2001; $169,744.00 per annum ($14,145.33 per month) from October 1, 2001 to and
including September 30, 2002; $174,836.32 per annum ($14,569.69 per month) from
October 1, 2002 to and including September 30, 2003; $180,081.41 per annum
($15,006.78 per month) from October 1, 2003 to and including September 30,
2004; $195,483.85 per annum ($16,290.32 per month) from October 1, 2004 to and
including September 30, 2005; $201,348.37 per annum ($16,779.03 per month) from
October 1, 2005 to and including September 30, 2006; $207,388.82 per annum
($17,282.40 per month) from October 1, 2006 to and including September 30, 2007;
$213,610.48 per annum ($17,800.87 per month) from October 1, 2007 to and
including September 30, 2008; and $22,018.80 per annum ($18,334.90 per month)
from October 1, 2008 to and including September 30, 2009.
(ii) Additional Rent consisting of all such other sums of money shall
become due from and payable by Tenant to Landlord hereunder (for default in
payment of which Landlord shall have the same remedies as a default in payment
of Minimum Rent).
(b) BASE TAX shall mean Taxes, as finally determined, for the fiscal period
of July 1, 1999 through June 30, 2000.
TENANT'S SHARE shall be 5.00%. The Tenant's Share shall be adjusted
proportionately in accordance with an increase or decrease in the gross leasable
area of the Building resulting from casualty or construction.
(c) INTENTIONALLY OMITTED.
(d) INTENTIONALLY OMITTED.
(e) INTENTIONALLY OMITTED.
(g) BROKER shall mean Julien J. Studley, Inc.
(h) USE shall mean General Offices.
42. AS-IS POSSESSION: Tenant acknowledges that neither Landlord, nor any agent
of Landlord, has made any representations or promises with regard to the Demised
Premises for the term herein demised except as may otherwise be expressly
provided herein. The taking of possession of the Demised Premises by Tenant for
the term herein demised shall be conclusive evidence as against Tenant that
Tenant accepts the same "as-is" and that the Demised Premises were in good and
satisfactory condition at the time such possession was taken. Except for
"Landlord's Work" (if any) as provided in Exhibit "A" annexed hereto Landlord
shall not be obligated to make any repairs, alterations, improvements or
additions to the Demised Premises for Tenant's initial occupancy.
43. USE: (A) Subject to and in accordance with the rules, regulations, laws,
ordinances, statutory limitations and requirements of all governmental
authorities and the fire insurance rating organization and board of fire
underwriters and any similar bodies having jurisdiction thereof, Tenant
covenants and agrees that it shall use the Demised Premises solely for the use
as provided in Article 41(h), but for no other purpose.
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(B) Tenant agrees that Landlord shall have the right to prohibit the
use of the Demised Premises by Tenant for any method of operation Landlord
reasonably deems detrimental to the operation or reputation of the Building and
upon notice from Landlord, Tenant shall forthwith refrain from or discontinue
such activities.
44. TENANT'S INSTALLATIONS: All work necessary or desirable to make the Demised
Premises suitable for Tenant's use and occupancy (other than Landlord's Work)
shall be performed by Tenant at Tenant's own cost and expense (hereinafter
called "Tenant's Work"). Tenant's Work to be performed by Tenant in the Demised
Premises shall be subject to the following conditions:
(A) Tenant shall comply with all of the laws, orders, rules and
regulations of all governmental authorities, and of the fire insurance rating
organization having jurisdiction thereof, and the local board of fire
underwriters, or any similar body, and Tenant shall have procured and paid for,
so far as the same may be required, all governmental permits and authorizations;
(B) Prior to commencing Tenant's Work, all plans and specifications
therefor shall be submitted to Landlord for Landlord's prior written approval.
Except for Tenant's Work in connection with its initial occupancy of the Demised
Premises, if, in connection with determining whether or not to approve Tenant's
plans and specifications Landlord incurs architectural, engineering or other
professional fees, Tenant shall pay such reasonable fees as additional rent
within ten days of submission of such bills to Tenant;
(C) Prior to commencing Tenant's Work, Tenant shall at its own cost
and expense deliver to Landlord an endorsement of Tenant's and Tenant's
contractor's policy of commercial general liability insurance referred to in
Article 52 of this Lease, covering the risk during the course of performance of
Tenant's Work, together with proof of payment of such endorsement, which policy
as endorsed shall protect Landlord and its managing agent in the same amounts
against any claims or liability arising out of Tenant's Work, and Tenant or
Tenant's contractors shall obtain workers' compensation insurance to cover all
persons engaged in Tenant's Work and liability insurance covering Tenant's Work
in the Demised Premises in the amounts of $1,000,000 in respect of property
damage and $1,000,000 in respect of any one person, not less than $2,000,000 in
respect of any one occurrence, and a certificate thereof shall be furnished to
the Landlord before commencement of any work by any contractor, subcontractor,
their agents, servants or employees. Tenant's contractor shall name Landlord,
its managing agent and any other party as Landlord may request as additional
insureds under said insurance policies;
(D) All of Tenant's Work shall be done in such a manner so as not to
materially interfere with, delay, or impose any additional expense upon Landlord
in the maintenance of the Building. In no event shall Landlord be required to
consent to any Tenant's Work which would physically affect any part of the
Building outside of the Demised Premises or would, in Landlord's sole judgment,
affect the proper functioning of any of the mechanical, electrical, sanitary or
other systems of the Building. Anything contained herein to the contrary
notwithstanding, Landlord shall not unreasonably withhold its consent to:
Tenant's installation of duct work for its air conditioning; the installation of
bathrooms and a kitchen in the places indicated on the plan annexed hereto using
existing roughing; distribution of electricity from the submeter throughout the
Demised Premises in compliance with law.
(E) Subject to the provisions of Articles 51 and 9 hereof, Tenant
shall make all repairs to the Demised Premises necessitated by Tenant's Work
permitted hereunder, and shall keep and maintain in good order and condition all
of the installations in connection with Tenant's Work, and shall make all
necessary replacements thereto.
(F) Prior to commencing Tenant's Work, Tenant shall deliver to
Landlord the names and addresses of Tenant's general contractor. Tenant, at its
sole cost and expense, shall procure written waivers of the right to file
mechanic's liens executed by its general contractor
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simultaneously with payment for the labor performed or materials furnished has
been made to its general contractor. Tenant shall also procure written releases
of lien executed by its general contractors simultaneously upon payment in full
for the labor performed or materials furnished by its general contractor. Any
failure or refusal on the part of Tenant to comply with the foregoing shall be
deemed a default under this Lease.
45. ELECTRICITY: Electricity shall be supplied to Tenant in accordance with the
provisions of paragraph A of Rider A annexed hereto.
46. TAX ESCALATION: (A) As used in this Lease:
(i) "Taxes" shall mean the real estate taxes and assessments
and special assessments imposed upon the Building and/or the land on which the
Building is situated (the "Land") by any governmental bodies or authorities. If
at any time during the term of this Lease the methods of taxation prevailing at
the commencement of the term hereof shall be altered so that in lieu of, or as
an addition to or as a substitute for the whole or any part of the taxes,
assessments, levies, impositions or charges now levied, assessed or imposed on
real estate and the improvements thereof, there shall be levied, assessed and
imposed (a) a tax, assessment, levy or otherwise on the rents received
therefrom, or (b) a license fee measured by the rent payable by Tenant to
Landlord, or (c) any other such additional or substitute tax, assessment, levy,
imposition or charge, then all such taxes, assessments, levies, impositions or
charges or the part thereof so measured or based shall be deemed to be included
within the term "Taxes" for the purpose hereof.
(ii) "Tax Year" shall mean the fiscal year commencing on
July 1 and ending on June 30 (or such other period as hereafter may be duly
adopted by the City of New York as its fiscal year for real estate tax
purposes).
(B) (i) If the Taxes for any Tax Year during the term hereof
shall be more than the Base Tax, Tenant shall pay as Additional Rent for such
Tax Year an amount equal to Tenant's Share of the amount by which the Taxes for
such Tax Year are greater than the Base Tax (the amount payable by Tenant is
hereinafter called the "Tax Payment"). The Tax Payment shall be prorated, if
necessary, to correspond with that portion of a Tax Year occurring within the
term of this Lease. The Tax Payment shall be payable by Tenant within thirty
(30) days after receipt of a demand from Landlord therefor. In addition to and
supplementing the foregoing, Landlord may estimate the amount of the Tax Payment
which will be due from Tenant to Landlord and notify Tenant of the amount so
estimated. Thereupon, Tenant shall pay the amount so estimated to Landlord, in
equal monthly installments, in advance, on the first day of each calendar month
during the applicable Tax Year. Within sixty (60) days after the end of each Tax
Year, Landlord shall deliver a copy to Tenant of all tax bills for such Tax
Year, together with a statement showing the amount of Tenant's Tax Payment. If
the amount of such monthly payments paid by Tenant exceeds the actual amount
due, the overpayment shall be credited on Tenant's next succeeding payment or,
during the last year of the term, Landlord will refund such excess to Tenant
within thirty (30) days following the expiration of the term, if Tenant is not
in default hereunder. If the amount of such monthly payments paid by Tenant
shall be less than the actual amount due, then Tenant shall pay to Landlord the
difference between the amount paid by Tenant and the actual amount due within
thirty (30) days after demand from Landlord. Landlord shall pay Taxes to the
Taxing Authority as same become due.
(ii) In the event the Base Tax is reduced as a result of an
appropriate proceeding, Landlord shall have the right to adjust the amount of
Tax Payment due from Tenant for any Tax Year in which Tenant is or was obligated
to pay a Tax Payment hereunder, and Tenant agrees to pay the amount of said
adjustment on the next rental installments day immediately following receipt of
a rent statement from Landlord setting forth the amount of said adjustment.
(C) Only Landlord shall be eligible to institute tax reduction or
other proceedings to reduce the assessed valuation of the Land and the Building.
Should Landlord be successful in any such reduction proceedings and obtain a
rebate for periods during which Tenant has paid its share of increases, Landlord
shall after deducting its reasonable expenses, including attorneys' fees and
disbursements in connection therewith, return Tenant's Share of such rebate to
Tenant. Tenant's right to the return of Tenant's Share of such rebate shall
survive the expiration or sooner termination of the Lease term for a period of
two (2) years.
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(D) With respect to any period at the expiration of the term of
this Lease which shall constitute a partial Tax Year, Landlord's statement shall
apportion the amount of the Additional Rent due hereunder. The obligation of
Tenant in respect to such Additional Rent applicable for the last year of the
term of this Lease or part thereof shall survive the expiration or sooner
termination of the term of this Lease for a period of two years.
(E) Notwithstanding the fact that the increase in rent is
measured by an increase in Taxes, such increase is Additional Rent and shall be
paid by Tenant as provided herein regardless of the fact that Tenant may be
exempt, in whole or in part, from the payment of any taxes by reason of Tenant's
diplomatic or other tax-exempt status or for any other reason whatsoever.
(F) In no event will Taxes include income, franchise, estate
inheritance transfer or gains taxes.
47. INTENTIONALLY OMITTED.
48. INTENTIONALLY OMITTED.
49. NON-WAIVER AND SURVIVAL OF ADDITIONAL RENT OBLIGATIONS: Landlord's failure
during the Lease term to prepare and deliver any of the tax bills, statements,
notices or bills set forth in Article 46, 47 and 48 or Landlord's failure to
make a demand shall not in any way cause Landlord to forfeit or surrender its
rights to collect any of the foregoing items of Additional Rent which may have
become due during the term of this Lease. Tenant's liability for the amounts due
under Article 46, 47 and 48 shall survive the expiration or sooner termination
of the Lease term for a period of two (2) years.
50. ADDENDUM TO ARTICLE 6 (COMPLIANCE WITH LAWS): Supplementing the provisions
of Article 6 hereof, Tenant shall give prompt notice to Landlord of any notice
it receives of the violation of any law or requirement of any public authority
with respect to the Demised Premises or the use or occupation thereof. Tenant
shall promptly comply with all present and future laws, orders and regulations
of all state, federal, municipal and local governments, departments, commissions
and boards or any direction of any public officer pursuant to law, and all
orders, rules and regulations of the New York Board of Fire Underwriters or any
similar body which shall impose any violation, order or duty upon Landlord or
Tenant with respect to the Demised Premises (in which event Tenant shall effect
such compliance at its sole cost and expense) or the Building arising out of
Tenant's use or manner of use of the Demised Premises, or Tenant's construction,
installation or alteration therein (in which event, notwithstanding anything
herein to the contrary, Landlord shall effect such compliance but Tenant shall
promptly pay to Landlord Tenant's Share of the cost thereof).
51. WAIVER OF SUBROGATION: Each party hereby releases the other party (which
term as used in this Article includes the shareholders, principals, partners,
members, assignees, sublessees, employees, agents, officers and directors of the
other party) from all liability, whether for negligence or otherwise, in
connection with loss covered by any fire and/or extended coverage insurance
policies, which the releasor carries with respect to the Demised Premises or
Building, or any interest or property therein or thereon (whether or not such
insurance is required to be carried under this Lease), but only to the extent
that such loss is collected under said fire and/or extended coverage insurance
policies. Such release is also conditioned upon the inclusion in the policy or
policies of a provision whereby any such release shall not adversely affect
said policies, or prejudice any right of the releasor to recover thereunder.
Each party agrees that its insurance policies aforesaid will include such a
provision so long as the same shall be obtainable without extra cost, or if
extra cost shall be charged therefor, so long as the party for whose benefit the
clause or endorsement is obtained shall pay such extra cost. If extra cost shall
be chargeable therefor, each party shall advise the other of the extra cost, and
the other party at its election may pay the same, but shall not be obligated to
do so.
52. INDEMNITY-LIABILITY INSURANCE: (A) Subject to the provisions of Article 51
hereof, Tenant covenants and agrees to indemnify and save Landlord, its
managing agent and its
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principals, disclosed or undisclosed, harmless from and against any and all
claims, losses, damages or expenses (including reasonable attorneys' fees) or
other liability arising during the term of this Lease out of or in connection
with (i) the construction, possession, use, occupancy, management, repair,
maintenance or control by Tenant, its agents, employees, and contractors of the
Demised Premises or any part thereof or any other part of the Building used by
Tenant, or (ii) any act or omission of Tenant or Tenant's agents, employees,
contractors, concessionaires, licensees, invitees, subtenants or assignees, or
(iii) any default, breach, violation or nonperformance of this Lease or any
provision hereof by Tenant, or (iv) any injury to person or property or loss of
life sustained in or about the Demised Premises or any part thereof, except such
claims found to be the result of the negligence or willful acts of Landlord,
its agents, employees or contractors. Tenant shall, at its own cost and expense,
defend any and all actions, suits and proceedings which may be brought against
Landlord in connection with any such claims, and Tenant shall pay, satisfy and
discharge any and all judgments, orders and decrees which may be made or entered
against Landlord, its managing agent, its principals, disclosed or undisclosed,
with respect to, or in connection with, any of the foregoing the comprehensive
general liability coverage maintained by Tenant pursuant to this Lease shall
specifically insure the contractual obligations of Tenant as set forth in this
Article and/or as provided in this Lease if such coverage is available at
commercially reasonable rates.
(B) Tenant covenants to provide on or before the Commencement Date
of the term hereof and to keep in force during the term hereof for the benefit
of Landlord, its managing agent and Tenant a comprehensive policy of liability
insurance protecting Landlord, its managing agent and Tenant (and any other
parties as Landlord shall designate to be added as insured parties) against
liability occasioned by accident on or about the Demised Premises or any
appurtenances thereto. Such policy is to be written by good and solvent
insurance companies licensed to do business in the State of New York and
reasonably satisfactory to Landlord. The policy shall be a comprehensive
General Liability type and extended to include personal injury liability and
fire legal liability with the amounts of liability thereunder not less than
$1,000,000.00 in respect of any one person, not less than $2,000,000.00 in
respect of any one accident, and not less than $500,000.00 in respect of
property damages. In addition, Tenant will, at Tenant's expense, maintain (i)
workers' compensation insurance within statutory limits covering all employees
of Tenant with respect to whom death or bodily injury claims could be asserted
against Landlord or Tenant, and Tenant shall have its contractors maintain such
coverage with respect to the employee of contractor; (ii) fire and extended
coverage, vandalism, malicious mischief and special extended coverage insurance
in an amount adequate to cover the cost of replacement of all fixtures and
decorations and Tenant's improvements in the Demised Premises; and (iii) rent
insurance covering those risks referred to in (ii) above in an amount equal to
all Minimum Rent and Additional Rent payable under this Lease for a period of
twelve (12) months commencing with the date of loss. Prior to the time such
insurance is first required to be carried by Tenant, and thereafter at least
thirty (30) days prior to the expiration of any such policy, Tenant agrees to
deliver to Landlord either a duplicate or original of the aforesaid policy or a
certificate evidencing such insurance, provided said certificate contains an
endorsement that such insurance may not be canceled or modified except upon ten
(10) days' written notice to Landlord, together with evidence of payment for the
policy. Tenant's failure to provide and keep in force the aforementioned
insurance shall be regarded as a material default hereunder, entitling Landlord
to exercise any or all of the remedies as provided in this Lease in the event of
Tenant's default. The minimum limits of insurance described above shall be
subject to increase at any time, and from time to time, after the third
anniversary of the commencement date, and no more often than once every two
years if Landlord shall reasonably deem same necessary for adequate protection.
Within thirty (30) days after demand therefor by Landlord, Tenant shall furnish
Landlord with evidence of compliance with such demand.
53. TENANT'S CERTIFICATE: Each party shall, without charge at any time and from
time to time, within ten (10) days after request by the other party, certify by
written instrument, duly executed, acknowledged and delivered, to any mortgagee,
assignee of any mortgage or purchaser, or any proposed mortgagee, assignee of
any mortgage or purchaser, assignee, sublessee or any other person, firm or
corporation specified by the requesting party:
(A) that this Lease is unmodified and in full force and effect
(or, if there has been modification, that the same is in full force and effect
as modified and stating the modifications);
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(B) whether or not there are then existing any setoffs or defenses
against the enforcement of any of the agreements, terms, covenants or conditions
hereof upon the part of Tenant to be performed or complied with (and, if so,
specifying the same); and
(C) the dates, if any, to which the rental and other charges hereunder
have been paid in advance; and
(D) Such other information as may reasonably be requested.
54. EXCULPATORY CLAUSE: If Landlord shall be an individual, joint venture,
tenancy-in-common, co-partnership, unincorporated association, or other
unincorporated aggregate of individuals and/or entities, or a corporation,
Tenant shall look only to such Landlord's estate and property in the Building
and, where expressly so provided in this Lease, to offset against the rents
payable under this Lease, for the satisfaction of Tenant's remedies for the
collection of a judgment (or other judicial process) requiring the payment of
money by Landlord in the event of any default by Landlord hereunder, and no
other property or assets of such Landlord or any of the principals of Landlord,
disclosed or undisclosed, shall be subject to levy, execution or other
enforcement procedure for the satisfaction of Tenant's remedies under or with
respect to this Lease, the relationship of Landlord and Tenant hereunder or
Tenant's use or occupancy of the Demised Premises.
55. BROKER: Landlord and Tenant each covenant, warrant and represent to the
other that there was no broker instrumental in consummating this Lease and no
conversations or negotiations were had with any broker other than broker
concerning the renting of the Demises Premises. Tenant agrees to indemnify,
defend and hold and save Landlord harmless against any and all liability from
any claims of any Broker other than Broker who claims to have dealt with Tenant
(including, without limitation, the cost of counsel fees in connection with the
defense of any such claims in connection with the renting of the Demised
Premises). Based upon such representation, Landlord has agreed to enter into
this leasing agreement with Tenant and shall be responsible for payment of any
commission due Broker pursuant to a separate agreement.
56. CONFLICT OF TERMS: In the event any term, covenant, condition or agreement
contained in this rider to the Lease shall conflict or be inconsistent with any
term, covenant, condition or agreement contained in the printed portion of this
Lease, then the parties agree that the rider provision shall prevail.
57. TENANT'S REMEDIES: With respect to any provision of this Lease which
provides, in effect, that Landlord shall not unreasonably withhold or
unreasonably delay any consent or any approval, Tenant in no event shall be
entitled to make, nor shall Tenant make, any claim, and Tenant hereby waives any
claim, for money damages; nor shall Tenant claim any money damages by way of
setoff, counterclaim or defense, based upon any claim or assertion by Tenant
that Landlord has unreasonably withheld or unreasonably delayed any consent or
approval; but Tenant's sole remedy shall be an action or proceeding to enforce
any such provision, or for specific performance, injunction or declaratory
judgment.
58. TENANT'S OPERATING OBLIGATIONS: Tenant covenants and agrees that during the
term of this Lease:
(A) If any governmental license or permit shall be required for the
proper and lawful conduct of Tenant's business in the Demised Premises, or any
part thereof, and if failure to secure such license or permit would in any way
affect Landlord, then Tenant, at its sole cost and expense, shall duly procure
and thereafter maintain such license or permit and submit the same to inspection
by Landlord. Tenant shall at all times comply with the terms and conditions of
each such license or permit.
(B) Tenant shall maintain any sanitary lines within the Demised
Premises and shall not misuse plumbing facilities or dispose of any foreign
substance therein. Tenant shall not permit any food, waste, or other foreign
substances to be thrown or drawn into the pipes. Tenant shall maintain the
plumbing that it installs in good order, repair and condition, and repair any
damage resulting from any violation of this Paragraph. Tenant shall make any
repairs to the other plumbing in the Building, if damage results from Tenant's
improper use of such plumbing.
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(C) To the extent such service is reasonably necessary, Tenant will
retain a licensed professional exterminating service which will service the
Demised Premises throughout the term so as to keep the Demised Premises free of
vermin.
(D) If required by law, or the Fire Insurance Rating Organization,
Tenant shall install chemical extinguishing devices approved by the Fire
Insurance Rating Organization and shall keep such devices under service as
required by such organization. If gas is used in the Demised Premises, Tenant
shall install gas cutoff devices (manual and automatic).
(E) Tenant will not encumber or obstruct or permit to be encumbered or
obstructed any hallway, service elevator, stairway or passageway in the
Building.
(F) Tenant covenants and agrees that throughout the term, it shall not
suffer, allow or permit any offensive or obnoxious vibration, noise, odor or
other undesirable effect to emanate from the Demised Premises, or any machine or
other installation therein, or otherwise suffer, allow or permit any such
obnoxious vibration, noise, odor or other undesirable effect to constitute a
nuisance or otherwise interfere with the safety, comfort or convenience of
Landlord, or other tenants, occupants, customers, agents, or invitees or any
others lawfully in or upon the Building and upon Landlord's notice, Tenant shall
within five (5) days thereof remove or control the same, and if any such
condition is not so remedied, then Landlord may, at its discretion, either; (i)
cure such condition and add any cost and expense incurred by Landlord therefor
to the next installment of rent due under this Lease, and Tenant shall then pay
said amount, as Additional Rent hereunder; or (ii) treat such failure on the
part of Tenant to remedy such condition as a material default of this Lease on
the part of Tenant hereunder, entitling Landlord to any of its remedies pursuant
to the terms of this Lease.
(G) Tenant shall not subject any fixtures or equipment in or on the
Demised Premises which are affixed to the realty, to any mortgage, liens,
conditions, sales agreements, security interests or encumbrances.
(H) Tenant shall not perform any act or carry on any practice which may
damage, mar or deface the Demised Premises or any other part of the Building.
(I) Tenant shall not permit window cleaning or other exterior
maintenance and janitorial services in and for the Demised Premises to be
performed except by such person(s) as shall be approved by Landlord, and except
during reasonable hours designated for such purposes by Landlord.
(J) Tenant shall not install, operate or maintain in the Demised
Premises any electrical equipment which will overload the electrical system
therein, or any part thereof, beyond its reasonable capacity for proper and safe
operation, as determined by Landlord, in light of the overall system and
requirements therefor in the Building, or which does not bear underwriters'
approval.
(K) Tenant shall not use or occupy the Demised Premises for any purpose
calculated to injure the reputation of the Demised Premises, and/or the Building
or of the neighborhood in which the same are located or to, presently or in the
future, impair the value of the Demised Premises and/or the Building.
(L) Tenant shall not permit any business to be operated in or from the
Demised Premises by any concessionaire or licensee without the prior written
consent of Landlord in each instance.
(M) Except for a microwave oven and coffeemaker, there shall be no
cooking or food preparation whatsoever in the Demised Premises.
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59. LABOR REGULATIONS: Tenant covenants and agrees that prior to and throughout
the demised term in connection with Tenant's Work or any other installation,
construction or improvements in or the to the Demised Premises, and the
maintenance and repair thereof, it shall not take any action which would violate
Landlord's union contract, if any, affecting the Building, nor create any work
stoppage, picketing, labor disruption or dispute, or any interference with the
business of Landlord or any other tenant or occupant in the Building or with the
rights and privileges of any person(s) lawfully in the Building, nor cause any
impairment or reduction of the good name of the Building. Any default by Tenant
under this Article shall be deemed a material default entitling Landlord to
exercise any or all of the remedies as provided in this Lease subject to the
notice provisions provided in Article 17 hereof.
60. INTENTIONALLY OMITTED.
61. ADDENDUM TO ARTICLE 22 (END OF TERM): If Tenant shall default in
surrendering the Demised Premises upon the expiration or termination of the
term, Tenant's occupancy subsequent to such expiration or termination, whether
or not with the consent or acquiescence of Landlord, shall be deemed to be that
of a tenancy at will and in no event from month to month or from year to year,
and it shall be subject to all the terms, covenants and conditions of this Lease
applicable thereto, except the Minimum Rent shall be twice the amount payable in
the last year of the term, and no extension or renewal of this Lease shall be
deemed to have occurred by such holding over. In the event Landlord shall
commence proceedings to dispossess Tenant by reason of Tenant's default, Tenant
shall pay, in addition to costs and disbursements, minimum legal fees of $500.00
for each proceeding as Additional Rent hereunder.
62. ADDENDUM TO ARTICLE 18 (LANDLORD'S REMEDIES): Should Tenant fail to pay
within five (5) days after same becomes due any installment of Minimum Rent,
Additional Rent, or any other sum payable to Landlord under the terms of this
Lease, then interest shall accrue from and after the date on which any such sum
shall be due and payable, and such interest, together with a late charge of five
cents for each dollar overdue to cover the extra expense involved in handling
such delinquency shall be paid by Tenant to Landlord at the time of payment of
the delinquent sum. If Tenant shall issue a check to Landlord which is
returnable unpaid for any reason, Tenant shall pay Landlord an additional charge
of $100.00 for Landlord's expenses in connection therewith. If Tenant shall be
late in making any payment due under this Lease more than three (3) times in any
Lease Year, Landlord shall be entitled to demand from Tenant and Tenant agrees
to tender to Landlord additional security in the amount of one month's current
Minimum Rent to be held in accordance with the terms of Article 32 hereof.
63. INTEREST: Whenever this Lease refers to "interest" (except in relation to
Tenant's security deposit), same shall be computed at a rate equal to the "Prime
Rate" (as hereinafter defined) plus three (3%) percent except where otherwise in
this Lease a different rate is specifically set forth. If, however, payment of
interest at any such rate by Tenant (or by the tenant then in possession having
succeeded to Tenant's interest in accordance with the terms of this Lease)
should be unlawful, i.e., violative of the usury statutes or otherwise, then
"interest" shall, as against such party, be computed at the maximum lawful rate
payable by such party. "Prime Rate" shall mean the rate being reported at the
time in question by The Wall Street Journal.
64. ARBITRATION: Either party may request arbitration of any matter in dispute
wherein arbitration is expressly provided in this Lease as the appropriate
remedy. All such controversies shall be settled by decision of the Chairman of
the Real Estate Board of New York, Inc. whose decision shall be final and
conclusive upon the parties hereto and a judgment may be obtained thereon in any
court having jurisdiction in accordance with the procedural rules then obtaining
of the Real Estate Board of New York, Inc. or any successor thereto. The
arbitrator or arbitrators may grant injunctions or other relief in such
controversies or claims. The parties agree that the unsuccessful party shall pay
the entire cost and expense of such arbitration, and each shall separately pay
for its own attorneys' fees and expenses.
65. ENTIRE AGREEMENT: No earlier statement or prior written matter shall have
any force or effect. Tenant agrees that it is not relying on any representations
or agreements other than those contained in this Lease. This agreement shall not
be modified or canceled except by writing subscribed by all of the parties
hereto.
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66. SAVINGS PROVISION: If any provision of this Lease or its application to any
situation shall be invalid or unenforceable to any extent, the remainder of this
Lease, or the application thereof to situations other than that as to which it
is invalid or unenforceable shall not be affected thereby, and every provision
of this Lease shall be valid and enforceable to the fullest extent permitted by
law.
67. LEASE NOT BINDING UNLESS EXECUTED: Submission by Landlord of the within
Lease for execution by Tenant shall confer no rights nor impose any obligations
on either party unless and until both Landlord and Tenant shall have executed
this Lease and duplicate originals thereof shall have been delivered to the
respective parties.
68. MECHANIC'S LIENS: (A) Notwithstanding anything to the contrary contained in
this Lease, Tenant, its successors and assigns, warrant and guarantee to
Landlord, its successors and assigns, that if any mechanic's lien shall be filed
against the Building of which the Demised Premises forms a part, for work
claimed to have been done for, or materials claimed to have been furnished to,
Tenant (i) the same shall be discharged by Tenant, by either payment, by bond or
otherwise, at the sole cost and expense of Tenant, within thirty (30) days of
the giving of notice thereof by Landlord, (ii) either a release or a
satisfaction of lien, as the case may be or other appropriate evidence of
bonding, shall be filed with the County Clerk of the county in which the
Building is situated within such thirty (30) day period, and (iii) a copy of
such release or satisfaction, as the case may be, certified to by such County
Clerk shall be delivered to Landlord within three (3) days after such filing.
(B) In the event such mechanic's lien is not discharged timely, as
aforesaid, Landlord may discharge same for the account of and at the expense of
Tenant by payment, bonding or otherwise, without investigation as to the
validity thereof or of any offsets or defenses thereto, and Tenant shall
promptly reimburse Landlord, as Additional Rent, for all costs, disbursements,
fees and expenses, including, without limitation, legal fees, incurred in
connection with so discharging said mechanic's lien, together with interest
thereon from the time or times of payment until reimbursement by Tenant.
(C) In the event such mechanic's lien is not discharged timely, as
aforesaid, Landlord, in addition to all other rights granted to Landlord in this
Lease and without limitation, may institute a dispossess summary proceeding
based upon such failure to discharge any such lien. In the event Tenant fails to
deliver to Landlord the certified copy of the release or satisfaction required
hereunder within the time period provided for the delivery thereof to Landlord,
Landlord shall have the right to assume that such mechanic's lien has not been
discharged and Landlord shall have all of the rights and remedies provided for
herein based upon Tenant's failure to discharge any such lien.
(D) It is further expressly understood and agreed between the parties
hereto that Landlord may expend all or a portion of the security deposit made by
Tenant hereunder toward discharging any such mechanic's lien and the cost,
expenses, fees and disbursements, including, without limitation, legal fees, in
connection therewith. Upon notification by Landlord of the application of all or
a portion of the security deposited by Tenant, Tenant shall, within ten (10)
days after receipt of said notice, restore the security deposit to such amount
held by Landlord prior to Landlord's application thereof. Tenant's failure to do
so within said ten (10) day period shall constitute a material default under
this Lease.
69. LANDLORD'S CONSENT: If Tenant requests Landlord's consent or approval to
alterations, assignment, subletting or any other matter or thing requiring
Landlord's consent or approval under this Lease (except in connection with the
initial Tenant's Work to prepare the Demised Premises for Tenant's occupancy),
and if in connection with such request Landlord seeks the advice of its
attorneys, architect and/or engineer, then Landlord, as a condition precedent to
granting its consent or approval, may require (in addition to any other
requirements of Landlord in connection with such request) that Tenant pay the
reasonable fee of Landlord's attorneys, architect and/or engineer in connection
with the consideration of such request and/or the preparation of any documents
pertaining thereto.
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70. ENTRANCE DOORS: Tenant shall, throughout the term of this Lease, maintain,
repair, service and replace when necessary, all doors leading into and out of
the Demised Premises and all hardware appurtenant thereto, including, but not
limited to, locks, hinges, silencers, door stops, door jams, door closets,
latchsets, flashbulbs, door frames, thresholds and door knobs. Landlord shall
have no liability or obligation whatsoever regarding the maintenance, repair,
service and replacement of the foregoing.
71. FINANCING REQUIREMENTS: If, in connection with obtaining financing or
refinancing for the Building of which the Demised Premises form a part, a
banking, insurance or other institutional lender shall request reasonable
modifications to this Lease as a condition to such financing or refinancing,
Tenant shall not unreasonably withhold, delay or defer its consent thereto;
provided, however, that such modifications do not increase the obligations of
Tenant hereunder (except, perhaps, to the extent that Tenant may be required to
give notices of any defaults by Landlord to such lender and/or permit the curing
of such defaults by such lender together with the granting of such additional
time for such curing as may be required for such lender to get possession of the
Building) or materially adversely affect the Leasehold interest hereby created.
In no event shall a requirement that the consent of any such lender be given for
any modification of this Lease or subject to the provisions of this Lease for
any assignment or sublease (as long as the standards for the consent of such
lender to an assignment or sublease are the same as the standards for Landlord's
consent thereto), be deemed to materially adversely affect the Leasehold
interest hereby created.
72. WAIVER OF COUNTERCLAIM: Except for a so-called "compulsory" counterclaim,
Tenant hereby waives the right to interpose any offset or counterclaim in any
action or proceeding brought by the Landlord against the Tenant, or to enjoin
any such action or proceeding brought by the Landlord against the Tenant and the
Tenant further waives the right to consolidate with, or try together in any such
action or proceeding so instituted by the Landlord, any action or proceeding
then pending or thereafter instituted by the Tenant against the Landlord.
73. PERMITS AND FEES: Tenant covenants and agrees that, upon request of
Landlord, it shall, within ten (10) days from the date of the request, furnish
Landlord with an up-to-date copy of any permit or license required by any
authority having jurisdiction therein for Tenant to conduct business at the
Demised Premises.
74. FORCE MAJEURE: Except for the payment of Minimum Rent and Additional Rent,
neither party shall be deemed in default in the performance of any obligation or
undertaking provided herein in the event and/or so long as the performance of
any such obligation is prevented or delayed, retarded or hindered by act of God,
fire, earthquake, floods, explosion, action of the elements, war, hostilities,
invasion, insurrection, riot, mob violence, sabotage, inability to procure or
general shortage of labor equipment, facilities, materials or supplies in the
open market, failure of transportation, strikes, lockouts, action of labor
unions, condemnation, requisition, laws, orders of government or civil or
military or naval authorities, act or failure to act of either party which
causes either party to be delayed in the performance of any such obligation or
undertaking, or any other cause, whether similar or dissimilar to the foregoing,
not within the reasonable control of the performing party.
75. ATTORNMENT: At the option of Landlord or any successor landlord or holder of
any mortgage affecting the Demised Premises, Tenant agrees that neither the
cancellation nor termination of any ground or underlying Lease to which this
Lease is now or may hereafter become subject or subordinate, nor any foreclosure
of a mortgage affecting the Demised Premises, nor the institution of any suit,
actions, summary or other proceeding against Landlord or any successor landlord,
or any foreclosure proceedings brought by the holder of any such mortgage to
recover possession of the Demised Premises, shall by operation of law or
otherwise result in the cancellation or termination of this Lease or the
obligations of Tenant hereunder, and upon the request of Landlord, successor
landlord or mortgagee, Tenant covenants and agrees to attorn to the Landlord or
to any successor the Landlord's interest in the Demised Premises, or to the
mortgagee or to the purchaser of the mortgaged premises in foreclosure.
76. SORTING AND SEPARATION OF REFUSE AND TRASH:
Tenant covenants and agrees, at its sole cost and expense, to comply with
all present and future laws, orders and regulations of all state, federal,
municipal and local governments, departments, commissions and boards regarding
the collection, sorting, separation and recycling
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of waste products, garbage, refuse and trash. Tenant shall sort and separate
such waste products, garbage, refuse and trash into such categories as provided
by law. Each separately sorted category of waste products, garbage and trash
shall be placed in separate receptacles reasonably approved by Landlord. Such
separate receptacles may at Landlord's option, be removed from the Demised
Premises in accordance with a collection schedule prescribed by law. Landlord
reserves the right to refuse to collect or accept from Tenant any waste
products, garbage, refuse or trash which is not separated and sorted as required
by law and to require Tenant to arrange for such collection, at Tenant's sole
cost and expense utilizing a contractor satisfactory to Landlord. Tenant shall
pay all costs, expenses, fines, penalties or damages which may be imposed on
Landlord or Tenant by reason of Tenant's failure to comply with the provisions
of this article, and, at Tenant's sole cost and expense, shall indemnify, defend
and hold Landlord harmless (including legal fees and expenses) from and against
any actions, claims and suits arising from such non-compliance, utilizing
counsel reasonably satisfactory to Landlord.
77. ASSIGNMENT, SUBLETTING, MORTGAGING. A. Tenant will not, by operation of law
or otherwise, assign, mortgage or encumber this Lease, nor sublet or permit the
Demised Premises or any part thereof to be used by others without Landlord's
consent. The consent by Landlord to any assignment or subletting shall not in
any manner be construed to relieve Tenant from obtaining Landlord's express
written consent to any other or further assignment or subletting nor shall any
such consent by Landlord serve to relieve or release Tenant from its obligations
to fully and faithfully observe and perform all of the terms, covenants and
conditions of this Lease on Tenant's part to be observed and performed.
B. Upon obtaining a proposed assignee or sublessee, upon terms satisfactory
to Tenant, Tenant shall submit to Landlord in writing (w) the name of the
proposed assignee or subtenant; (x) the terms and conditions of the proposed
assignment or subletting; (y) the nature and character of the business and
credit of the proposed assignee or subtenant; (z) current financial statements,
banking references and any other references and information reasonably requested
by the Landlord. Landlord's consent to any such proposed assignment or
subletting shall not be unreasonably withheld or unduly delayed, provided,
however, that Landlord may withhold consent thereto if in the exercise of its
sole reasonable judgment it determines that:
(i) The financial condition and general reputation of the proposed
assignee or subtenant are not consistent with the extent of the obligation
undertaken by the proposed assignment or sublease or with the character and
reputation of the Building.
(ii) The proposed use of the Demised Premises is not appropriate for
the Building or in keeping with the character of the existing tenancies or
permitted by the Lease or with the dignity and character of the Building (but
the foregoing shall not be deemed to enlarge the purposes for which the Demised
Premises are permitted to be used as set forth in this Lease).
(iii) The nature of the occupancy of the proposed assignee or subtenant
will cause an excessive density of employees or traffic or make excessive
demands on the Building's services or facilities or in any other way will lessen
the dignity or character of the Building.
(iv) The Tenant proposes to assign or sublet to one who, at the time,
is a tenant or occupant of the Building, or a subsidiary, division or affiliate
of any such tenant or occupant of the Building, or to one with whom Landlord or
its agents are actively negotiating for space in the Building, or to one who, at
the time, is a tenant or occupant of premises in any other building then owned
or managed by Landlord or its affiliates.
(v) The Tenant advertises the availability of all or a portion of the
Demised Premises at a rental rate less than the rental rate Landlord is then
asking for other space in the Building.
C. Further, and as a condition of Landlord's consent to any assignment or
subletting:
(i) Tenant at the time of requesting Landlord's consent shall not be in
default under this Lease;
(ii) Each assignee of this Lease shall assume in writing all of the
terms,
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covenants and conditions of this Lease on the part of Tenant hereunder to be
performed and observed from and after the effective date of such assignment;
(iii) An original or duplicate original of the instrument of assignment
and assumption or of the sublease agreement shall be delivered to Landlord
within (5) days following the making thereof;
(iv) Any instrument of sublease shall specifically state that each
sublease is subject to all of the terms, covenants and conditions of this Lease;
(v) Landlord may bill and Tenant shall pay all charges estimated by
Landlord to be due through the date of assignment (without relieving Tenant or
its assignee of the obligation to pay any balance due when the actual charges
are computed);
(vi) Any portion of the Demised Premises to be sublet shall have a
configuration which does not adversely impact on the remainder of the Demised
Premises and has direct access to the public corridor on the floor;
(vii) In the event that this Lease shall be terminated, then, at
Landlord's option sublessee shall attorn to Landlord pursuant to the then
executory terms and conditions of this sublease, except that Landlord shall not
(1) be liable for any previous act or omission of Tenant under such sublease,
(2) be subject to any offset, not expressly provided in such sublease, that
theretofore accrued to such subtenant against Tenant or (3) be bound by any
previous modification of such sublease or by any previous prepayment of more
than one month's fixed rent or any additional rent then due.
If Tenant shall duly comply with all of the foregoing then, as
aforesaid, Landlord shall not unreasonably withhold its consent to such
assignment or subletting.
Notwithstanding anything contained in this Article to the contrary,
Landlord shall not be obligated to entertain or consider any request by Tenant
to assign this Lease, or sublet all or a part of the Demised Premises unless
each request by Tenant is accompanied by a non-refundable fee payable to
Landlord in the amount of Five Hundred ($500.00) Dollars representing
Landlord's administrative costs and expenses in processing each of Tenant's
requests.
D. It is agreed that if Landlord shall consent to such assignment or
subletting, and Tenant thereupon assigns this Lease or sublets all or any
portion of the Demised Premises, then and in that event Tenant shall pay to
Landlord, as Additional Rent, (i) in the event of an assignment an amount equal
to one-half of the amount of all monies received by Tenant in excess of the
Minimum Rent and additional rent payable by Tenant pursuant to this Lease for
the corresponding period of such assignment less one-half of Tenant's reasonable
expenses incurred in connection with such assignment including, but not limited
to, any commercially reasonable brokerage fees, advertising and alteration
costs, and attorney's fees; and (ii) in the event of a subletting one-half of
the amount, if any, by which the Minimum Rent and Additional Rent payable by the
sublessee to Tenant shall exceed the Minimum Rent plus Additional Rent allocable
to that part of the Demised Premises affected by such sublease, pursuant to the
provisions of this Lease plus one-half of the amounts, if any, payable by such
sublessee to Tenant pursuant to any side agreement as consideration (partial or
otherwise) for Tenant making such subletting less one-half of Tenant's
reasonable expenses incurred in connection with such subletting, including but
not limited to, any commercially reasonable brokerage fees, advertising and
alteration costs and attorneys fees. Such Additional Rent payments shall be made
monthly within five (5) days after receipt of the same by Tenant or within five
(5) days after Tenant is credited with the same by the assignee or sublessee. At
the time of submitting the proposed assignment or lease sublease to Landlord,
Tenant shall certify to Landlord in writing or not the assignee or sublessee has
agreed to pay any monies to Tenant in consideration of the making of the
assignment or sublease other than as specified and set forth in such
instruments, and if so Tenant shall certify the amounts and time of payment
thereof in reasonable detail.
E. If this Lease shall be assigned, or if the Demised Premises or any part
thereof be sublet or occupied by any person or persons other than Tenant,
Landlord may, after default by
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Tenant, collect rent from the assignee, subtenant or occupant and apply the net
amount collected (which may be treated by Landlord as rent or as use and
occupancy) to the Minimum Rent and Additional Rent herein reserved but no such
assignment, subletting, occupancy or collection of rent shall be deemed a waiver
of the covenants in this Article, nor shall it be deemed an acceptance of the
assignee, subtenant or occupant as a tenant, nor a release of Tenant from the
full performance by Tenant of all the terms, conditions and covenants of this
Lease.
F. Each permitted assignee shall assume and be deemed to have assumed this
Lease from and after the effective date of such assignment and shall be and
remain liable jointly and severally with Tenant for the payment of the Minimum
Rent and Additional Rent and for the due performance of all the terms,
covenants, conditions and agreements herein contained on Tenant's part to be
performed for the term of this Lease and any renewals and modifications hereof.
No assignment shall be binding on Landlord unless, as hereinbefore provided,
such assignee or Tenant shall deliver to Landlord a duplicate original of the
instrument of assignment which contains a covenant of assumption by the assignee
of all of the obligations aforesaid and shall obtain from Landlord the aforesaid
written consent prior thereto. Any assignment, sublease or agreement permitting
the use and occupancy of the Demised Premises or any portion thereof, to which
Landlord shall not have expressly consented in writing shall be deemed null and
void and of no force or effect.
G. Tenant agrees that notwithstanding any subletting or assignment
permitted by Landlord, no other or further assignment of this Lease or
subletting of all or any part of the Demised Premises by Tenant or any person or
entity claiming through or under Tenant (except as provided in subparagraphs (B)
or (J) herein) shall or will be made except upon compliance with and subject to
the provisions of this Article.
H. No acceptance or rent by Landlord from a third party shall constitute a
consent to any assignment or subletting.
I. In lieu of consenting to any subletting or assignment as detailed above,
the Landlord shall have the option to cancel the term of this Lease by giving
Tenant written notice of its intention to do so within twenty (20) days after
Landlord's receipt of Tenant's request for consent to an assignment of this
Lease or a subletting of all or substantially all of the Demised Premises, in a
single subletting or the aggregate of multiple sublettings and such other
reasonable information regarding the financial condition of such assignee or
sublessee, in which event such cancellation shall become effective on the
effective date of such proposed subletting or assignment, with the same force
and effect as if said cancellation date were the date originally set forth as
the expiration date of the term of this Lease. Anything contained herein to the
contrary, notwithstanding, if Tenant shall have expended at least $250,000.00
in Permanent Building Improvements (as defined in Article 82 hereof) prior to
October 1, 1999, Landlord shall waive its option to cancel contained herein.
J. Anything contained herein to the contrary notwithstanding, Tenant,
without being subject to Landlord's option to cancel provided for in
subparagraph (I) hereof, or the splitting of profits as contained in
subparagraph (D) hereof shall have the right to assign this Lease or sublet all
or any part of the Demised Premises, to any parent company subsidiaries or a
subsidiary of a parent of Tenant or any entity into or with which Tenant is
merged or consolidated or the purchaser of all or substantially all of Tenant's
assets subject however to Tenant's compliance with paragrpah C hereof, upon
which occurring Landlord shall give its consent to such assignment or
subletting.
78. This Lease shall be construed and enforced in accordance with the laws of
the State of New York.
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79. RETURN OF SECURITY
Tenant agrees that at all times through September 31, 2004, it shall have six
(6) months Minimum Rent and electricity charges on deposit with Landlord as
security. On October 1, 2004, provided that the Tenant is not in default under
any of its obligations under this Lease, and Tenant shall not have exercised its
option contained in Article 84 hereof, Tenant shall be entitled to a return of
security so as to leave, with respect to the eleventh floor portion of the
Demised Premises an
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equivalent of four (4) months of the then Minimum Rent and electricity charges
on deposit with Landlord as security. Thereafter, Tenant agrees that at all
times it will have on deposit with the Landlord not less than four (4) months of
Minimum Rent and electricity charges as security deposit pursuant to Paragraph
32. It is specifically understood and agreed that on or before the date of any
increase in Minimum Rent after October 1, 2004, the Tenant will deposit with the
Landlord additional security so that at all times it shall have four (4) months
of Minimum Rent on deposit with Landlord as security. This additional security
deposit shall be due and subject to all terms and conditions as if it were
Additional Rent.
80. RENT CREDIT: Provided the Tenant is not in default under any of the terms,
covenants and conditions of this Lease at the time the rent credit is due,
Tenant shall be given six (6) monthly rent credits of $13,333.33 each to be
applied to the second, third, fourth, fifth, sixth and seventh monthly
installments of rent. Tenant shall use the Demised Premises and be subject to
all other terms and conditions of this Lease, including, but not limited to, the
obligation to pay for any and all electric current utilized in or furnished to
the Demised Premises during such period.
81. AIR CONDITIONING
(A) Tenant shall be permitted to use the air conditioning system presently
contained in the Demised Premises. Tenant covenants and agrees to maintain the
air-conditioning system in good and proper working conditions at all times
during the term of this Lease at Tenant's sole cost and expense and Tenant
further covenants and agrees to furnish and maintain at all times during the
term of this Lease an air conditioning contract with a reputable air
conditioning maintenance contractor reasonably acceptable to the Landlord. Title
to such air conditioning system shall be and continue to remain with Landlord at
all times. Tenant covenants and agrees to pay for any and all water and
electricity required in connection with such air-conditioning system.
(B) Notwithstanding anything herein contained, except for maintenance or
repair necessitated by the willful acts or negligence of Tenant, its agents,
employees or contractors, Landlord agrees to maintain the air conditioning units
located in the eleventh (11th) floor portion of the Demised Premises for one
year. Thereafter, Tenant shall be responsible for all costs to operate, maintain
and repair said units. In the event said units need to be replaced, or a major
repair is required, the Landlord shall contribute a maximum of $10,000.00 to
replace or repair said units.
82. NON-DISTURBANCE AGREEMENT:
(A) Provided Tenant shall have expended at least $250,000.00 on "Permanent
Building Improvements" (as hereinafter defined) in the Demised Premises prior to
October 1, 1999, Landlord agrees to obtain a "non-disturbance agreement from the
currently existing mortgagee of the Building, and any future mortgagee of the
Building, to the effect that, provided Tenant is not in default of any of the
terms, covenants, or provisions of this Lease, after having received written
notice thereof, beyond any applicable grace period, Tenant will not be named as
a defendant in any foreclosure action or proceeding which may be instituted by
such mortgagee or any trustee under any deed of trust, nor will Tenant be
evicted from the Demised Premises by reason of any default under the currently
existing mortgage or any future mortgage. If any such mortgagee shall succeed to
the position of Landlord under the Lease, Tenant shall attorn to and recognize
such mortgagee as Tenant's landlord under this Lease, and Tenant shall promptly
execute and deliver an attornment agreement upon the request of such mortgagee,
in form reasonably satisfactory to the attorneys for such mortgagee. It is
understood and agreed that no mortgagee shall be:
(i) liable for any previous act or omission of any prior landlord under
this Lease;
(ii) subject to any offsets or defenses which Tenant shall have against any
prior landlord under this Lease;
(iii) bound by any amendment or modification of this Lease made without
such mortgagee's prior written consent; or
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(iv) obligated to repair, replace, rebuild or restore the Demised Premises
in the event of any damage or destruction beyond such repair, replacement,
rebuilding or restoration as can reasonably be accomplished from the net
proceeds of insurance actually received by such mortgages.
(B) Any and all expenses in connection with obtaining each such
non-disturbance agreement shall be borne by Tenant, and shall be due and payable
as Additional Rent, promptly upon receipt of a statement therefor.
(C) "Permanent Building Improvements" shall mean flooring, lighting,
painting, distribution of air conditioning, dry wall partitioning and other dry
wall work, ceiling, carpeting, carpentry, electrical work, cabling, plumbing
and work of a similar nature, but specifically excluding, without limitation,
Tenant's equipment, decorations, furniture and furnishings, so-called "soft"
costs such as architect's and engineer's designers, and other professional fees
and the costs of obtaining permits and approvals.
(D) Prior to November 1, 1999, Tenant shall submit paid bills or canceled
checks to Landlord establishing the sums expended by Tenant on Permanent
Building Improvements.
(E) Landlord shall likewise give Tenant non-disturbance protection from any
superior lessor.
83. LETTER OF CREDIT IN LIEU OF SECURITY:
A. At Tenant's election, in lieu of the security deposit required herein,
Tenant, at anytime simultaneously with, or following the execution of this
Lease, may deliver to Landlord an irrevocable Letter of Credit running in favor
of Landlord by a bank under the supervision of the Superintendent of Banks of
the State of New York or a National Bank, in said sum. The Letter of Credit
shall be irrevocable for the entire term of this Lease.
B. The form and terms of the Letter of Credit shall be acceptable to
Landlord and shall provide in effect that upon the occurrence of any event of
default by Tenant under this Lease which shall continue after the expiration of
the applicable period of grace provided for in this Lease, the bank shall honor
the Letter of Credit and pay to Landlord the amount due to Landlord by reason of
Tenant's default, upon presentation of the Letter of Credit, together with a
statement verified by Landlord that the Tenant is in default under this Lease
after the expiration of the applicable period of grace, and specifying the
amount due to Landlord by reason thereof. The Letter of Credit will further
provide that it will be honored by the bank upon the delivery of such verified
statement by Landlord without inquiry as to its accuracy and regardless of
whether Tenant disputes the contents of such statements.
If as a result of any such application of all or any part of such security
the amount secured by the Letter of Credit shall be less than the amount
required pursuant to the terms of this Lease, Tenant shall forthwith provide
Landlord with additional Letter(s) of Credit in an amount equal to the
deficiency.
In the event of a transfer of Landlord's interest in the Building, Landlord
shall have the right to transfer the Letter of Credit to the transferee and
Landlord shall, without any further agreement between the parties, thereupon be
released by Tenant from all liability therefore. The provisions hereof shall
apply to every transfer or assignment made of the said Letter to a new Landlord.
Tenant further covenants that it will not assign or encumber said Letter of
Credit or any part thereof and that neither Landlord nor its successor or
assigns shall be bound by any such assignment or attempted encumbrance.
C. If, notwithstanding anything the contrary hereinabove, the Letter of
Credit expires earlier than the expiration of the term of this Lease, Landlord
will accept a one-year renewal thereof, (such renewal to be in effect not later
than thirty (30) days prior to the expiration thereof) irrevocable to the end of
the term of the Letter of Credit upon the same terms as the expiring Letter of
Credit. However, (i) if the Letter of Credit is not timely renewed; (ii) or if
Tenant fails to maintain the Letter of Credit in the amount and terms set forth
in this Article, Tenant, at least thirty (30) days prior to the expiration of
the Letter of Credit, or immediately upon its failure to
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comply with each and every term of this Article, shall deposit with Landlord
cash security in the amounts to be held and applied by Landlord as provided in
this Article, and subject to all of the terms and conditions as set forth in
Article 32 hereof, failing which Landlord may present such Letter of Credit to
the bank, in accordance with the terms of this Article, and the entire sum
secured thereby shall be paid to Landlord, to be held as cash security as
provided in this Article and Article 32.
84. TENANT'S ONE TIME RIGHT TO CANCEL LEASE: Subject to the provisions of
subparagraph F of Article 100, provided the Tenant is not in default of any of
the terms, conditions or covenants of this Lease beyond the expiration of any
applicable grace or notice periods, Tenant shall have a one time right to cancel
this Lease effective as of September 30, 2004. Said notice is to be received by
Landlord no later than January 31, 2004, by certified mail, return receipt
requested, or by nationally recognized over-night courier, time being of the
essence. Simultaneously with the giving of such notice by Tenant, Tenant shall
pay Landlord, in certified funds, an amount equal to the sum of $40,000.00 plus
an amount equal to three monthly installments of Minimum Rent then payable under
the Lease. In the event Tenant fails to notfiy the Landlord or make payment by
said date, Tenant shall have no cancellation rights whatsoever. Furthermore,
with such notice Tenant shall pay Landlord the final monthly installment of
Minimum Rent and electricity charges as due under this Lease. The Tenant shall
have no other cancellation rights whatsoever except as specifically detailed in
this clause.
85. OCCUPANCY
(A) Supplementing Article 15 hereof, Landlord agrees that in the event a
violation is imposed upon Tenant by any Federal, State, City, Municipal or Local
Government, Department, Commission, Board, Agency or other governmental
authority by reason of Tenant's use of the Demised Premises for the purposes
permitted pursuant to Article 2 hereof, Tenant shall immediately notify Landlord
of said violation and Landlord shall be responsible to pay the fine or penalty
connected therewith and Landlord, at its option and at its sole cost and
expense, shall take such steps as Landlord reasonably deems necessary to remove
or correct such violation, provided Landlord may defer compliance with any law,
order, rule, regulation, or directive alleged to have been violated for as long
as Landlord shall in good faith be contesting the validity or applicability
thereof. Notwithstanding the fact that Landlord may be contesting such
violation, it is further expressly understood and agreed that if the certificate
of occupancy covering Demised Premises (the "C/O") does not permit the use of
the Demised Premises for the purposes permitted pursuant to Article 2 hereof
and, (i) Tenant is prohibited by law from using the Demised Premises for the
purposes permitted pursuant to Article 2 hereof and physically prevented from
using the Demised Premises by governmental authority, (ii) the New York City
Buildings Department (the "Buildings Department") raises an objection in
connection with Tenant's filing of plans for the initial construction to the
effect that the C/O does not permit the uses specified in Article 2 hereof, or
(iii) the Buildings Department refuses to issue any required permit or consent
in connection with such work solely because the C/O does not permit the uses
specified in Article 2 hereof, then in the case of any of the foregoing (i),
(ii) or (iii) Tenant may elect to have the term of this Lease cease and expire
on a date (the "Termination Date") which shall be set forth in Tenant's notice
to Landlord, which Termination Date shall not be less than ten (10) days nor
more than forty-five (45) days from the date of such notice. Upon the giving of
such notice, the term of this Lease shall cease and expire on the Termination
Date with the same force and effect as if the Termination Date was the date
originally provided in this Lease as the expiration date of the term hereof and
Landlord shall return to Tenant the first monthly installment of Minimum Rent
paid by Tenant upon execution of this Lease. Except as otherwise provided in
this Lease, Tenant shall surrender full and complete vacant possession of the
Demised Premises to Landlord on or before the Termination Date, broom-clean in
good order and condition, free and clear of all leases, tenancies and rights of
occupancy of anyone claiming by or through Tenant, reasonable wear and tear and
damage by the elements excepted. In addition to Tenant's termination right
stated above, in the event that it is finally judicially determined by a court
of competent jurisdiction (without further judicial appeal), that Tenant cannot
use and occupy the Demised Premises for the purposes permitted pursuant to
Article 2 hereof and Tenant is physically prevented from using the Demised
Premises by governmental authority, then either Tenant or Landlord may elect to
have the term of this Lease cease and expire on a date which shall be set forth
in a notice to the other party, which date shall not be less than ten (10) days
nor more than forty-five (45) days from the date of such notice. Upon the giving
of such notice, the term of this Lease shall cease and expire on the date
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specified in such notice with the same force and effect as if such date were
originally provided in this Lease as the expiration date of the term hereof.
Except as otherwise provided in this Lease, Tenant shall surrender full and
complete vacant possession of the Demised Premises to Landlord on or before the
Termination Date, broom-clean in good order and condition, free and clear of all
leases, tenancies and rights of occupancy of anyone claiming by or through
Tenant, reasonable wear and tear and damage by the elements excepted.
(B) Notwithstanding the foregoing, Tenant shall not have a right to
terminate this Lease as aforesaid by reason of any violations of laws resulting
from Tenant's manner of use of the Demised Premises (as opposed to violations
which may result from Tenant's mere use of the Demised Premises for the purposes
permitted pursuant to Article 2.
(C) Notwithstanding anything contained herein to the contrary, Tenant's
remedies permitted under this Article 85 shall be limited to the termination
rights referred to above and shall not include a right to sue for damages.
86. RIDER CONTROLS: To the extent that any provision in this rider conflicts
with printed provisions on the Standard Form of Lease to which this rider is
attached the provisions of this rider shall prevail.
87. ALTERATIONS: Owner agrees that no plans or specifications need to be
submitted for purely decorative alterations and that except as otherwise
provided in Article 44 hereof, Owner's approval of all other non-structural
alterations which do not affect the Building's plumbing, electrical, HVAC or
mechanical systems, and the plans and specifications therefor will not be
unreasonably withheld or delayed.
88. COMPLIANCE WITH LAW: Owner represents and warrants that, to the best of the
Owner's knowledge, on the date hereof, the Demised Premises is in compliance
with all applicable laws.
89. ASBESTOS: Owner represents and warrants that, to the best of the Owner's
knowledge, the Demised Premises are free of any asbestos and asbestos-containing
material. If at any time during the term it shall become apparent that this
representation was inaccurate in any respect, Owner shall be responsible for
compliance with law with respect to such material.
90. SUPPLEMENT TO ARTICLE 9: In the event of a fire or casualty affecting all or
a portion of the Demised Premises occurring during the last year of the term of
this Lease (whether by scheduled maturity or exercise of the cancellation option
of Article 84), Tenant shall have the right to cancel this Lease on thirty (30)
days notice to Owner and upon the giving of such notice and the expiration of
such period, this Lease and the term shall end and expire as fully and
completely as if such date were the date originally set forth herein for the end
of this Lease and expiration of the term.
91. LANDLORD'S FIRE AND CASUALTY INSURANCE: Owner agrees that it will maintain
fire and casualty insurance in an all risk form on the Building of which the
Demised Premises form a part for its full insurable value, which insurance will
permit the release and waiver of subrogation provided for in this Lease.
92. ACCESS: Owner agrees to provide access to the Demised Premises seven (7)
days a week and 24 hours a day.
93. SIGNS: Owner agrees that will not unreasonably withhold or delay its consent
to any sign containing Tenant's name on the entrance to the Demised Premises.
94. RULES AND REGULATIONS: Owner agrees that will not enforce the rules and
regulations applying to the Building of which the Demised Premises form a part
in a discriminatory manner.
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95. SUPPLEMENT TO ARTICLE 46: Owner agrees that any change in the method of
taxation of real estate and any new or additional taxes to be included within
the term "Taxes" for purposes of Article 46 of this Lease will only be deemed
to be "in substitution for a real estate tax" and, therefore, deemed to be part
of "Taxes" if such change or new or additional tax only applied to the Owners
of real property. Owner represents and warrants to Tenant that, as of the date
hereof, the land and the Building of which the Demised Premises form a part do
not enjoy any tax abatement or tax incentive.
96. SUPPLEMENT TO ARTICLE 20: Supplementing Article 20 of this Lease, Owner
agrees that no such changes or alterations will materially adversely affect
ingress or egress to or from the Demised Premises nor materially impair services
being provided to the Demised Premises.
97. DEFAULT: The term "default" or "event of default" and words of similar
import shall mean a failure to perform beyond the applicable grace or cure
period therefor.
98. LEGAL FEES: The parties agree that the successful party in any legal
proceedings between the parties hereto, as so determined in any such proceeding,
shall be entitled to recover legal fees from the other party.
99. DEMOLITION REIMBURSEMENT: Landlord shall reimburse Tenant for the costs of
demolition incurred by Tenant in the eleventh (11th) floor portion of the
Demised Premises, in an amount not to exceed $5,000.00. If Tenant elects to add
the seventh (7th) floor of the Building to the Demised Premises in accordance
with the provisions of Article 100 hereof, Landlord shall reimburse Tenant for
costs of demolition incurred by Tenant in the seventh (7th) floor in an amount
not to exceed $10,000.00. Each such reimbursement shall be made by Landlord
within thirty (30) days of Landlord's receipt of cancelled checks or paid
receipts reflecting Tenant's payment for such demolition.
100. TENANT'S OPTION TO ADD ADDITIONAL SPACE:
(A) Provided Tenant is not then in default of any of the terms, conditions,
or provisions of this Lease, Tenant, by notice given to Landlord on or before
August 31, 1999, may elect to add the entire rentable portion of the seventh
(7th) floor of the Building (the "Additional Space") to the Demised Premises
effective as of January 1, 2000.
(B) In the event Tenant timely elects to add the Additional Space to the
Demised Premises, effective as of January 1, 2000, the following amendments to
the Lease shall automatically occur:
(i) The term "Demised Premises" as used in this Lease shall be deemed to
mean the entire rentable portions of the seventh (7th) and eleventh (11th)
floors of the Building.
(ii) The Minimum Rent payable hereunder shall be increased to the
following amounts:
(a) $320,000.00 per annum ($26,666.67 per month) from January 1, 2000 to
and including September 30, 2000;
(b) $329,600 per annum ($27,466.67 per month) from October 1, 2000 to and
including September 30, 2001;
(c) $339,488.00 per annum ($28,290.67 per month) from October 1, 2001 to
and including September 30, 2002;
(d) $349,672.64 per annum ($29,139.39 per month) from October 1, 2002 to
and including September 30, 2003;
(e) $360,162.82 per annum ($30,013.57 per month) from October 1, 2003 to
and including September 30, 2004;
(f) $390,967.70 per annum ($32,580.64 per month) from October 1, 2004 to
and including September 30, 2005;
(g) $402,696.74 per annum ($33,558.06 per month) from October 1, 2005 to
and including September 30, 2006;
(h) $414,777.64 per annum ($34,564.80 per month) from October 1, 2006 to
and including September 30, 2007;
(i) $427,220.96 per annum ($35,601.75 per month) from October 1, 2007 to
and including September 30, 2008; and
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(j) $440,037.60 per annum ($36,669.80 per month) from October 1, 2008 to
and including September 30, 2009;
(iii) Tenant's Share as defined in paragraph 41 (c) hereof shall be deemed
to mean ten percent (10.0%).
(C) Simultaneously upon exercising its option to add the Additional Space,
Tenant shall pay to Landlord by certified check the first monthly installment of
Minimum Rent and estimated electricity charges and Tenant shall deposit with
Landlord additional security so that the total security pursuant to this Lease
shall be $240,000.00, which security shall be increased (subject to the next
succeeding sentence) upon any increase in Minimum Rent so that at all times it
will have on deposit with the Landlord not less than nine (9) months of Minimum
Rent and electricity charges, in cash or a letter of credit pursuant to the
terms of this Lease. If Tenant shall not be in default of any of the terms,
covenants, conditions or provisions of this Lease, on October 1, 2004, Landlord
shall return such security to Tenant, so that the total security deposit then
being held by Landlord shall be an amount equal to six monthly installments of
Minimum Rent and electricity charges then payable by Tenant, or if Tenant shall
have furnished a letter of credit for said security, Tenant may submit, and
Landlord shall accept, a replacement letter of credit therefor in the sum equal
to six (6) months of Minimum Rent and electricity charges. Thereafter, upon any
increase in Minimum Rent, Tenant shall post additional security so as at all
times it shall have six (6) months of Minimum Rent and electric charges on
deposit as security. The foregoing requirements of additional security is in
addition to the security requirements of Article 79 hereof.
(D) Provided Tenant is not in default of any of the terms, covenants,
conditions or provisions of this Lease at the time the following rent credits
are due, Tenant shall be given four (4) monthly rent credits of $13,333.33 each
to be applied against the monthly installments of Minimum Rent due for February,
March, April and May, 2000.
(E) If Tenant shall elect to add the Additional Space to the Demised
Premises, Landlord shall reimburse Tenant for Tenant's demolition work in the
Additional Space in an amount not to exceed $10,000.00. Landlord shall make such
reimbursement payment within thirty (30) days of Landlord's receipt of said
invoices or cancelled checks evidencing Tenant's payment for demolition work in
the Additional Space. Tenant shall take the Additional Space vacant, free of
tenancies and occupancies and in its "as is" condition in all respects, and
Landlord shall not be required to perform any repairs, alterations, improvements
or additions to the Additional Space for Tenant's initial occupancy.
(F) Upon Tenant's exercise of its option to add the Additional Space to the
Demised Premises, the provisions of Article 84 hereof shall be deemed null and
void and of no force or effect.
101. SUPPLEMENTING ARTICLE 3: Anything contained in Article 3 to the contrary
notwithstanding, to the extent Tenant's installations in the Demised Premises
are commercially reasonable typical office installations, same may remain upon
and be surrendered with the Demised Premises upon the expiration or sooner
termination of the term of this Lease. To the extent Tenant's installation are
beyond typical office installations (such as, but not limited to raised
flooring, interior staircases, safes or vaults and installations of a similar
nature), Landlord may elect to have Tenant remove same upon the expiration or
sooner termination of the term of this Lease, and upon such removal, Tenant
shall repair and restore the Demised Premises to a substantially similar
condition existing prior to such installation. Landlord shall elect to have
Tenant remove such installations within thirty (30) days of Landlord's receipt
of Tenant's plans and specifications therefor, provided, however, that Tenant
notifies Landlord, in bold-face or underlined type, that Landlord's failure to
indicate, within thirty (30) days from the date of Landlord's receipt of
Tenant's notice, that such installation must be removed by Tenant upon the
expiration or sooner termination of the term of this Lease shall be deemed to
mean that such installations may remain in the Demised Premises upon the
expiration or sooner termination of the term of the Lease.
102. ELECTRICITY: Landlord represents and warrants that there is available for
Tenant's use on each of the seventh (7th) and eleventh (11th) floors of the
Building, 400 AMPS of electricity (three (3) phases). If Tenant requires greater
electric service, it may obtain same and shall pay
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the direct cost of obtaining same. Tenant shall use an electrical contractor
approved by Landlord for such work, which approval shall be at Landlord's
discretion.
103. Tenant agrees to post $8,000.00 per floor as security deposit for Tenant's
electric usage. This security is in addition to any other security required
under this Lease. Annually, the Landlord shall review the tenant's electric
usage and shall adjust this electric security deposit so that Tenant has six
months of electric billings on deposit with the Landlord as security for
Tenant's electric charges. In the event additional security is required, Tenant
agrees to post additional security as required upon said review of Tenant's
electric usage. In the event less security is required upon review of Tenant's
electric usage, Landlord shall promptly refund said amounts.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals (or in the case of a corporation, have had their proper corporate
officers execute this as of the date first above written.
LANDLORD:
PENNBUS REALTIES, INC.
By: [illegible]
--------------------------------
Vice President
TENANT:
FORMAN INTERACTIVE CORP.
By: [illegible]
--------------------------------
President
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EXHIBIT 10.6
REGISTER.COM, INC.
2000 STOCK INCENTIVE PLAN
Article One
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 2000 Stock Incentive Plan is intended to promote the interests of
Register.com, Inc., a Delaware corporation, by providing eligible persons with
the opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into five separate equity incentive
programs:
(i) the Discretionary Option Grant Program under which eligible persons
may, at the discretion of the Plan Administrator, be granted options to purchase
shares of Common Stock,
(ii) the Salary Investment Option Grant Program under which eligible
employees may elect to have a portion of their base salary invested each year in
special options,
(iii) the Stock Issuance Program under which eligible persons may, at
the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary),
(iv) the Automatic Option Grant Program under which eligible
non-employee Board members shall automatically receive options at periodic
intervals to purchase shares of Common Stock, and
(v) the Director Fee Option Grant Program under which non-employee
Board members may elect to have all or any portion of their annual retainer fee
otherwise payable in cash applied to a special option grant.
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B. The provisions of Articles One and Seven shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
III. ADMINISTRATION OF THE PLAN
A. Prior to the Section 12 Registration Date, the Discretionary Option
Grant and Stock Issuance Programs shall be administered by the Board unless
otherwise determined by the Board. Beginning with the Section 12 Registration
Date, the following provisions shall govern the administration of the Plan:
(i) The Board shall have the authority to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to Section 16 Insiders but
may delegate such authority in whole or in part to the Primary Committee.
(ii) Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons.
(iii) Administration of the Automatic Option Grant and Director Fee
Option Grant Programs shall be self-executing in accordance with the terms of
those programs.
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full power and authority
subject to the provisions of the Plan:
(i) to establish such rules as it may deem appropriate for proper
administration of the Plan, to make all factual determinations, to construe and
interpret the provisions of the Plan and the awards thereunder and to resolve
any and all ambiguities thereunder;
(ii) to determine, with respect to awards made under the Discretionary
Option Grant and Stock Issuance Programs, which eligible persons are to receive
such awards, the time or times when such awards are to be made, the number of
shares to be covered by each such award, the vesting schedule (if any)
applicable to the award, the status of a granted option as either an Incentive
Option or a Non-Statutory Option and the maximum term for which the option is to
remain outstanding;
(iii) to amend, modify or cancel any outstanding award with the consent
of the holder or accelerate the vesting of such award; and
(iv) to take such other discretionary actions as permitted pursuant to
the terms of the applicable program.
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Decisions of each Plan Administrator within the scope of its administrative
functions under the Plan shall be final and binding on all parties.
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any options or stock issuances under the Plan.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of directors of any
Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide services
to the Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.
C. Only non-employee Board members shall be eligible to participate in
the Automatic Option Grant and Director Fee Option Grant Programs.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed Seven
Million Three Hundred Fifty Thousand (7,350,000) shares. Such reserve shall
consist of (i) the number of shares estimated to remain available for issuance,
as of the Section 12 Registration Date, under the Predecessor Plans, including
the shares subject to the outstanding options to be incorporated into the Plan
and the additional shares which would otherwise be available for future grant,
plus (ii) an increase of Three Million Five Hundred Thousand (3,500,000) shares
authorized by the Board subject to stockholder approval prior to the Section 12
Registration Date.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of January each
calendar year during the term of the Plan, beginning with the calendar year
2001, by an amount equal to two percent (2%) of the total number of shares of
Common Stock outstanding on the last trading day in December of the immediately
preceding calendar year, but in no event shall such annual increase exceed One
Million, Seven Hundred Fifty Thousand (1,750,000) shares.
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C. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than One Million, Seven Hundred Fifty Thousand (1,750,000) shares of Common
Stock in the aggregate per calendar year.
D. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plans) shall be
available for subsequent issuance under the Plan to the extent those options
expire, terminate or are cancelled for any reason prior to exercise in full.
Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the original exercise or issue price paid per share, pursuant to
the Corporation's repurchase rights under the Plan shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent options
or direct stock issuances under the Plan. However, should the exercise price of
an option under the Plan be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option or the vesting of a stock issuance under the Plan, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised or which vest
under the stock issuance, and not by the net number of shares of Common Stock
issued to the holder of such option or stock issuance. Shares of Common Stock
underlying one or more stock appreciation rights exercised under the Plan shall
not be available for subsequent issuance.
E. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities by which the share reserve is
to increase each calendar year pursuant to the automatic share increase
provisions of the Plan, (iii) the number and/or class of securities for which
any one person may be granted options, separately exercisable stock appreciation
rights and direct stock issuances under the Plan per calendar year, (iv) the
number and/or class of securities for which grants are subsequently to be made
under the Automatic Option Grant Program to new and continuing non-employee
Board members, (v) the number and/or class of securities and the exercise price
per share in effect under each outstanding option under the Plan and (vi) the
number and/or class of securities and price per share in effect under each
outstanding option incorporated into this Plan from the Predecessor Plans. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan
Administrator at the time of the option grant and may be less than, equal to or
greater than the Fair Market Value per share of Common Stock on the option grant
date.
2. The exercise price shall become immediately due upon exercise of the
option and shall, subject to the provisions of Section II of Article Seven and
the documents evidencing the option, be payable in one or more of the following
forms:
(i) in cash or check made payable to the Corporation;
(ii) shares of Common Stock held for the requisite period necessary to
avoid a charge to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date, or
(iii) to the extent the option is exercised for vested shares, through
a special sale and remittance procedure pursuant to which the Optionee shall
concurrently provide irrevocable instructions to (a) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and (b)
the Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
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C. Cessation of Service.
1. The following provisions shall govern the exercise of any options
outstanding at the time of the Optionee's cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's cessation of
Service for any reason shall remain exercisable for such period of time
thereafter as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option, but no such option shall be exercisable after
the expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee at the
time of death may be subsequently exercised by his or her Beneficiary.
(iii) During the applicable post-Service exercise period, the option
may not be exercised in the aggregate for more than the number of vested shares
for which the option is exercisable on the date of the Optionee's cessation of
Service. Upon the expiration of the applicable exercise period or (if earlier)
upon the expiration of the option term, the option shall terminate and cease to
be outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's cessation
of Service, terminate and cease to be outstanding to the extent the option is
not otherwise at that time exercisable for vested shares.
(iv) Should the Optionee's Service be terminated for Misconduct or
should the Optionee engage in Misconduct while his or her options are
outstanding, then all such options shall terminate immediately and cease to be
outstanding.
2. The Plan Administrator shall have complete discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding:
(i) to extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service to such period of time
as the Plan Administrator shall deem appropriate, but in no event beyond the
expiration of the option term, and/or
(ii) to permit the option to be exercised, during the applicable
post-Service exercise period, for one or more additional installments in which
the Optionee would have vested had the Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the discretion
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
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F. Limited Transferability of Options. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of
inheritance following the Optionee's death. Non-Statutory Options shall be
subject to the same restrictions, except that a Non-Statutory Option may, to the
extent permitted by the Plan Administrator, be assigned in whole or in part
during the Optionee's lifetime (i) as a gift to one or more members of the
Optionee's immediate family, to a trust in which Optionee and/or one or more
such family members hold more than fifty percent (50%) of the beneficial
interest or to an entity in which more than fifty percent (50%) of the voting
interests are owned by one or more such family members or (ii) pursuant to a
domestic relations order. The terms applicable to the assigned portion shall be
the same as those in effect for the option immediately prior to such assignment
and shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate.
Notwithstanding the foregoing, the Optionee may also designate one or
more persons as the beneficiary or beneficiaries of his or her outstanding
options, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Six shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to Employees.
B. Exercise Price. The exercise price per share shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
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D. 10% Stockholder. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Each option outstanding at the time of a Change in Control but not
otherwise fully-vested shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Change in Control, become
exercisable for all of the shares of Common Stock at the time subject to that
option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Change in
Control, assumed or otherwise continued in full force and effect by the
successor corporation (or parent thereof) pursuant to the terms of the Change in
Control, (ii) such option is replaced with a cash incentive program of the
successor corporation which preserves the spread existing at the time of the
Change in Control on the shares of Common Stock for which the option is not
otherwise at that time exercisable and provides for subsequent payout in
accordance with the same vesting schedule applicable to those option shares or
(iii) the acceleration of such option is subject to other limitations imposed by
the Plan Administrator at the time of the option grant. Each option outstanding
at the time of the Change in Control shall terminate as provided in Section
III.C. of this Article Two.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Change in Control, except to
the extent: (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) or otherwise continue in full force and effect
pursuant to the terms of the Change in Control or (ii) such accelerated vesting
is precluded by other limitations imposed by the Plan Administrator at the time
the repurchase right is issued.
C. Immediately following the consummation of the Change in Control, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof) or otherwise
expressly continued in full force and effect pursuant to the terms of the Change
in Control.
D. Each option which is assumed in connection with a Change in Control
shall be appropriately adjusted, immediately after such Change in Control, to
apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Change in Control had the option been
exercised immediately prior to such Change in Control. Appropriate adjustments
to reflect such Change in Control shall also be made to (i) the exercise price
payable per share under each outstanding option, provided the aggregate exercise
price payable for such securities shall remain the same, (ii) the maximum number
and/or class of securities available for issuance over the remaining term of the
Plan and (iii) the maximum number and/or class of securities for which any one
person may be granted options, separately exercisable stock appreciation rights
and direct stock issuances under the Plan per calendar year. To the extent the
actual holders of the Corporation's outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Change in Control,
the successor corporation may, in connection with the assumption of the
outstanding options, substitute one or more shares of its own common stock with
a fair market value equivalent to the cash consideration paid per share of
Common Stock in such Change in Control.
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E. The Plan Administrator may at any time provide that one or more
options will automatically accelerate in connection with a Change in Control,
whether or not those options are assumed or otherwise continued in full force
and effect pursuant to the terms of the Change in Control. Any such option shall
accordingly become exercisable, immediately prior to the effective date of such
Change in Control, for all of the shares of Common Stock at the time subject to
that option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. In addition, the Plan Administrator may at any time
provide that one or more of the Corporation's repurchase rights shall not be
assignable in connection with such Change in Control and shall terminate upon
the consummation of such Change in Control.
F. The Plan Administrator may at any time provide that one or more
options will automatically accelerate upon an Involuntary Termination of the
Optionee's Service within a designated period (not to exceed eighteen (18)
months) following the effective date of any Change in Control in which those
options do not otherwise accelerate. Any options so accelerated shall remain
exercisable for fully-vested shares until the earlier of (i) the expiration of
the option term or (ii) the expiration of the one (1) year period measured from
the effective date of the Involuntary Termination. In addition, the Plan
Administrator may at any time provide that one or more of the Corporation's
repurchase rights shall immediately terminate upon such Involuntary Termination.
G. The Plan Administrator may at any time provide that one or more
options will automatically accelerate in connection with a Hostile Take-Over.
Any such option shall become exercisable, immediately prior to the effective
date of such Hostile Take-Over, for all of the shares of Common Stock at the
time subject to that option and may be exercised for any or all of those shares
as fully-vested shares of Common Stock. In addition, the Plan Administrator may
at any time provide that one or more of the Corporation's repurchase rights
shall terminate automatically upon the consummation of such Hostile Take-Over.
Alternatively, the Plan Administrator may condition such automatic acceleration
and termination upon an Involuntary Termination of the Optionee's Service within
a designated period (not to exceed eighteen (18) months) following the effective
date of such Hostile Take-Over. Each option so accelerated shall remain
exercisable for fully-vested shares until the expiration or sooner termination
of the option term.
H. The portion of any Incentive Option accelerated in connection with a
Change in Control or Hostile Take Over shall remain exercisable as an Incentive
Option only to the extent the applicable One Hundred Thousand Dollar ($100,000)
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
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IV. STOCK APPRECIATION RIGHTS
The Plan Administrator may, subject to such conditions as it may
determine, grant to selected Optionees stock appreciation rights which will
allow the holders of those rights to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of that option in
exchange for a distribution from the Corporation in an amount equal to the
excess of (a) the Option Surrender Value of the number of shares for which the
option is surrendered over (b) the aggregate exercise price payable for such
shares. The distribution may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
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Article THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee may implement the Salary Investment Option Grant
Program for one or more calendar years beginning after the Underwriting Date and
select the Section 16 Insiders and other highly compensated Employees eligible
to participate in the Salary Investment Option Grant Program for each such
calendar year. Each selected individual who elects to participate in the Salary
Investment Option Grant Program must, prior to the start of each calendar year
of participation, file with the Plan Administrator (or its designate) an
irrevocable authorization directing the Corporation to reduce his or her base
salary for that calendar year by an amount not less than Ten Thousand Dollars
($10,000) nor more than Fifty Thousand Dollars ($50,000). Each individual who
files such a timely election shall be granted an option under the Salary
Investment Grant Program on the first trading day in January for the calendar
year for which the salary reduction is to be in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one
or more documents in the form approved by the Plan Administrator; provided,
however, that each such document shall comply with the terms specified below.
A. Exercise Price.
1. The exercise price per share shall be thirty-three and one-third
percent (33-1/3%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall become immediately due upon exercise of the
option and shall be payable in one or more of the alternative forms authorized
under the Discretionary Option Grant Program. Except to the extent the sale and
remittance procedure specified thereunder is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.
B. Number of Option Shares. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
A is the dollar amount of the approved reduction in the
Optionee's base salary for the calendar year, and
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<PAGE>
B is the Fair Market Value per share of Common Stock on
the option grant date.
C. Exercise and Term of Options. The option shall become exercisable in
a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Service in the calendar year for
which the salary reduction is in effect. Each option shall have a maximum term
of ten (10) years measured from the option grant date.
D. Cessation of Service. Each option outstanding at the time of the
Optionee's cessation of Service shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the option term or (ii) the
expiration of the three (3)-year period following the Optionee's cessation of
Service. To the extent the option is held by the Optionee at the time of his or
her death, the option may be exercised by his or her Beneficiary. However, the
option shall, immediately upon the Optionee's cessation of Service, terminate
and cease to remain outstanding with respect to any and all shares of Common
Stock for which the option is not otherwise at that time exercisable.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile Take-Over while the
Optionee remains in Service, each outstanding option shall automatically
accelerate so that each such option shall, immediately prior to the effective
date of the Change in Control or Hostile Take-Over, become fully exercisable
with respect to the total number of shares of Common Stock at the time subject
to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. Each such option accelerated in connection
with a Change in Control shall terminate upon the Change in Control, except to
the extent assumed by the successor corporation (or parent thereof) or otherwise
continued in full force and effect pursuant to the terms of the Change in
Control. Each such option accelerated in connection with a Hostile Take-Over
shall remain exercisable until the expiration or sooner termination of the
option term.
B. Each option which is assumed in connection with a Change in Control
shall be appropriately adjusted to apply to the number and class of securities
which would have been issuable to the Optionee in consummation of such Change in
Control had the option been exercised immediately prior to such Change in
Control. Appropriate adjustments shall also be made to the exercise price
payable per share under each outstanding option, provided the aggregate exercise
price payable for such securities shall remain the same. To the extent the
actual holders of the Corporation's outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Change in Control,
the successor corporation may, in connection with the assumption of the
outstanding options, substitute one or more shares of its own common stock with
a fair market value equivalent to the cash consideration paid per share of
Common Stock in such Change in Control.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have
a thirty (30)-day period in which to surrender to the Corporation each of his or
her outstanding options. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Option Surrender Value of the shares of Common Stock at the time subject to each
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation.
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IV. REMAINING TERMS
The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for options made
under the Discretionary Option Grant Program.
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ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening options. Shares
of Common Stock may also be issued under the Stock Issuance Program pursuant to
share right awards which entitle the recipients to receive those shares upon the
attainment of designated performance goals or Service requirements. Each such
award shall be evidenced by one or more documents which comply with the terms
specified below.
A. Purchase Price.
1. The purchase price per share of Common Stock subject to direct
issuance shall be fixed by the Plan Administrator and may be less than, equal to
or greater than the Fair Market Value per share of Common Stock on the issue
date.
2. Subject to the provisions of Section II of Article Seven, shares of
Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent or
Subsidiary).
B. Vesting/Issuance Provisions.
1. The Plan Administrator may issue shares of Common Stock which are
fully and immediately vested upon issuance or which are to vest in one or more
installments over the Participant's period of Service or upon attainment of
specified performance objectives. Alternatively, the Plan Administrator may
issue share right awards which shall entitle the recipient to receive a
specified number of vested shares of Common Stock upon the attainment of one or
more performance goals or Service requirements established by the Plan
Administrator.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her unvested
shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
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<PAGE>
3. The Participant shall have full stockholder rights with respect to
the issued shares of Common Stock, whether or not the Participant's interest in
those shares is vested. Accordingly, the Participant shall have the right to
vote such shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding one
or more unvested shares of Common Stock, or should the performance objectives
not be attained with respect to one or more such unvested shares of Common
Stock, then those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights with
respect to those shares. To the extent the surrendered shares were previously
issued to the Participant for consideration paid in cash or cash equivalent
(including the Participant's purchase-money indebtedness), the Corporation shall
repay to the Participant the cash consideration paid for the surrendered shares
and shall cancel the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to the surrendered shares.
5. The Plan Administrator may waive the surrender and cancellation of
one or more unvested shares of Common Stock (or other assets attributable
thereto) which would otherwise occur upon the cessation of the Participant's
Service or the non-attainment of the performance objectives applicable to those
shares. Such waiver shall result in the immediate vesting of the Participant's
interest in the shares of Common Stock as to which the waiver applies. Such
waiver may be effected at any time, whether before or after the Participant's
cessation of Service or the attainment or non-attainment of the applicable
performance objectives.
6. Outstanding share right awards shall automatically terminate, and no
shares of Common Stock shall actually be issued in satisfaction of those awards,
if the performance goals or Service requirements established for such awards are
not attained. The Plan Administrator, however, shall have the authority to issue
shares of Common Stock in satisfaction of one or more outstanding share right
awards as to which the designated performance goals or Service requirements are
not attained.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. All of the Corporation's outstanding repurchase rights shall
terminate automatically, and all the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Change in
Control, except to the extent (i) those repurchase rights are assigned to the
successor corporation (or parent thereof) or otherwise continue in full force
and effect pursuant to the terms of the Change in Control or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
B. The Plan Administrator may at any time provide for the automatic
termination of one or more of those outstanding repurchase rights and the
immediate vesting of the shares of Common Stock subject to those terminated
rights upon (i) a Change in Control or Hostile Take-Over or (ii) an Involuntary
Termination of the Participant's Service within a designated period (not to
exceed eighteen (18) months) following the effective date of any Change in
Control or Hostile Take-Over in which those repurchase rights are assigned to
the successor corporation (or parent thereof) or otherwise continue in full
force and effect.
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III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
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ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. Grant Dates. Options shall be made on the dates specified below:
1. Each individual who is first elected or appointed as a non-employee
Board member at any time on or after the Plan Effective Date shall automatically
be granted, on the date of such initial election or appointment, a Non-Statutory
Option to purchase Thirty-five Thousand (35,000) shares of Common Stock,
provided that individual has not previously been in the employ of the
Corporation (or any Parent or Subsidiary).
2. Each individual who is to continue to serve as a non-employee Board
member shall automatically be granted a Non-Statutory Option to purchase Five
Thousand Two Hundred Fifty (5,250) shares of Common Stock on the date of each
Annual Stockholders Meeting beginning with the first Annual Meeting held after
the initial option grant made to such individual under Paragraph I.A.1 of this
Article Five is fully vested, provided that an individual who is a 3%
Stockholder shall not be eligible to receive any option grants under this
Paragraph I.A.2.
B. Exercise Price.
1. The exercise price per share shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the option grant
date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. Option Term. Each option shall have a term of ten (10) years
measured from the option grant date.
D. Exercise and Vesting of Options. Each option shall be immediately
exercisable for any or all of the option shares. However, any unvested shares
purchased under the option shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares. Each initial 35,000-share option shall
vest, and the Corporation's repurchase right shall lapse, in a series of two (2)
successive equal annual installments over the Optionee's period of continued
service as a Board member, with the first such installment to vest upon the
Optionee's completion of one (1) year of Board service measured from the option
grant date. Each annual 5,250-share option shall vest, and the Corporation's
repurchase right shall lapse, upon the Optionee's completion of one (1) year of
Board service measured from the option grant date.
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<PAGE>
E. Cessation of Board Service. The following provisions shall govern
the exercise of any options outstanding at the time of the Optionee's cessation
of Board service:
(i) Any option outstanding at the time of the Optionee's cessation of Board
service for any reason shall remain exercisable for a twelve (12)-month
period following the date of such cessation of Board service, but in no
event shall such option be exercisable after the expiration of the
option term.
(ii) Any option exercisable in whole or in part by the Optionee at the time
of death may be subsequently exercised by his or her Beneficiary.
(iii) Following the Optionee's cessation of Board service, the option may not
be exercised in the aggregate for more than the number of shares for
which the option was exercisable on the date of such cessation of Board
service. Upon the expiration of the applicable exercise period or (if
earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares for which
the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Board service, terminate
and cease to be outstanding for any and all shares for which the option
is not otherwise at that time exercisable.
(iv) However, should the Optionee cease to serve as a Board member by reason
of death or Permanent Disability, then all shares at the time subject
to the option shall immediately vest so that such option may, during
the twelve (12)-month exercise period following such cessation of Board
service, be exercised for all or any portion of those shares as
fully-vested shares of Common Stock.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile Take-Over, the
shares of Common Stock at the time subject to each outstanding option but not
otherwise vested shall automatically vest in full so that each such option may,
immediately prior to the effective date of such Change in Control or Hostile
Take-Over, became fully exercisable for all of the shares of Common Stock at the
time subject to such option and maybe exercised for all or any of those shares
as fully-vested shares of Common Stock. Each such option accelerated in
connection with a Change in Control shall terminate upon the Change in Control,
except to the extent assumed by the successor corporation (or parent thereof) or
otherwise continued in full force and effect pursuant to the terms of the Change
in Control. Each such option accelerated in connection with a Hostile Take-Over
shall remain exercisable until the expiration or sooner termination of the
option term.
B. All outstanding repurchase rights shall automatically terminate and
the shares of Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Change in Control or Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have
a thirty (30)-day period in which to surrender to the Corporation each of his or
her outstanding options. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Option Surrender Value of the shares of Common Stock at the time subject to each
surrendered option (whether or not the option is otherwise at the time
exercisable for those shares) over (ii) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within five (5) days following
the surrender of the option to the Corporation.
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<PAGE>
D. Each option which is assumed in connection with a Change in Control
shall be appropriately adjusted to apply to the number and class of securities
which would have been issuable to the Optionee in consummation of such Change in
Control had the option been exercised immediately prior to such Change in
Control. Appropriate adjustments shall also be made to the exercise price
payable per share under each outstanding option, provided the aggregate exercise
price payable for such securities shall remain the same. To the extent the
actual holders of the Corporation's outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Change in Control,
the successor corporation may, in connection with the assumption of the
outstanding options, substitute one or more shares of its own common stock with
a fair market value equivalent to the cash consideration paid per share of
Common Stock in such Change in Control.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for options made under
the Discretionary Option Grant Program.
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ARTICLE SIX
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
The Board may implement the Director Fee Option Grant Program as of the
first day of any calendar year beginning after the Underwriting Date. Upon such
implementation of the Program, each non-employee Board member may elect to apply
all or any portion of the annual retainer fee otherwise payable in cash for his
or her service on the Board to the acquisition of a special option grant under
this Director Fee Option Grant Program. Such election must be filed with the
Corporation's Chief Financial Officer prior to the first day of the calendar
year for which the election is to be in effect. Each non-employee Board member
who files such a timely election with respect to the annul retainer fee shall
automatically be granted an option under this Director Fee Option Grant Program
on the first trading day in January in the calendar year for which that fee
would otherwise be payable.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.
A. Exercise Price.
1. The exercise price per share shall be thirty-three and one-third
percent (33-1/3%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall become immediately due upon exercise of the
option and shall be payable in one or more of the alternative forms authorized
under the Discretionary Option Grant Program. Except to the extent the sale and
remittance procedure specified thereunder is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.
B. Number of Option Shares. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject to
the non-employee Board member's election, and
B is the Fair Market Value per share of Common Stock on
the option grant date.
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C. Exercise and Term of Options. The option shall become exercisable in
a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each month of Board service during the calendar year in
which the option is granted. Each option shall have a maximum term of ten (10)
years measured from the option grant date.
D. Cessation of Board Service. Should the Optionee cease Board service
for any reason (other than death or Permanent Disability) while holding one or
more options, then each such option shall remain exercisable, for any or all of
the shares for which the option is exercisable at the time of such cessation of
Board service, until the earlier of (i) the expiration of the ten (10)-year
option term or (ii) the expiration of the three (3)-year period measured from
the date of such cessation of Board service. However, each option held by the
Optionee at the time of such cessation of Board service shall immediately
terminate and cease to remain outstanding with respect to any and all shares of
Common Stock for which the option is not otherwise at that time exercisable.
E. Death or Permanent Disability. Should the Optionee's service as a
Board member cease by reason of death or Permanent Disability, then each option
held by such Optionee shall immediately become exercisable for all the shares of
Common Stock at the time subject to that option, and the option may be exercised
for any or all of those shares as fully-vested shares until the earlier of (i)
the expiration of the ten (10)-year option term or (ii) the expiration of the
three (3)-year period measured from the date of such cessation of Board service.
Should the Optionee die after cessation of Board service but while
holding one or more options, then each such option may be exercised, for any or
all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Board service (less any shares subsequently purchased by
Optionee prior to death), by the Optionee's Beneficiary. Such right of exercise
shall lapse, and the option shall terminate, upon the earlier of (i) the
expiration of the ten (10)-year option term or (ii) the three (3)-year period
measured from the date of the Optionee's cessation of Board service.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile Take-Over while the
Optionee remains in Board service, each outstanding option held by such Optionee
shall automatically accelerate so that each such option shall, immediately prior
to the effective date of the Change in Control or Hostile Take-Over, become
fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. Each such option accelerated in
connection with a Change in Control shall terminate upon the Change in Control,
except to the extent assumed by the successor corporation (or parent thereof) or
otherwise expressly continued in full force and effect pursuant to the terms of
the Change in Control. Each such option accelerated in connection with a Hostile
Take-Over shall remain exercisable until the expiration or sooner termination of
the option term.
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B. Upon the occurrence of a Hostile Take-Over, the Optionee shall have
a thirty (30)-day period in which to surrender to the Corporation each of his or
her outstanding options. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Option Surrender Value of the shares of Common Stock at the time subject to each
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation.
C. Each option which is assumed in connection with a Change in Control
shall be appropriately adjusted, immediately after such Change in Control, to
apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Change in Control had the option been
exercised immediately prior to such Change in Control. Appropriate adjustments
shall also be made to the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same. To the extent the actual holders of the
Corporation's outstanding Common Stock receive cash consideration for their
Common Stock in consummation of the Change in Control, the successor corporation
may, in connection with the assumption of the outstanding options under the
Director Fee Option Grant Program, substitute one or more shares of its own
common stock with a fair market value equivalent to the cash consideration paid
per share of Common Stock in such Change in Control.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director Fee
Option Grant Program shall be the same as the terms in effect for options made
under the Discretionary Option Grant Program.
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ARTICLE SEVEN
MISCELLANEOUS
I. NO IMPAIRMENT OF AUTHORITY
Outstanding awards shall in no way affect the right of the Corporation
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
II. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value of
such shares) plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Withholding Taxes incurred by such holders in connection with the
exercise of their options or the vesting of their shares. Such right may be
provided to any such holder in either or both of the following formats:
Stock Withholding: The election to have the Corporation withhold, from
the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Withholding
Taxes (not to exceed one hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the Corporation, at the time
the Non-Statutory Option is exercised or the shares vest, one or more shares of
Common Stock previously acquired by such holder (other than in connection with
the option exercise or share vesting triggering the Withholding Taxes) with an
aggregate Fair Market Value equal to the percentage of the Taxes (not to exceed
one hundred percent (100%)) designated by the holder.
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IV. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the Plan Effective
Date. However, the Salary Investment Option Grant, the Stock Issuance Program
and Director Fee Option Grant Programs shall not be implemented until such time
as the Primary Committee or the Board may deem appropriate. Options may be
granted under the Discretionary Option Grant Program at any time on or after the
Plan Effective Date. However, no options granted under the Plan may be
exercised, and no shares shall be issued under the Plan, until the Plan is
approved by the Corporation's stockholders. If such stockholder approval is not
obtained within twelve (12) months after the Plan Effective Date, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plans, and
no further options or direct stock issuances shall be made under the Predecessor
Plans after the Section 12 Registration Date. All options outstanding under the
Predecessor Plans on the Section 12 Registration Date shall be incorporated into
the Plan at that time and shall be treated as outstanding options under the
Plan. However, each outstanding option so incorporated shall continue to be
governed solely by the terms of the documents evidencing such option, and no
provision of the Plan shall be deemed to affect or otherwise modify the rights
or obligations of the holders of such incorporated options with respect to their
acquisition of shares of Common Stock.
C. One or more provisions of the Plan, including (without limitation)
the option/vesting acceleration provisions of Article Two relating to Changes in
Control, may, in the Plan Administrator's discretion, be extended to one or more
options incorporated from the Predecessor Plans which do not otherwise contain
such provisions.
D. The Plan shall terminate upon the earliest of (i) January 25, 2010,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Change in Control. Upon such plan
termination, all outstanding options and unvested stock issuances shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants or issuances.
V. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.
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B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
shall be held in escrow until there is obtained stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic option grant
program in effect under the Plan.
B. Beneficiary shall mean, in the event the Plan Administrator
implements a beneficiary designation procedure, the person designated by an
Optionee or Participant, pursuant to such procedure, to succeed to such person's
rights under any outstanding awards held by him or her at the time of death. In
the absence of such designation or procedure, the Beneficiary shall be the
personal representative of the estate of the Optionee or Participant or the
person or persons to whom the award is transferred by will or the laws of
inheritance.
C. Board shall mean the Corporation's Board of Directors.
D. Change in Control shall mean a change in ownership or control of the
Corporation effected through any of the following transactions:
(i) a merger, consolidation or reorganization approved by the
Corporation's stockholders, unless securities representing more than fifty
percent (50%) of the total combined voting power of the voting securities
of the successor corporation are immediately thereafter beneficially owned,
directly or indirectly and in substantially the same proportion, by the
persons who beneficially owned the Corporation's outstanding voting
securities immediately prior to such transaction,
(ii) any stockholder-approved transfer or other disposition of all or
substantially all of the Corporation's assets, or
(iii) the acquisition, directly or indirectly by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board recommends such stockholders accept.
E. Code shall mean the Internal Revenue Code of 1986, as amended.
F. Common Stock shall mean the Corporation's common stock.
G. Corporation shall mean Register.com, Inc., a Delaware corporation,
and any corporate successor to all or substantially all of the assets or voting
stock of Register.com, Inc. which shall by appropriate action adopt the Plan.
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H. Director Fee Option Grant Program shall mean the director fee option
grant program in effect under the Plan.
I. Discretionary Option Grant Program shall mean the discretionary
option grant program in effect under the Plan.
J. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
K. Exercise Date shall mean the date on which the Corporation shall
have received written notice of the option exercise.
L. Fair Market Value per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as such price is reported on
the Nasdaq National Market or any successor system and in The Wall Street
Journal. If there is no closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by
the Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange and reported in The Wall Street Journal. If there is no
closing selling price for the Common Stock on the date in question, then
the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(iii) For purposes of any option grants made on the Underwriting Date,
the Fair Market Value shall be deemed to be equal to the price per share at
which the Common Stock is to be sold in the initial public offering
pursuant to the Underwriting Agreement.
(iv) For purposes of any options made prior to the Underwriting Date,
the Fair Market Value shall be determined by the Plan Administrator, after
taking into account such factors as it deems appropriate.
M. Hostile Take-Over shall mean:
(i) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept, or
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(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or
nomination.
N. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
O. Involuntary Termination shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change in
his or her position with the Corporation or Parent or Subsidiary employing
the individual which materially reduces his or her duties and
responsibilities or the level of management to which he or she reports, (B)
a reduction in his or her level of compensation (including base salary,
fringe benefits and target bonus under any corporate-performance based
bonus or incentive programs) by more than fifteen percent (15%) or (C) a
relocation of such individual's place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is
effected by the Corporation without the individual's consent.
P. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any intentional wrongdoing by such
person, whether by omission or commission, which adversely affects the business
or affairs of the Corporation (or any Parent or Subsidiary) in a material
manner. This shall not limit the grounds for the dismissal or discharge of any
person in the Service of the Corporation (or any Parent or Subsidiary).
Q. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
R. Non-Statutory Option shall mean an option not intended to satisfy
the requirements of Code Section 422.
S. Option Surrender Value shall mean the Fair Market Value per share of
Common Stock on the date the option is surrendered to the Corporation or, in the
event of a Hostile Take-Over, effected through a tender offer, the highest
reported price per share of Common Stock paid by the tender offeror in effecting
such Hostile Take-Over, if greater. However, if the surrendered option is an
Incentive Option, the Option Surrender Value shall not exceed the Fair Market
Value per share.
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T. Optionee shall mean any person to whom an option is granted under
the Discretionary Option Grant, Salary Investment Option Grant, Automatic Option
Grant or Director Fee Option Grant Program.
U. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. Participant shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
W. Permanent Disability or Permanently Disabled shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
and Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
X. Plan shall mean the Corporation's 2000 Stock Incentive Plan, as set
forth in this document.
Y. Plan Administrator shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant, Salary Investment Option Grant and
Stock Issuance Programs with respect to one or more classes of eligible persons,
to the extent such entity is carrying out its administrative functions under
those programs with respect to the persons under its jurisdiction. However, the
Primary Committee shall have the plenary authority to make all factual
determinations and to construe and interpret any and all ambiguities under the
Plan to the extent such authority is not otherwise expressly delegated to any
other Plan Administrator.
Z. Plan Effective Date shall mean January 26, 2000, the date on which
the Plan was adopted by the Board.
AA. Predecessor Plans shall mean the Corporation's pre-existing 1997
Stock Option Plan and 1999 Stock Option Plan in effect immediately prior to the
Plan Effective Date hereunder.
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BB. Primary Committee shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders and to administer the Salary Investment Option Grant Program with
respect to all eligible individuals.
CC. Salary Investment Option Grant Program shall mean the salary
investment grant program in effect under the Plan.
DD. Secondary Committee shall mean a committee of one (1) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
EE. Section 12 Registration Date shall mean the date on which the
Common Stock is first registered under Section 12(g) of the 1934 Act.
FF. Section 16 Insider shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
GG. Service shall mean the performance of services for the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
HH. Stock Exchange shall mean either the American Stock Exchange or the
New York Stock Exchange.
II. Stock Issuance Program shall mean the stock issuance program in
effect under the Plan.
JJ. Subsidiary shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
KK. 10% Stockholder shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
LL. 3% Stockholder shall mean a non-employee Board member who, directly
or indirectly, owns stock (as determined under Code Section 424(d)) possessing
at least three percent (3%) of the total combined voting power of the
outstanding securities of the Corporation (or any Parent or Subsidiary) or is
affiliated with or is a representative of such a three percent (3%) or greater
stockholder.
MM. Underwriting Agreement shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
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NN. Underwriting Date shall mean the date on which the Underwriting
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.
OO. Withholding Taxes shall mean the Federal, state and local income
and employment withholding tax liabilities to which the holder of Non-Statutory
Options or unvested shares of Common Stock may become subject in connection with
the exercise of those options or the vesting of those shares.
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EXHIBIT 10.7
REGISTER.COM, INC.
EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests
of Register.com, Inc., a Delaware corporation, by providing eligible employees
with the opportunity to acquire a proprietary interest in the Corporation
through participation in a payroll-deduction based employee stock purchase plan
designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such terms
in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Section 423 of the Code. Decisions of the Plan Administrator
shall be final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares of Common Stock
purchased on the open market. The maximum number of shares of Common Stock which
may be issued in the aggregate under the Plan shall not exceed Three Hundred
Fifty Thousand (350,000) shares.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of January each
calendar year during the term of the Plan, beginning with calendar year 2001, by
an amount equal to 0.25% percent of the total number of shares of Common Stock
outstanding on the last trading day in December of the immediately preceding
calendar year, but in no event shall any such annual increase exceed One
Hundred Forty Thousand (140,000) shares.
C. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to the maximum number and class of securities issuable in the aggregate
under the Plan, (ii) the maximum number and class of securities by which the
share reserve is to increase automatically each calendar year, (iii) the maximum
number and class of securities purchasable per Participant and in the aggregate
on any one Purchase Date and (iv) the number and class of securities and the
price per share in effect under each outstanding purchase right in order to
prevent the dilution or enlargement of benefits thereunder.
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IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the Plan
through a series of successive offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
B. Each offering period shall be of such duration (not to exceed
twenty-four (24) months) as determined by the Plan Administrator prior to the
start date of such offering period. However, the initial offering period shall
commence at the Effective Time and terminate on the last business day in October
2001. Subsequent offering periods shall commence as designated by the Plan
Administrator.
C. Each offering period shall be comprised of a series of one or more
successive Purchase Intervals. Purchase Intervals shall run from the first
business day in May each year to the last business day in October of the same
year and from the first business day in November each year to the last business
day in April of the following year. However, the first Purchase Interval in
effect under the initial offering period shall commence at the Effective Time
and terminate on the last business day in April 2000.
D. Should the Fair Market Value per share of Common Stock on any
Purchase Date within an offering period be less than the Fair Market Value per
share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new offering
period shall have a duration of twenty (24) months, unless a shorter duration is
established by the Plan Administrator within five (5) business days following
the start date of that offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of an
offering period under the Plan may enter that offering period on such start date
or on any subsequent Semi-Annual Entry Date within that offering period,
provided he or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee after the
start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.
C. The date an individual enters an offering period shall be designated
his or her Entry Date for purposes of that offering period.
D. To participate in the Plan for a particular offering period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.
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VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes of
acquiring shares of Common Stock during an offering period may be any multiple
of one percent (1%) of the Cash Earnings paid to the Participant during each
Purchase Interval within that offering period, up to a maximum of ten percent
(10%). The deduction rate so authorized shall continue in effect throughout the
offering period, except to the extent such rate is changed in accordance with
the following guidelines:
(i) The Participant may, at any time during the offering period, reduce
his or her rate of payroll deduction to become effective as soon as
possible after filing the appropriate form with the Plan
Administrator. The Participant may not, however, effect more than one
(1) such reduction per Purchase Interval.
(ii) The Participant may, prior to the commencement of any new Purchase
Interval within the offering period, increase the rate of his or her
payroll deduction by filing the appropriate form with the Plan
Administrator. The new rate (which may not exceed the ten percent
(10%) maximum) shall become effective on the start date of the first
Purchase Interval following the filing of such form.
B. Payroll deductions shall begin on the first pay day administratively
feasible following the Participant's Entry Date into the offering period and
shall (unless sooner terminated by the Participant) continue through the pay day
ending with or immediately prior to the last day of that offering period. The
amounts so collected shall be credited to the Participant's book account under
the Plan, but no interest shall be paid on the balance from time to time
outstanding in such account. The amounts collected from the Participant shall
not be required to be held in any segregated account or trust fund and may be
commingled with the general assets of the Corporation and used for general
corporate purposes.
C. Payroll deductions shall automatically cease upon the termination of
the Participant's purchase right in accordance with the provisions of the Plan.
D. The Participant's acquisition of Common Stock under the Plan on any
Purchase Date shall neither limit nor require the Participant's acquisition of
Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.
VII. PURCHASE RIGHTS
A. Grant of Purchase Right. A Participant shall be granted a separate
purchase right for each offering period in which he or she participates. The
purchase right shall be granted on the Participant's Entry Date into the
offering period and shall provide the Participant with the right to purchase
shares of Common Stock, in a series of successive installments over the
remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
3
<PAGE>
Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (within the meaning of Code Section 424(d)) or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Corporation
or any Corporate Affiliate.
B. Exercise of the Purchase Right. Each purchase right shall be
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant (other than Participants whose payroll deductions
have previously been refunded pursuant to the Termination of Purchase Right
provisions below) on each such Purchase Date. The purchase shall be effected by
applying the Participant's payroll deductions for the Purchase Interval ending
on such Purchase Date to the purchase of whole shares of Common Stock at the
purchase price in effect for the Participant for that Purchase Date.
C. Purchase Price. The purchase price per share at which Common Stock
will be purchased on the Participant's behalf on each Purchase Date within the
offering period shall be equal to eighty-five percent (85%) of the lower of (i)
the Fair Market Value per share of Common Stock on the Participant's Entry Date
into that offering period or (ii) the Fair Market Value per share of Common
Stock on that Purchase Date.
D. Number of Purchasable Shares. The number of shares of Common Stock
purchasable by a Participant on each Purchase Date during the offering period
shall be the number of whole shares obtained by dividing the amount collected
from the Participant through payroll deductions during the Purchase Interval
ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date. However, the maximum number of shares of
Common Stock purchasable per Participant on any one Purchase Date shall not
exceed Seven Hundred (700) shares, subject to periodic adjustments in the event
of certain changes in the Corporation's capitalization. In addition, the maximum
number of shares of Common Stock purchasable in the aggregate by all
Participants on any one Purchase Date shall not exceed One Hundred, Twenty-two
Thousand, Five Hundred (122,500) shares, subject to periodic adjustments in the
event of certain changes in the corporation's capitalization.
E. Excess Payroll Deductions. Any payroll deductions not applied to the
purchase of shares of Common Stock on any Purchase Date because they are not
sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable on the Purchase Date
shall be promptly refunded.
F. Termination of Purchase Right. The following provisions shall govern
the termination of outstanding purchase rights:
4
<PAGE>
(i) A Participant may, at any time prior to the next scheduled Purchase
Date in the offering period, terminate his or her outstanding
purchase right by filing the appropriate form with the Plan
Administrator (or its designate), and no further payroll deductions
shall be collected from the Participant with respect to the
terminated purchase right. Any payroll deductions collected during
the Purchase Interval in which such termination occurs shall, at the
Participant's election, be immediately refunded or held for the
purchase of shares on the next Purchase Date. If no such election is
made at the time such purchase right is terminated, then the payroll
deductions collected with respect to the terminated right shall be
refunded as soon as possible.
(ii) The termination of such purchase right shall be irrevocable, and the
Participant may not subsequently rejoin the offering period for
which the terminated purchase right was granted. In order to resume
participation in any subsequent offering period, such individual
must re-enroll in the Plan (by making a timely filing of the
prescribed enrollment forms) on or before his or her scheduled Entry
Date into that offering period.
(iii) Should the Participant cease to remain an Eligible Employee for any
reason (including death, disability or change in status) while his
or her purchase right remains outstanding, then that purchase right
shall immediately terminate, and all of the Participant's payroll
deductions for the Purchase Interval in which the purchase right so
terminates shall be immediately refunded. However, should the
Participant cease to remain in active service by reason of an
approved unpaid leave of absence, then the Participant shall have
the right, exercisable up until the last business day of the
Purchase Interval in which such leave commences, to (a) withdraw all
the payroll deductions collected to date on his or her behalf for
that Purchase Interval or (b) have such funds held for the purchase
of shares on his or her behalf on the next scheduled Purchase Date.
In no event, however, shall any further payroll deductions be
collected on the Participant's behalf during such leave. Upon the
Participant's return to active service (i) within ninety (90) days
following the commencement of such leave or, (ii) prior to the
expiration of any longer period for which such Participant's right
to reemployment with the Corporation is guaranteed by either statute
or contract, his or her payroll deductions under the Plan shall
automatically resume at the rate in effect at the time the leave
began. However, should the Participant's leave of absence exceed
ninety (90) days and his or her re-employment rights not be
guaranteed by either statute or contract, then the Participant shall
be treated as a new Employee for purposes of the Plan and must, in
order to resume participation in the Plan, re-enroll in the Plan (by
making a timely filing of the prescribed enrollment forms) on or
before his or her scheduled Entry Date into the offering period.
G. Change in Control. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Change in Control, by applying the payroll deductions of each Participant for
the Purchase Interval in which such Change in Control occurs to the purchase of
whole shares of Common Stock at a purchase price per share equal to eighty-five
percent (85%) of the lower of (i) the Fair Market Value per share of Common
Stock on the Participant's Entry Date into the offering period in which such
Change in Control occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Change in Control. However, the
applicable limitation on the number of shares of Common Stock purchasable by all
Participants in the aggregate shall not apply to any such purchase.
5
<PAGE>
The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Change in Control, and
Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Change in Control.
H. Proration of Purchase Rights. Should the total number of shares of
Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. Assignability. The purchase right shall be exercisable only by the
Participant and shall not be assignable or transferable by the Participant.
J. Stockholder Rights. A Participant shall have no stockholder rights
with respect to the shares subject to his or her outstanding purchase right
until the shares are purchased on the Participant's behalf in accordance with
the provisions of the Plan and the Participant has become a holder of record of
the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire Common
Stock pursuant to any purchase right outstanding under this Plan if and to the
extent such accrual, when aggregated with (i) rights to purchase Common Stock
accrued under any other purchase right granted under this Plan and (ii) similar
rights accrued under other employee stock purchase plans (within the meaning of
Code Section 423) of the Corporation or any Corporate Affiliate, would otherwise
permit such Participant to purchase more than Twenty-Five Thousand Dollars
($25,000) worth of stock of the Corporation or any Corporate Affiliate
(determined on the basis of the Fair Market Value per share on the date or dates
such rights are granted) for each calendar year such rights are at any time
outstanding.
B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding purchase
right shall accrue in a series of installments on each successive
Purchase Date during the offering period on which such right remains
outstanding.
(ii) No right to acquire Common Stock under any outstanding purchase right
shall accrue to the extent the Participant has already accrued in the
same calendar year the right to acquire Common Stock under one (1) or
more other purchase rights at a rate equal to Twenty-Five Thousand
Dollars ($25,000) worth of Common Stock (determined on the basis of
the Fair Market Value per share on the date or dates of grant) for
each calendar year such rights were at any time outstanding.
6
<PAGE>
C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Interval, then the payroll
deductions which the Participant made during that Purchase Interval with respect
to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on January 26, 2000 and shall
become effective at the Effective Time, provided no purchase rights granted
under the Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the stockholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements
established by law or regulation. In the event such stockholder approval is not
obtained, or such compliance is not effected, within twelve (12) months after
the date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect, and all sums collected from Participants during
the initial offering period hereunder shall be refunded.
B. Unless sooner terminated by the Board, the Plan shall terminate upon
the earliest of (i) the last business day in April, 2010, (ii) the date on which
all shares available for issuance under the Plan shall have been sold pursuant
to purchase rights exercised under the Plan or (iii) the date on which all
purchase rights are exercised in connection with a Corporate Transaction. No
further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following such termination.
X. AMENDMENT/TERMINATION OF THE PLAN
A. The Board may alter, amend, suspend or terminate the Plan at any
time to become effective immediately following the close of any Purchase
Interval. However, the Plan may be amended or terminated immediately upon Board
action, if and to the extent necessary to assure that the Corporation will not
recognize, for financial reporting purposes, any compensation expense in
connection with the shares of Common Stock offered for purchase under the Plan,
should the financial accounting rules applicable to the Plan at the Effective
Time be subsequently revised so as to require the recognition of compensation
expense in the absence of such amendment or termination.
7
<PAGE>
B. In no event may the Board effect any of the following amendments or
revisions to the Plan without the approval of the Corporation's stockholders:
(i) increase the number of shares of Common Stock issuable under the Plan,
except for permissible adjustments in the event of certain changes in the
Corporation's capitalization, (ii) alter the purchase price formula so as to
reduce the purchase price payable for the shares of Common Stock purchasable
under the Plan or (iii) modify eligibility requirements for participation in the
Plan.
XI. GENERAL PROVISIONS
A. Nothing in the Plan shall confer upon the Participant any right to
continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
B. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation; however, each Plan Participant shall bear all
costs and expenses incurred by such individual in the sale or other disposition
of any shares purchased under the Plan.
C. The provisions of the Plan shall be governed by the laws of the
State of New York without regard to that State's conflict-of-laws rules.
8
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. Board shall mean the Corporation's Board of Directors.
B. Cash Earnings shall mean the (i) base salary payable to a
Participant by one or more Participating Corporations during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
all overtime payments, bonuses, commissions, current profit-sharing
distributions and other incentive-type payments. Such Cash Earnings shall be
calculated before deduction of (A) any income or employment tax withholdings or
(B) any pre-tax contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. However,
Cash Earnings shall not include any contributions (other than Code Section
401(k) or Code Section 125 contributions) made on the Participant's behalf by
the Corporation or any Corporate Affiliate to any employee benefit or welfare
plan now or hereafter established.
C. Change in Control shall mean a change in ownership of the
Corporation pursuant to any of the following transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those
securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Corporation in complete liquidation or
dissolution of the Corporation, or
(iii) the acquisition, directly or indirectly, by a person or related
group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by or is under
common control with the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant
to a tender or exchange offer made directly to the Corporation's
stockholders.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Common Stock shall mean the Corporation's common stock.
F. Corporate Affiliate shall mean any parent or subsidiary corporation
of the Corporation (as determined in accordance with Code Section 424), whether
now existing or subsequently established.
A-1
<PAGE>
G. Corporation shall mean Register.com, Inc., a Delaware corporation,
and any corporate successor to all or substantially all of the assets or voting
stock of Register.com, Inc. which shall by appropriate action adopt the Plan.
H. Effective Time shall mean the time at which the Underwriting
Agreement is executed. Any Corporate Affiliate which becomes a Participating
Corporation after such Effective Time shall designate a subsequent Effective
Time with respect to its employee-Participants.
I. Eligible Employee shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
J. Entry Date shall mean the date an Eligible Employee first commences
participation in the offering period in effect under the Plan. The earliest
Entry Date under the Plan shall be the Effective Time.
K. Fair Market Value per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the
Nasdaq National Market or any successor system. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange, then
the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined
by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which
such quotation exists.
(iii) For purposes of the initial offering period which begins at the
Effective Time, the Fair Market Value shall be deemed to be equal to
the price per share at which the Common Stock is sold in the initial
public offering pursuant to the Underwriting Agreement.
L. 1933 Act shall mean the Securities Act of 1933, as amended.
M. Participant shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.
A-2
<PAGE>
N. Participating Corporation shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.
O. Plan shall mean the Corporation's Employee Stock Purchase Plan, as
set forth in this document.
P. Plan Administrator shall mean the committee of two (2) or more Board
members appointed by the Board to administer the Plan.
Q. Purchase Date shall mean the last business day of each Purchase
Interval. The initial Purchase Date shall be October 31, 2000.
R. Purchase Interval shall mean each successive six (6)-month period
within the offering period at the end of which there shall be purchased shares
of Common Stock on behalf of each Participant.
S. Semi-Annual Entry Date shall mean the first business day in May and
November each year on which an Eligible Employee may first enter an offering
period.
T. Stock Exchange shall mean either the American Stock Exchange or the
New York Stock Exchange.
U. Underwriting Agreement shall mean the agreement between the
Corporation and the underwriter or underwriters managing the Corporation's
initial public offering of its Common Stock.
A-3
<PAGE>
FORMAN INTERACTIVE CORP.
201 Water Street
Brooklyn, New York 11201-1174
As of November 15, 1995
Mr. Richard D. Forman
201 Water Street
Brooklyn, N.Y. 11201-1174
Re: Employment Agreement
Dear Richard:
We refer to the Stock Purchase Agreement dated concurrently herewith
(the "Purchase Agreement") between Forman Interactive Corp. (the "Company"), Dan
B. Levine, Peter A. Forman, Richard D. Forman and Capital Express, L.L.C.
("CapEx").
This will confirm our understanding as to the terms of your employment
by the Company in connection with the closing (the "Closing") of the
transactions contemplated by the Purchase Agreement:
1. Position and Duties. You will be employed as a senior executive of
the Company. You may also be elected an officer and director of the Company and
serve as such for no additional compensation. You will perform such duties as
the Board of Directors of the Company may from time to time determine consistent
with your position and prior experience. You will devote such working time as
you deem necessary, in good faith, to perform your duties.
2. Compensation. (a) Your initial base salary shall be at the monthly
full-time rate (based on an average of 40 hours per week) of $10,000, which will
be prorated based on the amount of time you work on Company business each month.
The amount of time worked by you in any month will be calculated by you;
provided that, if there is a dispute as to the number of hours worked by you on
Company business in any month, the Company's Board of Directors will review such
number of hours within 30 days thereafter (or the number shall be deemed
accepted) and its decision will be final.
(b) Until the conclusion of the contemplated marketing test,
but not longer than 120 days from the date hereof, your salary shall accrue in
lieu of payment. Thereafter, and until June 30, 1996, you will be paid 50% of
your base salary and the balance shall accrue. Beginning July l, 1996, you will
be paid 75% of your base salary in accordance with the Company's policy for its
senior executives, and the balance shall accrue. Commencing as of January 1,
1997, you will be paid 100% of your base salary on a current basis with no
accrual requirement.
<PAGE>
(c) Upon the closing of the books for the Company's fiscal
year ending December 31, 1996 (which shall occur not later than [30] days after
the end of such fiscal year, you shall be paid all accrued salary, including
interest thereon from the date accrued to payment at the interest rate presently
charged by Citibank, N.A. for a one-year commitment to its preferred customers
plus 5%, provided that (i) the Company's gross revenues for such fiscal year
exceed $1,000,000 and (ii) the payment of such accrued salary and interest
thereon would not either (x) cause the then current ratio of current assets to
current liabilities to fall below 1.75:1 or (y) working capital (i.e., current
assets minus current liabilities) to be less than an amount equal to 60 days of
"Operating Losses". For purposes of this subparagraph (c), the term "Operating
Losses" means the average of the Company's operating losses for the immediately
preceding three-month period, excluding extraordinary marketing expenses. If
such tests would not be met as a result of payment of all of your accrued salary
and interest thereon, the Company shall pay you such portion, on a pro rata
basis with that of Richard D. Forman and Dan B. Levine, as it is able to so pay
without failing such tests, and the balance of the accrued salary and interest
thereon will be paid in the first fiscal quarter following December 31, 1996 as
such tests are met.
(d) The Board of Directors may by majority vote eliminate the
provisions of subparagraphs (b) and (c) of this paragraph 2. Any compensation
payable by the Company to you in your capacity as an employee pursuant to
subparagraph (a) or otherwise shall not be increased for two years after the
date hereof and thereafter shall not be increased by more than 10% in any year,
and except as provided in the previous sentence, no provision of this agreement
shall be amended, modified or eliminated except by unanimous vote of the Board
of Directors.
3. Benefits. In the event that you devote at least 90% of your normal
business hours to the Company's business for a period of twelve consecutive
weeks, the Company will provide health insurance for you and your spouse and
children having the same coverage as that presently contemplated to be provided
to Foy Sperring or its cash equivalent.
4. Employee-at-Will. You expressly acknowledge that you are an
employee-at-will of the Company.
5. Miscellaneous. (a) This agreement sets forth the entire agreement
and understanding of the parties with respect to the subject matter hereof, and
there are no other terms or agreements with respect to your employment by the
Company.
(b) This letter agreement will be governed by, and construed
and enforced in accordance with, the internal laws of the State of New York,
without regard to principles of conflicts of law.
2
<PAGE>
Please acknowledge your understanding of, and agreement with, the
foregoing by signing your name in the space indicated below, whereupon this
letter agreement will become a binding agreement upon the parties.
Very truly yours,
FORMAN INTERACTIVE CORP.
By: /s/ Peter A. Forman
-------------------
Name: Peter A. Forman
Title: President
Agreed to and acknowledged as of
the date first written above:
/s/ Richard D. Forman
- ---------------------
Richard D. Forman
<PAGE>
FORMAN INTERACTIVE CORP.
201 Water Street
Brooklyn, New York 11201-1174
January 5, 1998
Mr. Richard D. Forman
201 Water Street
Brooklyn, New York 11201-1174
Re: Employment Agreement dated as of November 15, 1995 (the
"Employment Agreement")
Dear Richard:
When signed by each of us, this letter will constitute our agreement to
amend the Employment Agreement. We hereby agree as follows:
1. Section 2 of the Employment Agreement is amended by adding thereto a
new paragraph (e) which shall read in full as follows:
"(e) The Company hereby grants to you an option, exercisable at any
time within five (5) years from the date hereof, to purchase up to
500,000 shares of the Company's common stock, of which 150,000 shares
shall be purchasable at an exercise price of $.60 per share; 100,000
shares shall be purchasable at an exercise price of $1.60 per share;
100,000 shares shall be purchasable at an exercise price of $3.00 per
share, and 150,000 shares shall be purchasable at an exercise price of
$6.00 per share. Options with respect to 150,000 of such shares shall
vest on the date of grant and the remaining options shall vest at the
rate of 100,000 shares every six (6) months hereafter until full
vested, provided that the lowest prices options shall vest first. Such
options shall be evidenced by an option certificate in the form annexed
hereto and shall be subject to the further terms and conditions set
forth in such option certificate."
<PAGE>
2. The Employment Agreement shall be further amended by deleting the
existing Section 4 thereof and substituting, in place of such Section, a new
Section 4 which shall read in full as follows:
"4. Term of Employment This Employment Agreement shall continue in full
force and effect from the date hereof through June 30, 2000, unless
sooner terminated as provided herein. Either party may terminate this
agreement upon written notice to the other party in the event of any
material breach not cured within thirty (30) days after written notice
of such breach is given to the other party hereto, which notice shall
specify the nature of the alleged breach in reasonable detail."
3. Except as amended hereby, the Employment Agreement shall continue in
full force and effect in accordance with its terms.
Kindly indicate your agreement to the foregoing by executing the
enclosed copy of this letter in the space provided below and return it to the
undersigned at your earliest convenience.
Very truly yours,
FORMAN INTERACTIVE CORP.
By: /s/ Peter A. Forman
-------------------
Name: P. Forman
Title: President
Agreed to and acknowledged as of
the date first written above:
/s/ Richard D. Forman
- ---------------------
RICHARD D. FORMAN
<PAGE>
Register.com, Inc.
575 Eighth Avenue
11th Floor
New York, New York
June 24, 1999
Mr. Richard D. Forman
c/o Register.com, Inc.
575 Eighth Avenue
11th Floor
New York, New York
Re: Employment Agreement
Dear Richard:
Reference is hereby made to your employment agreement dated as of
November 15, 1995 by and between you and Register.com, Inc. (f/k/a Forman
Interactive Corp.) (the "Company"), as amended (the "Employment Agreement"). You
and the company hereby agree to amend the Employment Agreement as follows:
1. Section 3 of the Employment Agreement is amended by adding the
following:
"For so long as you are an employee of the Company, are entitled to
receive a reimbursement of car expenses and other prerequisites equal
to $20,000 per annum; provided that to the extent you work on Company
business on less than a full-time basis, then such $20,000 shall be
prorated for the amount of time you actually work on Company business."
2. Except as amended hereby the Employment Agreement shall continue in
full force and effect in accordance with its terms.
Please indicate your agreement to the foregoing by signing a
counterpart copy of this letter.
Sincerely,
REGISTER.COM, INC.
By: /s/ Alan G. Breitman
--------------------
Name: Alan G. Breitman
Title: VP Finance, Treasurer
Agreed to as of the date hereof:
/s/ Richard D. Forman
- ---------------------
Richard D. Forman
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of September 24,
1999, between REGISTER.COM, INC., a Delaware corporation with offices at 575
Eighth Avenue, 11th Floor, New York, New York 10018 (the "Company"), and Jack S.
Levy, residing at 3801 Hudson Manor Terrace, Apt. 4M, Bronx New York 10463
("Employee").
WHEREAS, the Company desires to engage Employee to perform services for
the Company, and any present or future parent, subsidiary, or affiliate of the
Company, and (subject to Section 11) any successor or assign of the Company (the
"Companies"), and Employee desires to perform such services, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the covenants set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. Term
The Company shall employ Employee, and Employee shall perform duties
and provide services, on the terms and conditions of this Agreement, for a
period commencing October 11, 1999 (the "Commencement Date") and ending twelve
months from the Commencement Date (the "Initial Period") or such shorter period
as may be provided for herein. Thereafter, such period shall extend for
consecutive forty-five (45) day periods, unless either party shall provide
notice of non-renewal to the other party not less than thirty (30) days prior to
the expiration of the Initial Period or any such forty-five (45) day period, as
the case may be. The period during which Employee is employed hereunder is
hereinafter referred to as the "Employment Period."
SECTION 2. Duties and Services
During the Employment Period, Employee shall serve as General Counsel
of the Company. Employee shall also be available to serve as the Secretary or an
Assistant Secretary of any of the Companies. In performance of his duties
contemplated in this Agreement, Employee shall be subject to the direction of
the President or the Chief Executive Officer of the Company. Employee agrees to
his employment as described in this Section 2, not to engage in any business
activities other those of the Companies, to devote all of his business time and
efforts to the performance of his duties under this Agreement, to perform in a
diligent, professional and competent manner and to comply with the Company's
policies in effect from time to time. The preceding sentence shall not preclude
Employee from (i) engaging in charitable activities and community affairs, (ii)
managing his personal investments and affairs and (iii) serving on the boards of
a reasonable number of charitable organizations, provided that such activities
set forth in this sentence do not interfere with the proper performance of his
duties and responsibilities under this Section 2. Employee shall be based at the
Company's headquarters, which shall be in New York City or within 25 miles
thereof, and shall be available to travel as the needs of
<PAGE>
Company require. Prior to the Commencement Date, Employee shall execute the
Company's proprietary information agreement in substantially the form provided
to Employee.
SECTION 3. Compensation
(a) Base Salary. The Company shall pay Employee, during the Employment
Period, an annual base salary of $116,327 (as it may be increased from time to
time pursuant to this Section 3(a), the "Base Salary"), payable in equal,
bi-monthly installments, or in accordance with the Company's policy for the
payment of salaries to employees. The Base Salary will be reviewed not less
frequently than once per year and may be increased at the sole discretion of the
Board of Directors of the Company; provided, however, that in no event shall the
Base Salary be decreased.
(b) Options. On the Commencement Date, the Company shall award to
Employee, subject to the terms and provisions of either (at the Company's sole
discretion) the Register.com, Inc. 1999 Stock Option Plan or the Register.com,
Inc 1997 Stock Option Plan (the "Option Plan") and one or more option agreements
(the "Option Agreements") pursuant thereto, options (the "Options") to purchase
up to:
(i) 35,000 shares of common stock, $.0001 par value per
share, of the Company ("Common Stock"), for a
purchase price equal to $5.00 per share, vesting on a
monthly basis for a period of 42 months with the
first monthly vesting date beginning on the 3-month
anniversary of the Commencement Date, in 41
installments of 833 shares and a final installment of
847 shares; and
(ii) 15,000 shares of Common Stock on the following terms:
(A) vesting on a monthly basis for a period of
42 months, with the first monthly vesting
date being the earlier of October 31, 2000
and the closing of a Qualified IPO (as such
term is defined in the Certificate of
Designation of the Company's Series A
Convertible Preferred Stock), in 41
installments of 357 shares and a final
installment of 363 shares; and
(B) a purchase price equal to $25.00 per share
if the Qualified IPO does not close prior to
October 31, 2000, or the price per share of
Common Stock sold in the Qualified IPO if
the Qualified IPO closes prior to October
31, 2000.
The Option Agreements shall each provide that the vesting of the Options shall
accelerate upon the earlier of (x) a Change in Control (as defined in Section 11
below) to the 6-month anniversary date of the consummation of a Change in
Control or (y) termination of the Employee's employment by the Company following
a Change in Control other than for Cause (as defined in Section 10(a) below) or
by the Employee for Good Reason (as defined in Section 10(c) below) to the
effective date of such termination. The Option Agreements shall also provide
that, in the event the Company terminates the Employee's employment during the
Employment
2
<PAGE>
Period other than for Cause or the Employee terminates his employment for Good
Reason, the vesting of those Options that would have vested through the
expiration of the Employment Period had such termination not occurred will
accelerate to the effective date of such termination; provided, that, this
sentence shall only apply to the Options set forth in Section 3(b)(ii) above if
a Change in Control or Qualified IPO shall have occurred prior to such effective
date.
(c) Signing Bonus. The Company shall pay Employee a signing bonus of
$25,000 payable within thirty (30) days following the Commencement Date. If at
any time during the Initial Period, the Employee shall terminate his employment
other than for Good Reason or the Company shall terminate Employee's employment
for Cause, Employee shall disgorge to the Company a pro rata amount of such
bonus based on a 12-month period.
(d) IPO/Change in Control Bonus.
The Company shall pay Employee a $50,000 cash bonus within fifteen (15)
days of the earlier of (x) the date of the closing of a Qualified IPO and (y)
the date of consummation of a Change in Control. The Company shall pay the
Employee a $25,000 cash bonus on the earlier of (x) the one-year anniversary
date of the closing of the Qualified IPO or (y) the 6-month anniversary date of
the consummation of the Change in Control. The $50,000 cash bonus and the
$25,000 cash bonus are hereinafter referred to as the "IPO/COC Bonuses." If a
Qualified IPO or execution of a definitive agreement which contemplates a Change
in Control shall occur during the Employee's employment with the Company, and
the Employee (i) is terminated by the Company for a reason other than for Cause,
(ii) terminates for Good Reason, or (iii) the Company determines not to extend
the Employment Period as provided in Section 1, then the Company shall pay the
IPO/COC Bonuses at the following times: in the case of a Qualified IPO, on the
effective date of the termination or non-renewal, and in the case of the
execution of a definitive agreement which contemplates a Change in Control, on
the date of the consummation of such Change in Control.
(e) Employee Benefits. Employee shall be entitled to participate in all
benefits for which Employee qualifies that the Company may make available to
executive or administrative employees, on like terms, including all medical,
disability, hospital, health and life insurance plans and arrangements. For the
3-month period during which Employee is not eligible to participate in the
Company's current medical insurance program, the Company shall pay to Employee
an amount equal to the amount of the Company's share of the insurance premium
that the Company would have paid during such period.
(f) Termination Payment upon Termination by the Company other than for
Cause or by Employee with Good Reason. If the Company gives notice of
termination of Employee's employment for a reason other than those described in
Section 10(a) below or if Employee terminates the Employment Period for Good
Reason, then the Company shall pay Employee the Base Salary earned up to the
effective date of such termination (the "Termination Date"), plus an amount (a
"Termination Payment") equal to the Base Salary that would have been earned
pursuant to Section 3 during the period from the Termination Date to the then
scheduled expiration of the Employment Period.
3
<PAGE>
The Company may elect to make the Termination Payment (but not the IPO/COC
Bonuses) in regular and equal installments, or in a single payment equal to the
present value thereof determined using an interest rate equal to 110% of the
Short-Term Applicable Federal Rate for the month such termination is effective.
Employee shall not be required to mitigate damages resulting from his
termination of employment and the amounts payable to Employee pursuant to this
Section 3(f) shall not be offset or reduced by any other compensation earned by
Employee. Unless otherwise stated in the Option Plan, all options to purchase
Common Stock, including the Options, vested at the time of termination shall
remain outstanding unless Employee is terminated for Cause.
(g) Vacation. Employee shall be entitled to vacation and sick days in
accordance with the Company's policies for senior executive staff from time to
time.
SECTION 4. Expenses
The Company shall reimburse Employee for all reasonable travel and
other out-of-pocket expenses necessarily incurred in carrying out his duties
hereunder, upon submission and approval of written statements and bills in
accordance with the then regular procedures of the Company.
SECTION 5. Representations and Warranties
(a) Representations and Warranties of Employee. Employee represents and
warrants to the Company that (a) Employee is not under any contractual or other
restriction or obligation which is inconsistent with the execution of this
Agreement, the performance of his duties hereunder, or the other rights of the
Company hereunder and (b) Employee has no knowledge of any physical or mental
disability that would hinder his performance of duties under this Agreement.
(b) Representations and Warranties of the Company. The Company has full
power and legal right to execute and deliver this Agreement and to perform its
obligations hereunder. The Company has taken all action necessary for the
authorization, execution, delivery, and performance of this Agreement and its
obligations hereunder, and, upon execution and delivery by Employee, this
Agreement shall constitute the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The Company has
authorized the issuance and delivery of the Options in accordance with this
Agreement. The Company is not under any contractual or other restriction or
obligation which is inconsistent with the execution of this Agreement, the
performance of its obligations hereunder, or the other rights of Employee
hereunder or pursuant to which the Company is required to give any notice or
obtain any consent, approval or action prior to the execution of this Agreement
or the performance of its obligations hereunder.
SECTION 6. Non-Solicitation
In view of the unique and valuable services it is expected Employee
will render to the Companies, Employee's knowledge of the customers, trade
secrets, and other proprietary
4
<PAGE>
information relating to the business of the Company and its customers and
suppliers and similar knowledge regarding the Companies it is expected Employee
will obtain, and in consideration of the compensation to be received hereunder,
Employee agrees:
(i) that he will not during the Employment Period directly or
indirectly reveal the name of, solicit or interfere with, or
endeavor to entice away from any of the Companies any of its
suppliers, customers, contractors, consultants, or employees;
and
(ii) for a period of twelve months after he ceases to be employed
by any of the Companies under this Agreement or otherwise that
neither he nor any of his affiliates will:
(A) intentionally solicit, or induce any employee,
contractor, consultant of any of the Companies to
terminate his or his employment therewith or
hire/contract any person who within twelve (12)
months preceding such hiring had been employed
thereby; provided, however, that this subsection (A)
shall not prohibit such action with respect to any
person whose employment is terminated or suspended by
any of the Companies; and
(B) in any manner, other than fair competition,
intentionally (1) cause or attempt to cause any
customer, supplier or other independent contractor of
any of the Companies to reduce the level of business
theretofore conducted by such customer, supplier or
other independent contractor, or to cease doing
business, with any of the Companies, or (2)
discourage or attempt to discourage any prospective
customer, supplier or other independent contractor
from doing business with any of the Companies.
5
<PAGE>
SECTION 7. Patents, Etc.
Any interest in patents, patent applications, inventions, technological
innovations, copyrights, copyrightable works, developments, discoveries,
designs, and processes ("Such Inventions") which Employee now or hereafter
during the Employment Period and for six (6) months thereafter may own, conceive
of, or develop and either relating to the fields in which any of the Companies
may then be engaged or contemplates being engaged or conceived of or developed
utilizing the time, material, facilities, or information of any of the
Companies, shall belong to the Company; as soon as Employee owns, conceives of,
or develops any Such Invention, he shall immediately communicate such fact in
writing to the Company, and without further compensation, but at the Company's
expense (except as noted in clause (a) of this Section 7 below), forthwith upon
request of the Company, Employee shall execute all such assignments and other
documents (including applications for patents, copyrights, trademarks, and
assignments thereof) and take all such other action as the Company may
reasonably request in order (a) to vest in the Company all Employee's right,
title, and interest in and to Such Inventions, free and clear of liens,
mortgages, security interests, pledges, charges, and encumbrances ("Liens")
(Employee to take such action, at his expense, as is necessary to remove all
such Liens) and (b), if patentable or copyrightable, to obtain patents or
copyrights (including extensions and renewals) therefor in any and all countries
in such name as the Company shall determine.
SECTION 8. Confidential Information
All confidential information (including, without limitation, trade
secrets, know how, proprietary information, price lists, marketing plans and
customer lists), which Employee may now possess, may obtain during the
Employment Period, or may create prior to the end of the Employment Period
relating to the business of the Companies or of any customer or supplier of the
Companies shall not be published, disclosed, or made accessible by Employee to
any other person, firm, or corporation either during or after the termination of
this Agreement or used by it except during the Employment Period in the business
and for the benefit of the Companies in each case without prior written
permission of the Company. Employee shall return all tangible evidence of such
confidential information to the Company prior to or at the termination of the
Employment Period.
SECTION 9. Life Insurance
If requested by the Company, Employee shall submit to such physical
examinations and otherwise take such actions and execute and deliver such
documents as may be reasonably necessary to enable the Company, at its expense
and for its own benefit, to obtain life insurance on the life of Employee.
Employee has no reason to believe that his life is not insurable with a
reputable insurance company at rates now prevailing for healthy men of his age.
6
<PAGE>
SECTION 10. Termination
(a) Notwithstanding anything herein contained, if on or after the date
hereof and prior to the end of the Employment Period,
(1) either (i) Employee shall be physically or mentally
incapacitated or disabled or otherwise unable fully to discharge his duties
hereunder for a period of three consecutive months, (ii) Employee shall be
convicted of a crime, (iii) Employee breaches a fiduciary duty, (iv) Employee
breaches a material term of this Agreement or a material policy of the Company
(v) Employee shall continually fail or refuse to perform any duties reasonably
required in the course of his employment, (vi) Employee shall refuse to take or
fail to satisfactorily to complete any screening test for illegal drugs and
controlled substances that may be administered, (vii) Employee commits a
dishonest act or common law fraud against the Company or any customer thereof,
or (viii) Employee engages in misconduct in bad faith which is materially
injurious to the Company (the events specified in clauses (ii) through (viii),
"Cause") then, and in each such case, the Company shall have the right to give
notice of termination of Employee's employment as of a date (not earlier than
ten (10) days from such notice) to be specified in such notice, and Employee's
employment hereunder shall terminate on the date so specified; provided,
however, that, in the case of an event specified in clause (iv), or (v), the
Company shall provide Employee with notice of such breach and a reasonable
opportunity to cure such breach under the circumstances (but not more than
thirty (30) days), and Employee's employment hereunder shall terminate on the
date so specified if Employee has not cured such breach to the reasonable
satisfaction of the Company within the period specified.
(2) Employee shall die, then Employee's employment hereunder
shall terminate on the date of Employee's death. Unless otherwise stated in the
Option Plan, all Options vested at the time of termination due to Employee's
death shall remain outstanding.
Upon termination of Employee's employment under this Section 10(a), Employee
shall be entitled to receive the Base Salary to the date on which termination
shall take effect. If the Company shall terminate the Employee for Cause, any
vested but unexercised Options granted under the Option Plan shall be cancelled
and of no force and effect. Notwithstanding any other provision of this
Agreement, upon a termination under Section 10(a)(1)(i), unless otherwise stated
in the Option Plan, all Options (and, if applicable other options to purchase
Common Stock granted to Employee) vested at the time of such termination shall
remain outstanding and exercisable.
(b) Nothing contained in this Section 10 shall be deemed to limit any
other right the Company may have to terminate Employee's employment hereunder
upon any ground permitted by law, by giving forty-five (45) days notice of
termination. Upon termination of Employee's employment under this Section 10(b),
Employee shall be entitled to receive all benefits and payments as specifically
provided for pursuant to Section 3 of this Agreement.
(c) Notwithstanding anything herein, Employee shall have the right to
terminate his employment for Good Reason (as defined below) on giving ten (10)
days notice to the
7
<PAGE>
Company. Upon termination of Employee's employment under this Section 10(c),
Employee shall be entitled to receive all benefits and payments as specifically
provided for pursuant to Section 3 of this Agreement. For purposes of this
Agreement, "Good Reason" shall mean:
(1) any action by the Company which results in a material and
continuing diminution in the position, authority, duties or responsibilities, or
the assignment to Employee of duties on a regular or continuing basis which are
materially inconsistent with his duties described in Section 2,excluding for
this purpose one or several isolated and insubstantial actions not taken in bad
faith and which are remedied by the Company promptly after receipt of notice
thereof given by the Employee or which are consistent with duties or
responsibilities of senior executives of the Company;
(2) any material failure by the Company to comply with any of
the provisions of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company after receipt of notice thereof given by the Employee; or
(3) the Company's requiring Employee to be based at any office
or location other than as provided in Section 2 hereof.
(d) Notwithstanding anything herein, Employee shall have the right to
terminate his employment without Good Reason on giving forty-five (45) days
notice to the Company. Upon such notice, Employee shall be entitled to receive
the Base Salary to the date on which such termination shall take effect provided
that he shall continue to perform his duties hereunder to such date. Following
receipt of such notice, the Company may terminate the Employee's employment
effective immediately in which case the Employee shall be entitled to receive
the Base Salary to the date on which such termination shall take effect, shall
not be entitled to any further bonus payments and shall not vest in any Options
after such date.
(e) Upon termination of employment for any reason, Employee shall be
entitled to continued coverage under the Company's health, disability and
medical benefits for the period provided under applicable law (but only to the
extent Employee takes whatever actions are required of him under applicable law
to secure such continued coverage).
SECTION 11. Change in Control
In the event of a Change of Control as defined below, then the Company
may elect:
(1) to assign this Agreement and all of its rights and
obligations hereunder to the acquiring or surviving corporation; provided that
such corporation shall assume in writing all of the obligations of the Company
hereunder; and provided further that the Company (in the event and so long as it
remains in business as an independent going enterprise) shall remain liable for
the performance of its obligations hereunder in the event of a failure of the
acquiring or surviving corporation to perform its obligations under this
Agreement; or
8
<PAGE>
(2) in addition to its other rights of termination, to
terminate this Agreement upon at least ten (10) days' notice following the
consummation of such Change in Control, whereupon Employee shall be entitled to
receive all benefits and payments as specifically provided for pursuant to
Section 3 of this Agreement.
For purposes of this Agreement, "Change in Control" shall mean (i) the sale of
all or substantially all of the assets of the Corporation or the merger or
consolidation of the Corporation with or into any other corporation or entity in
which the holders of the Corporation's outstanding Common Stock immediately
prior to the merger or consolidation do not retain a majority of the voting
power of the corporation or entity surviving the merger of consolidation or (ii)
the acquisition by any person of shares of Common Stock representing a majority
of the issued and outstanding shares of Common Stock then outstanding.
SECTION 12. Survival
The covenants, agreements, representations, and warranties contained in
or made pursuant to this Agreement shall survive the Employment Period,
irrespective of any investigation made by or on behalf of any party.
SECTION 13. Modification
This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, supersedes all existing agreements between
them concerning such subject matter, and may be modified only by a written
instrument duly executed by each party.
SECTION 14. Notices
Any notices or other communication required or permitted by this
Agreement shall be in writing and shall be sufficiently given if delivered in
person, by air courier or by facsimile transmission, at the address set forth in
the preamble to this Agreement (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 14). Any
such notice or communication shall be deemed given (a) if by air courier, when
recorded on the records of the air courier as received by the receiving party;
(b) if sent by facsimile transmission, upon transmission, if on a business day
and during business hours in the country of receipt; otherwise, notice shall be
deemed given at 9:00 A.M. on the next business day in the country of receipt and
(c) if delivered in person, on the date of delivery.
SECTION 15. Waiver
Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
9
<PAGE>
SECTION 16. Binding Effect
Employee's rights and obligations under this Agreement shall not be
transferable by assignment or otherwise, such rights shall not be subject to
commutation, encumbrance, or the claims of Employee's creditors, and any attempt
to do any of the foregoing shall be void. The provisions of this Agreement shall
be binding upon and inure to the benefit of Employee and his personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees, and shall be binding upon and inure to the benefit of the Company and
its successors and those who are its assigns under Section 11. If Employee
should die while any amount would still be payable to Employee hereunder if he
had continued to live, all such amounts shall be paid in accordance with the
terms of this Agreement to Employee's beneficiary, devisee, legatee or other
designee, or if there is no such designee, to Employee's estate.
SECTION 17. No Third Party Beneficiaries
Except as provided in Section 16, this Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement.
SECTION 18. Headings
The headings in this Agreement are solely for the convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
SECTION 19. Counterparts; Governing Law
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
any conflict of laws rule which would have the substantive law of any other
jurisdiction apply to the subject matter hereof.
SECTION 20. Specific Performance
Since a breach of the provisions of Sections 6, 7 and 8 could not
adequately be compensated by money damages, the Company shall be entitled, in
addition to any other right and remedy available to it, to an injunction
restraining such breach or a threatened breach, and in either case no bond or
other security shall be required in connection therewith, and Employee hereby
consents to the issuance of such injunction. Employee agrees that the provisions
of Sections 6, 7 and 8 are necessary and reasonable to protect the Company in
the conduct of its business. If any restriction contained in Sections 6, 7 and 8
shall be deemed to be invalid, illegal, or unenforceable by reason of the
extent, duration, or geographical scope thereof, or otherwise, then the court
making such determination shall have the right to reduce such extent, duration,
geographical scope, or other provisions hereof, and in its reduced form such
restriction shall then be enforceable in the manner contemplated hereby.
SECTION 21. Severability
If any provision of this Agreement (including any provision relating to
the scope or term of or geographic areas covered by Sections 6, 7 or 8) or the
application thereof to any
10
<PAGE>
person or circumstance is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions hereof, or the
application of such provision to persons or circumstances other than those as to
which it has been held invalid or unenforceable, shall remain in full force and
effect and shall in no way be affected, impaired or invalidated thereby;
provided that, if any provision hereof or the application thereof shall be so
held to be invalid, void or unenforceable by a final judgment of a court of
competent jurisdiction, then such court may substitute therefor a suitable and
equitable provision in order to carry out, so far as may be valid and
enforceable, the intent and purpose of the invalid, void or unenforceable
provision and if such court shall fail or decline to do so, the parties shall
negotiate in good faith a suitable and equitable substitute provision. To the
extent that any provision shall be judicially unenforceable in any one or more
jurisdictions, such provision shall not be affected with respect to any other
jurisdiction, each provision with respect to each state being construed as
several and independent.
SECTION 22. Waiver of Jury Trial
Each of the Company and Employee hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or any
other basis document or the transactions contemplated hereby or thereby.
11
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
REGISTER.COM, INC.
By: /s/ Richard A. Forman
---------------------------
Name:
Title:
/s/ Jack S. Levy
-------------------------------
Jack S. Levy
12
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated January 31, 2000 relating to the financial statements and
financial statement schedule of Register.com, Inc., which appears in such
Registration Statement. We also consent to the references to us under the
headings "Experts" and "Selected Financial Data" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
- -------------------------------
New York, New York
February 3, 2000
<PAGE>
POWER OF ATTORNEY
I, the undersigned director of Register.com, Inc. (the "Company"),
hereby severally constitute and appoint Richard D. Forman, President and Chief
Executive Officer, and Alan G. Breitman, Vice President and Finance and
Accounting, and each of them individually, with full powers of substitution and
resubstitution, our true and lawful attorneys, with full powers to them and each
of them to sign for us, in our names and in the capacities indicated below, any
and all amendments to the registration statement on Form S-1 filed with the
Securities and Exchange Commission, (including post-effective amendments), and
any registration statement filed pursuant to Rule 462(b) under the Securities
Act of 1933, as amended, in connection with the registration under the
Securities Act of 1933, as amended, of equity securities of the Company, and to
file or cause to be filed the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as each of them might
or could do in person, and hereby ratifying and confirming all that said
attorney, and each of them, or their substitute or substitutes, shall do or
cause to be done by virtue of this Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on February 2, 2000.
Signature Title
- --------- ------
/s/ Reginald Van Lee
- ----------------------------------
Reginald Van Lee Director
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<S> <C> <C>
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<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-30-1999
<CASH> 1,284,648 40,944,122
<SECURITIES> 0 0
<RECEIVABLES> 133,456 2,830,702
<ALLOWANCES> (65,947) (314,516)
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<CURRENT-ASSETS> 1,356,082 62,301,329
<PP&E> 412,797 2,994,743
<DEPRECIATION> (188,497) (536,357)
<TOTAL-ASSETS> 180,786 68,336,046
<CURRENT-LIABILITIES> 786,466 32,487,972
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0 0
0 469
<COMMON> 1,729 2,106
<OTHER-SE> 821,051 21,910,749
<TOTAL-LIABILITY-AND-EQUITY> 1,611,025 68,336,046
<SALES> 0 0
<TOTAL-REVENUES> 1,319,359 9,644,552
<CGS> 461,152 3,082,499
<TOTAL-COSTS> 2,085,514 16,226,241
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 66,559 887,270
<INCOME-PRETAX> (1,160,748) (8,776,918)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,160,748) (8,776,918)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
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<NET-INCOME> (1,160,748) (8,776,918)
<EPS-BASIC> (.07) (.46)
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