<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
RESOURCEPHOENIX.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7300 68-0393895
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
RESOURCEPHOENIX.COM, INC.
2401 KERNER BOULEVARD
SAN RAFAEL, CA 94901
(415) 485-4500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
GUS CONSTANTIN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
RESOURCEPHOENIX.COM, INC.
2401 KERNER BOULEVARD
SAN RAFAEL, CA 94901
(415) 485-4500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
ALAN K. AUSTIN ARMANDO CASTRO
STEVEN V. BERNARD ELIZABETH A. YEE
JAMES C. CREIGH PAUL L. SIEBEN
WILSON SONSINI GOODRICH & ROSATI BROBECK, PHLEGER & HARRISON LLP
650 PAGE MILL ROAD TWO EMBARCADERO PLACE
PALO ALTO, CA 94304 2200 GENG ROAD
(650) 493-9300 PALO ALTO, CA 94303
(650) 424-0160
</TABLE>
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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------
Class A common stock, $0.001 par
value.............................. $57,500,000 $15,985
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- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell securities, and we are not soliciting offers to buy these securities, in
any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED , 1999
[LOGO]
SHARES
CLASS A COMMON STOCK
ReSourcePhoenix.com, Inc. is offering shares of its Class A
common stock. This is ReSourcePhoenix.com's initial public offering and no
public market currently exists for its shares. We have applied to have our Class
A common stock quoted on the Nasdaq National Market under the symbol "RPCX." We
anticipate that the initial public offering price will be between $ and
$ per share.
------------------------------
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
------------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ----------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to ReSourcePhoenix.com............................. $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
ReSourcePhoenix.com has granted the underwriters a 30-day option to
purchase up to an additional shares of Class A common stock to cover
over-allotments. BancBoston Robertson Stephens Inc. expects to deliver the
shares of Class A common stock to purchasers on , 1999.
We have requested that the underwriters reserve up to percent of the
Class A Common Stock for sale at the initial public offering price to directors,
officers, employees and other individuals designated by ReSourcePhoenix.com.
------------------------------
BANCBOSTON ROBERTSON STEPHENS THOMAS WEISEL PARTNERS LLC
The date of this prospectus is , 1999.
<PAGE> 3
Description of Artwork
Front Inside Cover
Depicted here is a graphical presentation, which shows how our service
offerings utilize technology to outsource the financial and management reporting
needs of our clients.
<PAGE> 4
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF CLASS A COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES
ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS
OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR CLASS A COMMON STOCK. IN THIS PROSPECTUS, THE
"COMPANY," "RESOURCEPHOENIX.COM," "WE," "US," AND "OUR" REFER TO
RESOURCEPHOENIX.COM, INC., A DELAWARE CORPORATION, AND ITS SUBSIDIARY.
UNTIL , 1999, ALL DEALERS THAT BUY, SELL OR TRADE OUR
CLASS A COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE
DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENT OR SUBSCRIPTION.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 1
Risk Factors................................................ 4
Use of Proceeds............................................. 13
Dividend Policy............................................. 13
Capitalization.............................................. 14
Dilution.................................................... 15
Selected Financial Data..................................... 16
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 17
Business.................................................... 26
Management.................................................. 36
Relationship with Phoenix Companies and Certain
Transactions.............................................. 41
Principal Stockholders...................................... 43
Description of Capital Stock................................ 44
Shares Eligible For Future Sale............................. 48
Underwriting................................................ 49
Legal Matters............................................... 51
Experts..................................................... 51
Where You Can Find More Information......................... 51
</TABLE>
-------------------------
ReSourcePhoenix.com, ReFOCOS, S.T.A.R. and M.A.R.S. are trademarks of
ReSourcePhoenix.com., Inc. This prospectus contains trademarks and trade names
of other companies.
i
<PAGE> 5
SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus, including "Risk Factors" and the
financial statements, carefully before making an investment decision.
RESOURCEPHOENIX.COM, INC.
ReSourcePhoenix.com is a leading provider of outsourced financial and
management reporting, accounting management, transaction processing and record
keeping services. We allow our clients to focus on their core business by
outsourcing the infrastructure and operations of these critical back-office
functions. Our primary service offerings include:
- financial and management reporting;
- accounting and finance management;
- transaction processing;
- financial budgeting and analysis;
- implementation, integration and operation of financial and management
reporting software, hardware, network and communications infrastructure;
- sales tracking;
- sales force contact management; and
- investor services record keeping.
Today's companies increasingly need financial and management reporting
systems that can collect, organize and disseminate business information in a
timely, accurate, relevant and easy-to-use format. This need is particularly
acute for early stage and middle market companies that rely upon this
information, but have limited capital and personnel resources to manage these
systems and simultaneously focus on growing their business.
We are pioneering the use of the Internet to integrate leading enterprise
resource planning software applications with the expertise of information
technology, finance, accounting and transaction processing professionals. Our
solution offers the cost-effective benefits of outsourcing while providing the
flexibility, control, customization, integration and scalability of an in-house
system. We offer our clients access to the leading enterprise resource planning
software applications, which often are too costly and complex for early stage
and middle market companies to obtain and operate.
We believe that our success will be driven by the increased demand for
outsourced financial and management reporting solutions. Reasons for this growth
include a desire by companies to focus on their core business, the inability of
many early stage and middle market companies to cost-effectively acquire
complete financial management solutions and difficulties in attracting and
retaining qualified information technology, accounting, finance and transaction
processing professionals. In addition, we believe that this growth will be
fueled by the inability of many companies to effectively adopt and implement
leading enterprise resource planning applications in-house, as well as the
challenges inherent in developing and maintaining software applications,
hardware, and data and communications networks.
By outsourcing these critical back-office functions, companies can reduce
or eliminate the costs of:
- purchasing leading enterprise resource planning applications and
associated hardware;
- integrating and implementing the software and hardware with existing
systems;
- recruiting, hiring and training an extensive staff of information
technology, accounting, finance and transaction processing professionals;
1
<PAGE> 6
- ongoing training of these professionals in their respective operational
areas;
- expanding overhead to support the growing organization; and
- ongoing technology and process upgrades.
We provide comprehensive, high-quality client service through our three
primary service offerings. Our ReFOCOS service is a financial outsourcing
solution that includes reporting, accounting, transaction processing, budgeting
and analysis solutions. M.A.R.S. is a sales force automation software
application for specialized financial services clients that can be licensed to
clients or purchased by clients as a hosted application service. Our S.T.A.R.
services are similar to ReFOCOS, but designed to provide investor services to
sponsors of limited partnerships and real estate investment trusts.
In providing our services, we offer our clients access to a broad range of
professionals who are highly qualified and specialized in their areas of
functional expertise. In addition, we develop a business partnership with each
client by assessing the client's needs and implementing a value-added solution
based on our internally developed best practices. We have never lost a client
because of service or pricing issues. As of August 1, 1999, we had 77 clients,
including 35 unaffiliated clients and 42 clients affiliated with us.
We incorporated in Delaware in July 1999 and our operating subsidiary was
incorporated in California in September 1996. Our headquarters are located at
2401 Kerner Boulevard, San Rafael, California 94901 and our telephone number is
(415) 485-4500. Our website address is www.resourcephoenix.com. The information
on our website is not a part of this prospectus.
2
<PAGE> 7
THE OFFERING
The calculation of the shares of common stock outstanding in the table
below is based on the number of shares outstanding as of August 4, 1999. The
shares of common stock outstanding excludes (1) 1,750,000 shares of Class A
common stock that have been reserved for issuance under our stock option plan
and (2) 500,000 shares of Class A common stock that have been reserved for
purchase by employees under our employee stock purchase plan.
Class A Common stock offered by
ReSourcePhoenix.com.................. shares
Common stock to be outstanding after
the offering:
Class A common stock................. shares
Class B common stock................. 10,000,000 shares
Total............................. shares
Over-allotment option.................. shares
Voting rights:
Class A common stock................. 1 vote per share
Class B common stock................. 5 votes per share
Use of proceeds........................ To fund operations, capital
expenditures and general corporate
purposes, including working capital
Proposed Nasdaq National Market
symbol................................. RPCX
SUMMARY CONSOLIDATED AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table should be read with the financial statements and notes
to those statements appearing elsewhere in this prospectus. The as adjusted
column reflects the sale of shares of Class A common stock offered by
this prospectus at an assumed initial public offering price of $ per share
after deducting underwriter discounts and commissions and estimated expenses
payable by us.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------ -------------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Total revenue............................ $ 1,175 $ 5,340 $ 4,686 $ 2,312 $ 4,238
Total operating expenses................. 1,298 6,121 10,354 4,204 11,766
Loss from operations..................... (123) (781) (5,668) (1,892) (7,528)
Net loss................................. (123) (740) (5,657) (1,933) (7,511)
Basic and diluted net loss per share..... $ (0.01) $ (0.07) $ (0.57) $ (0.19) $ (0.75)
Shares used in computing basic and
diluted net loss per share............. 10,000 10,000 10,000 10,000 10,000
Pro forma basic net loss per share.......
Pro forma diluted net loss per share.....
Shares used in computing pro forma basic
net loss per share.....................
Shares used in computing pro forma
diluted net loss per share.............
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
---------------------
PRO FORMA
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 128
Working capital (deficit)................................. (553)
Total assets.............................................. 3,425
Total liabilities......................................... 1,963
Total stockholder's equity................................ 1,462
</TABLE>
3
<PAGE> 8
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus before
deciding to invest in shares of our Class A common stock. Our business,
operating results and financial condition could be adversely affected by any of
the following risks. The trading price of our Class A common stock could decline
due to any of these risks, and you could lose all or part of your investment.
You should also refer to the other information set forth in this prospectus,
including our financial statements and the related notes.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. These statements relate to our future plans, objectives,
expectations and intentions, and the assumptions underlying or relating to any
of these statements. These statements may be identified by the use of words such
as "expects," "anticipates," "intends," and "plans" and similar expressions. Our
actual results could differ materially from those discussed in these statements.
Factors that could contribute to such differences include, but are not limited
to, those discussed below and elsewhere in this prospectus.
RISKS ASSOCIATED WITH OUR OPERATIONS
OUR SUCCESS DEPENDS ON THE ACCEPTANCE AND INCREASED USE OF INTERNET-BASED
SOFTWARE APPLICATIONS AND BUSINESS PROCESS OUTSOURCING SOLUTIONS. WE CANNOT BE
SURE THAT THESE SOLUTIONS WILL GAIN MARKET ACCEPTANCE.
Our business model depends on the adoption of Internet-based software
applications and business process outsourcing solutions by commercial users. Our
business would suffer dramatically if these solutions are not accepted or not
perceived to be effective. The market for Internet services, virtual private
networks and widely distributed Internet-enabled packaged application software
has only recently begun to develop. The growth of Internet-based business
process outsourcing solutions could also be limited by:
- concerns over transaction security and user privacy;
- inadequate network infrastructure for the entire Internet; and
- inconsistent performance of the Internet.
In addition, growth in demand for and acceptance of Internet-based software
applications and business process outsourcing solutions, including our ReFOCOS
service, by early stage and middle market companies is highly uncertain. It is
possible that our outsourced business information solutions may never achieve
market acceptance. If the market for our services does not grow or grows less
than we currently anticipate, our business, financial condition and operating
results would be seriously harmed.
OUR REFOCOS SERVICE IS TARGETED AT EARLY STAGE AND MIDDLE MARKET COMPANIES,
WHICH MAY BE MORE LIKELY TO BE ACQUIRED OR TO CEASE OPERATIONS THAN OTHER
COMPANIES. AS A RESULT, OUR CLIENT BASE MAY BE MORE VOLATILE THAN THE CLIENT
BASES OF COMPANIES THAT HAVE GREATER EMPHASIS ON MORE ESTABLISHED COMPANIES.
Our ReFOCOS service is targeted at early stage and middle market companies,
which may be more likely to be acquired or to cease operations than other
companies. As a result, our client base may be more volatile than the client
bases of companies that have greater emphasis on more established companies. We
have lost two unaffiliated clients to date, one because the client was acquired
and the other because the client ceased operations. If we experience greater
than expected client turnover, either because our clients are acquired, cease
operations or for any other reason, our business, financial condition and
operating results could be seriously harmed.
OUR GROWTH WILL BE LIMITED IF WE ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL.
We must continue to attract and retain qualified information technology,
accounting, finance and transaction processing professionals in order to perform
services to our existing and future clients. The personnel capable of filling
these positions are in great demand and recruiting and training them requires
4
<PAGE> 9
substantial resources. We may not be able to hire the necessary personnel to
implement our business strategy, or we may need to pay higher compensation for
employees than we currently expect. We cannot assure you that we will succeed in
attracting and retaining the personnel we need to grow.
OUR CURRENT AND HISTORICAL FINANCIAL INFORMATION MAY NOT BE COMPARABLE TO OUR
FUTURE FINANCIAL RESULTS.
Our historical revenues were derived primarily from services that we do not
expect to be the focus of our business in the future. We introduced our S.T.A.R.
services and our original ReFOCOS service in 1993. Our web-enabled ReFOCOS
service and our hosted M.A.R.S. service, were introduced in November 1998 and
August 1999, respectively. Because our historical revenues were derived from a
different type of service than the services that we plan to emphasize in the
future, our historical financial results may not be comparable to our future
financial results. In addition, our M.A.R.S. and S.T.A.R. services are marketed
to specialized financial services clients. Our ReFOCOS services are marketed to
a broader, less specialized market than either of our M.A.R.S. or S.T.A.R.
services. We do not have much experience selling to the market that we have
targeted for our ReFOCOS service. We may be unsuccessful in our efforts to
market to this target market.
We realized approximately 35.1% of our revenues from software revenue from
our M.A.R.S. product for the six months ended June 30, 1999. We recently began
to market M.A.R.S. as a hosted application in which our clients can outsource to
us several functions, including database management, call center services,
telemarketing services and sales transaction processing. Our strategy is to
emphasize hosting M.A.R.S. in our data centers while continuing to offer
M.A.R.S. as a licensed software product to our clients that prefer a
software-only solution. As a result, we expect that software license fees will
decline as a percentage of revenues as we add clients to our outsourced M.A.R.S.
services and devote greater resources to our other outsourced financial and
management reporting services.
WE EXPECT TO CONTINUE TO INCUR LOSSES AND EXPERIENCE NEGATIVE CASH FLOW.
We expect to have significant operating losses and to record significant
net cash outflow on a quarterly and annual basis. Our business has not generated
sufficient cash flow to fund our operations without requiring external sources
of capital. Starting our company and building our network required substantial
capital and other expenditures. As a result, we reported net loss from
operations of approximately $13.9 million for the period from January 1, 1997,
the date on which we began operations as a separate company, through June 30,
1999, and reported net cash used in operating and investing activities of $8.2
million for the same period. Further developing our business and expanding our
network will require significant additional capital and other expenditures. We
may not be able to obtain additional capital on terms favorable to us or at all.
OUR STOCK PRICE COULD FLUCTUATE DRAMATICALLY BECAUSE OF FLUCTUATIONS IN OUR
QUARTERLY OPERATING RESULTS. THIS COULD RESULT IN SUBSTANTIAL LOSSES TO
INVESTORS.
Period-to-period comparisons of our operating results may not be a good
indication of our future performance. Moreover, our operating results in some
quarters may not meet the expectations of stock market analysts or investors. In
that event, our stock price would likely fall significantly. As a result of the
evolving nature of the markets in which we compete, we may have difficulty
accurately forecasting our revenue in any given period. In addition to the
factors discussed elsewhere in this section, a number of factors may cause our
revenue to fall short of our expectations or cause our operating results to
fluctuate, including:
- the announcement or introduction of new or enhanced products or services
by our competitors;
- pricing changes by us or our competitors;
- the timing and frequency of new client engagements or cancellations; and
- sales cycle fluctuations.
5
<PAGE> 10
We must implement our services for new clients in a timely and
cost-effective manner. To the extent that we are unable to staff client
implementations using internal staff, we will need to delay our client
implementations or hire outside software and systems integration consultants,
whose services generally are much more costly. If we delay implementation for
any client, we may not meet the expectations of that client, which could damage
our relationship with that client. A delay in implementation would also postpone
our recognition of revenues from that client, perhaps into a subsequent
financial reporting period, which could cause us not to meet analyst or investor
expectations for that period. If we hire outside software and systems
integration consultants, our operating expenses will increase and our operating
results will be harmed.
Stock markets often experience significant price and volume fluctuations.
These fluctuations, as well as general economic and political conditions
unrelated to our performance, may adversely affect the price of our Class A
common stock. In particular, following initial public offerings, the market
prices for stocks of Internet and technology-related companies often reach
levels that bear no relationship to the operating performance of these
companies. These market prices are generally not sustainable and could vary
widely. The market prices of the securities of Internet-related and
technology-related companies have been especially volatile. If our Class A
common stock trades to high levels following this offering, it could eventually
experience a significant decline. In addition, if our performance falls below
the expectations of securities analysts or investors, the price of our Class A
common stock will likely fall significantly.
OUR OPERATING RESULTS DEPEND ON OUR RELATIONSHIPS WITH A LIMITED NUMBER OF
CLIENTS.
Our results of operations and our business depend on our relationships with
a limited number of large clients. Set forth below is the percentage of revenues
during 1998 and the six months ended June 30, 1999 for each of our clients that
accounted for more than 10% of our revenues and for our ten largest clients
combined:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- ----------------
<S> <C> <C>
Phoenix Leasing (an affiliate) 41% 18%
GE Capital Aviation Services/PIMC 20% 10%
John Hancock Advisors -- 30%
Total of ten largest clients combined: 86% 84%
</TABLE>
We cannot assure you that we will be able to maintain our historical rate
of growth or our current level of revenues derived from any of our clients in
the future. The termination of our business relationships with any of our
significant clients or a material reduction in the use of our services by any of
our significant clients, could seriously harm our business and operating
results.
WE RELY ON THIRD PARTIES TO SUPPLY US WITH THE SOFTWARE, HARDWARE AND SERVICES
NECESSARY TO PROVIDE OUR SERVICES.
A substantial portion of the software that is integrated into our services
is licensed from third parties, including Oracle Corporation and Necho Systems
Corp. Our agreements with our software vendors are non-exclusive. Our vendors
may choose to compete with us directly. Oracle, for example, recently announced
a web-enabled version of its enterprise resource planning software that it plans
to market directly to middle market businesses. Our vendors may also enter into
strategic relationships with our competitors. These relationships may take the
form of strategic investments or marketing or other contractual arrangements.
Our competitors may also license and utilize the same technology in competition
with us. We cannot assure you that the vendors of technology used in our
products will continue to support this technology in its current form. We also
cannot assure you that we will be able to adapt our own offerings to changes in
this technology. In addition, we cannot assure you that the financial or other
difficulties of our vendors will not adversely affect the technologies
incorporated into our services, or that if these technologies become unavailable
we will be able to find suitable alternatives.
6
<PAGE> 11
In addition, we depend on third parties, such as Cisco Systems, Inc. and
Sun Microsystems, Inc., to supply servers, routers, firewalls, encryption
technology and other key components of our telecommunications and network
infrastructure. If any of our vendors fail to provide needed products or
services in a timely fashion or at an acceptable cost, our business, financial
condition and operating results could be seriously harmed. A disruption in
telecommunications capacity could prevent us from maintaining our standard of
service. Some of the key components of our system and network are available only
from sole or limited sources in the quantities and quality we demand.
We also depend on the services of software and systems integration firms to
help us establish service with new clients. If the services of these firms
became unavailable for any reason, our services to new clients could be delayed.
In addition, we could be forced to pay higher rates for the services of these or
substitute firms. If either of these events were to occur, our business,
financial condition and operating results could be seriously harmed.
OUR BUSINESS AND REPUTATION MAY BE HARMED IF WE MAKE MISTAKES IN PERFORMING OUR
SERVICES.
Our business is subject to various risks resulting from errors and
omissions in performing services for our clients. We perform accounting,
finance, transaction processing, tax reporting, transfer agency and other
services for our clients. We process data received from our clients that is
critical to our clients' businesses and operations. We may make mistakes in
performing our services, which may result in claims being made against us. If we
do make mistakes, we cannot assure you that our financial reserves or insurance
will be adequate to cover any claims made against us. In addition, our business
reputation will be seriously harmed if we make any mistakes, which could
adversely affect our relationships with our existing clients and our ability to
attract new clients.
OUR SOFTWARE PRODUCTS AND THE SOFTWARE THAT WE HAVE INTEGRATED INTO OUR SERVICES
MAY HAVE UNKNOWN DEFECTS THAT COULD HARM OUR REPUTATION OR DECREASE MARKET
ACCEPTANCE OF OUR SERVICES.
We derived more than 35.1% of our revenues from licensing our M.A.R.S.
software product during the six months ended June 30, 1999. Our clients rely on
this software to perform critical business functions such as sales and expense
tracking and fulfillment/inventory tracking. Because our clients depend on our
M.A.R.S. software for their critical systems and business functions, any
interruptions caused by unknown defects in our software could damage our
reputation, cause our clients to initiate product liability suits against us,
divert our research and development resources, cause us to lose revenue or delay
market acceptance of the outsourced business service that is based on this
software. Any of these things could harm our business. Our software may contain
errors or defects, particularly when new versions or enhancements are released.
We may not discover software defects that affect our current software or
enhancements until after they are sold. Although we have not experienced any
material software defects to date, any defects could cause our clients to
experience severe system failures.
The software applications that we license from Oracle, Necho and other
third parties and integrate into our service offerings may contain defects when
introduced or when new versions or enhancements are released. We cannot assure
you that software defects will not be discovered in the future. If our services
incorporate software that has defects and these defects adversely affect our
service offerings, our business, reputation and operating results may be harmed.
THE MARKETS WE SERVE ARE HIGHLY COMPETITIVE AND MANY OF OUR COMPETITORS HAVE
MUCH GREATER RESOURCES.
Our current and potential competitors include applications service
providers, systems integrators, and software and hardware vendors. Our
competitors, who may operate in one or more of these areas, include companies
such as Andersen Consulting, DIGEX, Inc., Exodus Communications, Inc.,
International Business Machines Corporation, PricewaterhouseCoopers LLP, and
USInternetworking, Inc. Some of our competitors may make strategic acquisitions
or establish cooperative relationships among themselves or with third parties to
increase their ability to rapidly gain market share by addressing the needs of
our
7
<PAGE> 12
prospective clients. These relationships may take the form of strategic
investments or marketing or other contractual arrangements.
Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we do.
We cannot be sure that we will have the resources or expertise to compete
successfully in the future. Our competitors may be able to:
- more quickly develop and expand their network infrastructures and service
offerings;
- better adapt to new or emerging technologies and changing customer needs;
- negotiate more favorable licensing agreements with software application
vendors;
- more successfully recruit qualified information technology, accounting,
finance and transaction processing professionals;
- negotiate more favorable services agreements with software and systems
integrators;
- devote greater resources to the marketing and sale of their services; and
- adopt more aggressive pricing policies.
Some of our competitors may also be able to provide customers with
additional benefits at lower overall costs. We cannot be sure that we will be
able to match cost reductions by our competitors. In addition, we believe that
there is likely to be consolidation in our markets, which could increase price
and other competition in ways that could seriously harm our business, financial
condition and operating results. Finally, there are few substantial barriers to
entry, and we have no patented technology that would bar competitors from our
market. See "Business -- Competition."
WE RELY ON RAPIDLY CHANGING TECHNOLOGY AND MUST ANTICIPATE NEW TECHNOLOGIES.
The technologies in which we have invested are rapidly evolving. As a
result, we must anticipate and rapidly adapt to changes in technology to keep
pace with the latest technological advances that are likely to affect our
business and competitive position. Our future success will depend on our ability
to deploy advanced technologies and respond to technological advances in a
timely and cost effective manner. Even if we are able to deploy new technologies
in a timely manner, we may incur substantial cost in doing so. If we are unable
to develop or successfully introduce new technology on an as needed basis or if
we are unable to do so in a cost effective manner, our business, financial
condition and operating results would be seriously harmed.
WE PLAN TO EXPAND VERY RAPIDLY AND MANAGING OUR GROWTH MAY BE DIFFICULT.
We have recently begun to aggressively expand our operations. To the extent
that our business continues to grow both geographically and in terms of the
number of products and services we offer, we must:
- expand, train and manage our employee base effectively;
- enlarge our network and infrastructure to accommodate new clients;
- expand our infrastructure and systems to accommodate the growth of our
existing clients; and
- improve our management, financial and information systems and controls.
There will be additional demands on our operations group and sales,
marketing and administrative resources as we increase our service offerings and
expand our target markets. The strains imposed by these demands are magnified by
the early stage nature of our operations. If we cannot manage our growth
effectively, our business, financial condition or operating results could be
seriously harmed.
8
<PAGE> 13
WE DEPEND ON A LIMITED NUMBER OF KEY EXECUTIVES WHO WOULD BE DIFFICULT TO
REPLACE.
Our success depends in significant part on the continued services of our
senior management personnel. Losing one or more of our key executives could
seriously harm our business, financial condition and operating results. We
cannot assure you that we will be able to retain our key executives or that we
would be able to replace any of our key executives if we were to lose their
services for any reason.
WE COULD BE HARMED IF OUR PRODUCTS, SERVICES OR TECHNOLOGIES ARE NOT COMPATIBLE
WITH OTHER PRODUCTS, SERVICES OR TECHNOLOGIES.
We believe that our ability to compete successfully also depends on the
continued compatibility of our services with products, services and network
architectures offered by various vendors. If we fail to conform to a prevailing
or emerging standard, our business, results of operations and financial
condition could be seriously harmed. We cannot be sure that their products will
be compatible with ours or that they will adequately address changing customer
needs. We also cannot be sure what new industry standards will develop. We also
cannot be sure that we will be able to conform to these new standards quickly
enough to stay competitive. In addition, we cannot be sure that products,
services or technologies developed by others will not make our products,
services or technologies noncompetitive or obsolete.
IF WE DO NOT EFFECTIVELY EXECUTE OUR STRATEGY, OUR COMPETITORS MAY SEIZE THE
MARKET OPPORTUNITY WE HAVE IDENTIFIED.
If we fail to execute our strategy in a timely or effective manner, our
competitors may be able to seize the marketing opportunities we have identified.
Our business strategy is complex and requires that we successfully and
simultaneously complete many tasks. In order to be successful, we will need to:
- attract and retain additional clients;
- attract and retain highly-skilled employees;
- evolve our business to gain advantages in an increasingly competitive
environment;
- negotiate effective partnerships and develop economically attractive
products and services; and
- build and operate a complex data and communications network.
We cannot assure you that we will be able to successfully execute all elements
of our strategy.
IF WE DO NOT EFFECTIVELY ADDRESS OUR MARKET, WE MAY NEVER REALIZE A RETURN ON
THE INVESTMENTS WE HAVE MADE TO EXECUTE OUR STRATEGY.
We have made substantial investments to pursue our strategy. These
investments include:
- developing relationships with particular software providers, including
Oracle and Necho;
- investing to develop unique product features, including invoice reporting
and imaging functions; and
- developing implementation resources around specific applications.
These investments may not be successful. More cost-effective strategies may
be available to compete in this market. We may have chosen to focus on the wrong
application areas or to work with the wrong partners. Potential customers may
not value the specific product features in which we have invested. We cannot
assure you that our strategy will prove successful.
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST US, EVEN WITHOUT MERIT, COULD
COST A SIGNIFICANT AMOUNT OF MONEY TO DEFEND AND DIVERT MANAGEMENT'S ATTENTION
AWAY FROM OUR BUSINESS.
As the number of software products in our target market increases and the
functionality of these products further overlaps, software industry participants
may become increasingly subject to infringement claims. Someone may even claim
that our technology infringes their proprietary rights. Any infringement
9
<PAGE> 14
claims, even if without merit, can be time consuming and expensive to defend.
For example, we recently incurred significant expenses to successfully defend a
meritless copyright infringement lawsuit that was filed against us. These suits
may divert management's attention and resources and could cause service
implementation delays. They also could require us to enter into costly royalty
or licensing agreements. If successful, a claim of product infringement against
us and our inability to license the infringed or similar technology could
adversely affect our business.
WE MAY BE LIABLE IF WE LOSE CLIENT DATA FROM NATURAL DISASTERS OR FOR ANY OTHER
REASON.
We currently conduct all of our data processing and network operations at
our facility in San Rafael, California. In the event of a catastrophic disaster
at our San Rafael data operations center, SunGard Recovery Services Inc. will
provide business resumption of our critical systems at their data center in
Philadelphia.
We have comprehensive disaster recovery procedures in place, including
uninterruptible power supply systems with seven day capacity, back-up power
generators, nightly backup of our critical data, systems with off-site data
vaults, and 24 and 72 hour service level agreements for recovering systems and
data from the last available backup. However, we cannot assure you that our
disaster recovery procedures are sufficient, or that our client's data would be
recoverable in the event of a disaster.
Our operations are dependent on SunGard being able to successfully provide
back-up processing capability if we are unable to protect our computer and
network systems against damage from a major catastrophe such as an earthquake or
other natural disaster, fire, power loss, security breach, telecommunications
failure or similar event. We cannot assure you that the precautions that we have
taken to protect ourselves against these types of events will prove to be
adequate. If we suffer damage to our data or operations center, experience a
telecommunications failure or experience a security breach, our operations could
be seriously interrupted. We cannot assure you that any such interruption or
other loss will be covered by our insurance. Any such interruption or loss could
seriously harm our business and results of operations.
IF OUR COMPUTER SYSTEMS AND SOFTWARE PRODUCTS ARE NOT YEAR 2000-COMPLIANT, OUR
SERVICES COULD BE DISRUPTED.
We confront the Year 2000 problem in three contexts.
Our clients. Many of our clients and prospective clients maintain their
operations on computer systems that may not be Year 2000-compliant. The failure
of any clients to ensure that their systems are Year 2000-compliant could
seriously harm their businesses, which in turn could seriously harm our
business, financial condition and operating results. In addition, clients or
prospective clients may delay purchasing software and related services,
including our ReFOCOS, S.T.A.R. and M.A.R.S. services and M.A.R.S. software, due
to concerns related to the Year 2000 problem.
Our services. We sell computer-related services, so our risk of lawsuits
relating to Year 2000 issues may be greater than that of companies in other
industries. Because our computer products and services may incorporate
components from different providers, it may be difficult to determine which
component may cause a Year 2000 problem. As a result, we may become subject to
Year 2000-related lawsuits whether or not our products and services are Year
2000-compliant.
Our suppliers. Our business could be adversely affected if we cannot obtain
products, services or systems that are Year 2000-compliant when we need them. In
addition, if our vendors and service providers cannot deliver their products
because of Year 2000 compliance problems, our business, financial condition and
operating results could be seriously harmed.
10
<PAGE> 15
RISKS ASSOCIATED WITH THE INTERNET INDUSTRY
OUR OPERATING RESULTS COULD BE IMPAIRED IF WE BECOME SUBJECT TO BURDENSOME
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES.
We are currently not subject to direct regulation by any domestic or
foreign governmental agency, other than regulations applicable to businesses
generally, and laws or regulations directly applicable to electronic commerce.
However, due to the increasing popularity and use of the Internet, it is
possible that a number of laws and regulations may be adopted with respect to
the Internet, relating to:
- user privacy;
- pricing;
- content;
- distribution; and
- characteristics and quality of products and services.
The adoption of any additional laws or regulations may decrease or slow the
expansion of the Internet. A decline in the growth of the Internet could
decrease demand for our products and services and increase our cost of doing
business. Moreover, how existing laws will apply to the Internet is uncertain
with respect to property ownership, export of specialized technology, sales tax
and personal privacy and various other aspects. Our business, financial
condition and operating results could be seriously harmed by any new legislation
or regulation. The application of laws and regulations from jurisdictions whose
laws do not currently apply to our business, or the application of existing laws
and regulations to the Internet and other online services could also harm our
business.
We plan to offer our service over the Internet which reaches multiple
jurisdictions. These jurisdictions may claim that we are required to qualify to
do business as a foreign corporation in each state or foreign country which we
reach. Our failure to qualify as a foreign corporation in jurisdictions where we
are required to do so could subject us to taxes and penalties. Further, we might
unintentionally violate the laws of foreign jurisdictions in which we operate on
the Internet. Current laws may be modified and new laws may be enacted in the
future.
RISKS RELATED TO THIS OFFERING
WE CANNOT BE CERTAIN THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR OUR CLASS A
COMMON STOCK.
Prior to this offering, there has been no public market for our Class A
common stock, and we cannot assure you that an active trading market for the
Class A common stock will develop or continue as a result of this offering. If
no active trading market develops for our Class A common stock, you may have
difficulty selling our Class A common stock, which could adversely affect the
price you are able to obtain for our Class A common stock.
GUS CONSTANTIN CAN EXERT SUBSTANTIAL CONTROL OVER OUR COMPANY.
Gus Constantin, our founder, chairman and chief executive officer, owns all
of the shares of our Class B common stock, each share of which entitles its
holder to five votes on most stockholder actions. As a result, Mr. Constantin
will have % of the combined voting power of both classes of our common
stock after this offering. Holders of Class A common stock will be entitled to
one vote per share and will have % of the combined voting power of both
classes of our common stock after this offering. As a result of his stock
ownership after this offering, Mr. Constantin will be in a position, without the
approval of our public stockholders, to take corporate actions that could
conflict with the interests of our public stockholders, such as:
- amending our charter documents;
- approving or defeating mergers or takeover attempts;
11
<PAGE> 16
- determining the amount and timing of dividends paid to himself and to
holders of Class A common stock;
- changing the size and composition of our board of directors and
committees of our board of directors; and
- otherwise controlling management and operations and the outcome of most
matters submitted for a stockholder vote.
OUR OFFERING PRICE DOES NOT NECESSARILY RELATE TO ANY ESTABLISHED CRITERIA OF
VALUE AND OUR STOCK PRICE MAY TRADE AT PRICES BELOW OUR OFFERING PRICE.
Through negotiations with the underwriters, we will determine the public
offering price of the shares of our Class A common stock. This price will not
necessarily relate to our book value, assets, past operating results, financial
condition or any other established criteria of value. As a result, the shares
being offered may trade at market prices below the initial public offering
price.
APPROXIMATELY 11.175 MILLION, OR %, OF OUR TOTAL OUTSTANDING SHARES ARE
RESTRICTED FROM IMMEDIATE RESALE BUT MAY BE SOLD INTO THE MARKET IN THE NEAR
FUTURE. THIS COULD CAUSE THE MARKET PRICE OF OUR CLASS A COMMON STOCK TO DROP
SIGNIFICANTLY, EVEN IF OUR BUSINESS IS DOING WELL.
After this offering, we will have shares of Class A common stock
outstanding. This includes the shares that we are selling in this
offering, which may be resold in the public market immediately as long as these
shares are not purchased by our affiliates. The remaining %, or
shares, of our total outstanding shares will become available for resale in the
public market as shown in the chart below.
As restrictions on resale end, the market price of our Class A common stock
could drop significantly if the holders of restricted shares sell them or are
perceived by the market as intending to sell them.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES TOTAL OUTSTANDING DATE OF AVAILABILITY FOR SALE INTO PUBLIC MARKET
- ---------- ----------------- ------------------------------------------------
<C> <C> <S>
11,175,405 180 days after the date of this prospectus, subject in some
cases to volume limitations
</TABLE>
For a more detailed description, see "Shares Eligible for Future Sale."
OUR MANAGEMENT HAS BROAD DISCRETION OVER USE OF THE PROCEEDS FROM THIS OFFERING
AND MAY NOT USE THE PROCEEDS EFFECTIVELY.
The net proceeds of this offering are estimated to be approximately $
at an assumed initial public offering price of $ per share and after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses. Our management will retain broad discretion as to the
allocation of the proceeds of this offering. See "Use of Proceeds."
OUR CHARTER DOCUMENTS COULD DETER A TAKEOVER EFFORT, WHICH COULD INHIBIT YOUR
ABILITY TO RECEIVE AN ACQUISITION PREMIUM FOR YOUR SHARES.
Provisions of our certificate of incorporation, bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. In addition, we are subject to the
provisions of Section 203 of the Delaware General Corporation Law. This statute
could prohibit or delay the accomplishment of mergers or other takeover or
change in control in attempts with respect to us and, accordingly, may
discourage attempts to acquire us. See "Description of Capital Stock."
12
<PAGE> 17
USE OF PROCEEDS
Our net proceeds from the sale of the shares of Class A common
stock offered by this prospectus are estimated to be approximately $
based upon an assumed offering price of $
per share, or approximately $ if the underwriters exercise fully their
over-allotment option, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us.
We currently estimate that the net proceeds of the offering will be used as
follows:
- fund operations;
- capital expenditures; and
- general corporate purposes, including working capital.
From time to time, in the ordinary course of business, we may pursue the
acquisition of new or complementary businesses, products or technologies in an
effort to enter into new business areas, diversify our sources of revenue and
expand our product and service offerings. A portion of the net proceeds may be
used to fund acquisitions or investments. We currently have no arrangements,
agreements or understandings, and are not engaged in active negotiations for any
material acquisitions or investments.
DIVIDEND POLICY
We have never declared or paid dividends on our capital stock and do not
anticipate paying any dividends in the foreseeable future. We currently intend
to retain any future earnings for the expansion and operation of our business.
13
<PAGE> 18
CAPITALIZATION
The following table sets forth, as of June 30, 1999, our total
capitalization on an actual basis and as adjusted to give effect to the sale of
shares of Class A common stock in this offering at an assumed initial
public offering price of $ per share and the application of the estimated
net proceeds after deducting estimated underwriting discounts and commissions
and estimated offering expenses. This table should be read in conjunction with
our historical consolidated financial statements and the related notes included
elsewhere in this prospectus. The indicated number of shares of common stock
outstanding does not include 1,175,405 shares of Class A common stock issuable
upon exercise of stock options granted under our stock option plan at a weighted
average exercise price of $1.50 per share and shares at Class A common
stock that will be sold in this offering if the underwriters exercise fully
their over-allotment option.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
---------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Preferred stock, $.001 par value per share; 5,000,000 shares
authorized, actual and as adjusted, no shares issued or
outstanding, actual and as adjusted....................... $ -- $
Class A common stock, $.001 par value per share; 15,000,000
shares authorized, actual and as adjusted, no shares,
issued and outstanding, actual and shares,
issued and outstanding, as adjusted....................... --
Class B common stock, $.001 par value per share; 10,000,000
shares authorized, actual and as adjusted, 10,000,000
issued and outstanding, actual and as adjusted............ 15,370
Accumulated deficit......................................... (13,908)
-------- -------
Total stockholders' equity.................................. $ 1,462 $
======== =======
</TABLE>
14
<PAGE> 19
DILUTION
Our pro forma net tangible book value as of June 30, 1999 was approximately
$ , or $
per share of common stock. Pro forma net tangible book value per share
represents the amount of our pro forma total tangible assets less pro forma
total liabilities divided by the pro forma number of shares of common stock
outstanding as of June 30, 1999. Without taking into account any other changes
in pro forma net tangible book value, other than to give effect to our sale of
the shares of Class A common stock in this offering and the receipt
and application of the net proceeds from this offering, the pro forma net
tangible book value as of June 30, 1999 would have been approximately $ , or
$ per share of common stock. This represents an immediate increase in pro
forma net tangible book value of $ per share to existing stockholders and an
immediate dilution in pro forma net tangible book value of $ per share to
investors purchasing Class A common stock in this offering.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of June 30,
1999................................................... $
Increase per share attributable to new investors..........
--------
Pro forma net tangible book value per share after this
offering..................................................
--------
Dilution per share to new investors......................... $
========
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1999,
the difference between the number of shares of Class A common stock purchased
from us, the total consideration paid and the average price per share paid by
our existing stockholder and by new investors, assuming an initial public
offering price of $ per share and before deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....................... % $ % $
New investors............................... $
---------- --- ---------- ---
Total............................. % %
========== === ========== ===
</TABLE>
The foregoing table assumes no exercise of the underwriters' over-allotment
option or shares of Class A common stock underlying outstanding options. As of
August 4, 1999, options to purchase 1,175,405 shares of Class A common stock
were outstanding at a weighted average exercise price of $1.50 per share. To the
extent that these options are exercised, new investors will experience further
dilution.
15
<PAGE> 20
SELECTED FINANCIAL DATA
The following selected financial data should be read with our consolidated
financial statements and the notes to those statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The consolidated statement of operations
data for the fiscal years ended December 31, 1996, 1997 and 1998 and the
consolidated balance sheet data at December 31, 1997 and 1998, are derived from
our consolidated financial statements which have been audited by Arthur Andersen
LLP, our independent public accountants, and are included elsewhere in this
prospectus. The consolidated statements of operations data for the fiscal years
ended December 31, 1994 and 1995 and the six-month periods ended June 30, 1998
and June 30, 1999, and the consolidated balance sheet data at June 30, 1999, are
derived from our unaudited interim consolidated financial statements included
elsewhere in this prospectus. Our unaudited consolidated financial statements
have been prepared on a basis consistent with our audited consolidated financial
statements and, in the opinion of our management, include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the consolidated results of operations for these periods. Please be advised that
historical results are not necessarily indicative of the results to be expected
in the future, and results of interim periods are not necessarily indicative of
results for the entire year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue:
Contract service revenue................. $ 691 $ 896 $ 1,175 $ 2,255 $ 2,460 $ 1,240 $ 1,836
Software revenue......................... -- -- -- -- 44 38 1,489
Affiliate revenue........................ -- -- -- 3,085 2,182 1,034 913
------- ------- ------- ------- ------- ------- -------
Total revenue.......................... 691 896 1,175 5,340 4,686 2,312 4,238
------- ------- ------- ------- ------- ------- -------
Operating Expenses:
Cost of providing services............... 325 442 570 2,874 4,555 2,311 2,559
General and administrative............... 188 222 298 2,035 2,072 750 1,142
Research and development................. -- -- -- 566 2,286 674 1,550
Client acquisition....................... 345 347 418 513 1,134 328 996
Depreciation and amortization............ 5 8 12 133 307 141 228
Stock-related compensation............... -- -- -- -- -- -- 5,291
------- ------- ------- ------- ------- ------- -------
Total operating expenses............... 863 1,019 1,298 6,121 10,354 4,204 11,766
------- ------- ------- ------- ------- ------- -------
Loss from operations....................... (172) (123) (123) (781) (5,668) (1,892) (7,528)
Other revenue (expense).................... -- -- -- 41 11 (41) 17
------- ------- ------- ------- ------- ------- -------
Net loss................................... $ (172) $ (123) $ (123) $ (740) $(5,657) $(1,933) $(7,511)
======= ======= ======= ======= ======= ======= =======
Basic and diluted net loss per share....... $ (0.02) $ (0.01) $ (0.01) $ (0.07) $ (0.57) $ (0.19) $ (0.75)
Shares used in computing basic and diluted
net loss per share....................... 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Pro forma basic net loss per share.........
Shares used in computing pro forma basic
net loss per share.......................
Pro forma diluted net loss per share.......
Shares used in computing pro forma diluted
net loss per share.......................
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------------------------- JUNE 30,
1994 1995 1996 1997 1998 1999
----------- ----------- ----------- ------ ------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEETS DATA:
Cash and cash equivalents................. $ -- $ -- $ -- $ 106 $ 503 $ 128
Accounts receivable....................... 219 300 303 889 601 1,144
Property and equipment.................... 232 250 256 686 694 1,994
Other assets.............................. -- -- -- 51 24 159
Total assets.............................. 451 550 559 1,732 1,822 3,425
Accounts payable and accrued
liabilities............................. 446 369 361 874 1,195 962
Deferred revenue.......................... -- -- -- -- 627 1,001
Total liabilities......................... 446 369 361 874 1,822 1,963
Stockholder's equity...................... 5 181 198 858 -- 1,462
</TABLE>
16
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and the notes appearing elsewhere in this prospectus. The following
discussion contains forward-looking statements. Our actual results may differ
materially from those projected in the forward-looking statements. Factors that
might cause future results to differ materially from those projected in the
forward-looking statements include those discussed in "Risk Factors" and
elsewhere in this prospectus.
OVERVIEW
ReSourcePhoenix.com is a leading provider of outsourced financial and
management reporting, accounting management, transaction processing and record
keeping services. We allow our clients to focus on their core business by
outsourcing the infrastructure and operations of these critical back-office
functions.
Our operating subsidiary, ReSource/Phoenix, Inc., commenced operations on
January 1, 1997. Before this time, we operated as part of Phoenix Leasing Inc.,
a sponsor and syndicator of publicly-traded limited partnerships, for more than
25 years. In August 1999, we reorganized into a holding company structure. As a
result, we currently conduct all of our operations through our wholly-owned
subsidiary ReSource/Phoenix, Inc.
At the time of our formation, we provided information technology,
accounting, finance and transaction processing services to more than 43 entities
affiliated with Phoenix Leasing Inc. which had at that time total combined
assets of more than $200 million. We provided services to 42 entities affiliated
with Phoenix Leasing Inc., which had total combined assets of more than $300
million at June 30, 1999. See "Relationship with Phoenix Companies and Certain
Transactions." Financial information for periods prior to January 1, 1997 have
been derived from the financial statements of Phoenix Leasing using principles
of carve-out accounting.
We introduced our S.T.A.R. and our original ReFOCOS services in 1993. Using
our S.T.A.R. service, we perform a variety of investor relations functions for
sponsors of limited partnerships and real estate investment trusts. Using our
original ReFOCOS service, we perform a wide variety of accounting, finance,
transaction processing and other related services for our clients. Our S.T.A.R.
and original ReFOCOS services are based on point-to-point client-server
technology.
In March 1999, we began licensing our M.A.R.S. software, which is a sales
force automation application aimed at the mutual fund and variable annuity
industries. We realized approximately 35.1% of our revenues from software
revenues from our M.A.R.S. product for the six months ended June 30, 1999.
Moving forward, however, we expect that software revenues will decline as a
percentage of revenues as we add clients for our hosted M.A.R.S. service and as
we devote greater resources to our other outsourced business services.
We introduced our web-enabled ReFOCOS service and our hosted M.A.R.S.
service in November 1998 and August 1999, respectively. Our Web-enabled ReFOCOS
service is similar to our original ReFOCOS service, except that clients can now
access the service using conventional Internet browser software. We are
currently implementing our first hosted M.A.R.S. client. Our M.A.R.S. service
offerings will include a hosted software service in which we install and
maintain the M.A.R.S. software in our data operations center for our clients.
We expect to record aggregate compensation expense of $ million in the
third quarter of 1999 in connection with the grant of stock options to some of
our officers and employees. This entire amount will be recognized at the
effective time of our initial public offering.
Contract service revenue. We derive contract service revenue from fees to
provide monthly information technology, accounting, finance and transaction
processing for both ReFOCOS and S.T.A.R.
17
<PAGE> 22
clients and from one-time installation fees. We recognize monthly fees as these
services are performed and installation fees once installation is complete.
Software revenue. We derive software revenue from software license fees,
consulting services, training and maintenance for our M.A.R.S. software.
Software license fee revenue consists principally of up-front license fees
earned from the licensing of the M.A.R.S. software. Revenue from up-front
software license agreements is generally recognized in accordance with the
American Institute of Certified Public Accountants Statement of Position 97-2.
This revenue is recognized when delivery has occurred, collection is deemed
probable, the fee is fixed or determinable and vendor-specific objective
evidence exists to allocate the total fee to all delivered and undelivered
elements of the arrangement. To date, we have licensed M.A.R.S. product
primarily on a perpetual basis. Consulting services and training revenues are
recognized as services are performed and accepted by the customers. Maintenance
revenue is recognized ratably over the term of the agreement. In instances where
software license agreements include a combination of consulting services,
training and maintenance, these separate elements are unbundled from the
agreement based on the element's fair value.
Affiliate revenue. We derive affiliate revenue by providing our S.T.A.R.
and ReFOCOS services to our affiliates. Prior to August 1, 1999 we charged our
affiliates the fully allocated cost to provide such services. Effective August
1, 1999, we increased our fees to affiliates to reflect a market rate. We
recognize affiliate revenue in the same manner as our contract service revenues.
See "Relationship with Phoenix Companies and Certain
Transactions -- Intercompany Agreements."
Components of costs and expenses. Cost of providing services includes
salaries and benefits for personnel in our operations group, fees paid to
outside service providers other than implementation service providers,
amortization of certain capitalized software costs and other miscellaneous
operating costs. General and administrative expenses includes salaries and
benefits for management personnel, fees paid to outside service providers for
corporate-related services and other corporate overhead. Research and
development expenses include salaries and benefits for personnel engaged in
M.A.R.S. development, consulting fees paid to outside service providers engaged
in M.A.R.S. development and other miscellaneous costs associated with M.A.R.S.
development. Client acquisition expense includes salaries, benefits and
commissions paid to our sales and marketing and implementation personnel, travel
expenses of our sales and marketing and implementation personnel, advertising
expenses and fees paid to outside implementation consultants.
18
<PAGE> 23
CONSOLIDATED RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
reflected in our consolidated statements of operations expressed as a percentage
of revenue.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- -----------------
1996 1997 1998 1998 1999
----- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue:
Contract service revenue....................... 100.0% 42.2% 52.5% 53.6% 43.3%
Software revenue............................... -- -- 0.9 1.7 35.1
Affiliate revenue.............................. -- 57.8 46.6 44.7 21.6
----- ------ ------ ----- ------
Total revenue.......................... 100.0 100.0 100.0 100.0 100.0
----- ------ ------ ----- ------
Operating expenses:
Cost of providing services..................... 48.5 53.8 97.2 99.9 60.4
General and administrative..................... 25.4 38.1 44.2 32.4 26.9
Research and development....................... -- 10.6 48.8 29.2 36.5
Client acquisition............................. 35.6 9.6 24.2 14.2 23.5
Stock-related compensation..................... -- -- -- -- 124.9
Depreciation and amortization.................. 1.0 2.5 6.6 6.1 5.4
----- ------ ------ ----- ------
Total operating expenses............... 110.5 114.6 221.0 181.8 277.6
----- ------ ------ ----- ------
Loss from operations............................. (10.5) (14.6) (121.0) (81.8) (177.6)
Other income (expense)........................... -- 0.8 0.2 (1.8) 0.4
----- ------ ------ ----- ------
Net loss......................................... (10.5)% (13.8)% (120.8)% (83.6)% (177.2)%
===== ====== ====== ===== ======
</TABLE>
Six Months Ended June 30, 1999 and 1998
Revenue. Revenue increased 83.3% to $4.2 million for the six months ended
June 30, 1999 from $2.3 million for the six months ended June 30, 1998. Contract
service revenue increased 48.1% to $1.8 million for the six months ended June
30, 1999 as compared to $1.2 million in the corresponding period of 1998. During
this period, the number of our S.T.A.R. clients increased to 13 at June 30, 1999
from 11 at June 30, 1998 and the number of our ReFOCOS clients increased to 11
at June 30, 1999 from eight at June 30, 1998. Software revenue increased to $1.5
million for the six months ended June 30, 1999 from $38,000 in the corresponding
period of 1998, due to the completion of the M.A.R.S. development phase and the
initial installation of the software at client sites beginning in the second
quarter of 1999. Affiliate revenue decreased 11.7% to $0.9 million for the six
months ended June 30, 1999 from $1.0 million for the corresponding period in
1998. This decrease was the result of the dissolution of certain affiliated
partnerships as these partnerships reached the end of their stated terms, which
resulted in the loss of these clients.
Cost of providing service. Cost of providing service increased 10.7% to
$2.6 million for the six months ended June 30, 1999 from $2.3 million for the
six months ended June 30, 1998. The increase is due to additional salary and
benefit costs associated with hiring additional operations personnel required to
provide services to new clients.
General and administrative expenses. General and administrative expenses
increased 52.3% to $1.1 million for the six months ended June 30, 1999 from $0.8
million for the six months ended June 30, 1998. The increase is due to
additional salaries and benefits and hiring expense associated with hiring
additional management and administrative personnel to support our operations.
Research and development expenses. Research and development expenses
increased 130.0% to $1.6 million for the six months ended June 30, 1999 from
$0.7 million for the corresponding period in 1998. The increase was due to
additional salary and benefits associated with hiring additional employees
19
<PAGE> 24
and additional fees paid to contract personnel to develop enhancements and new
features to our M.A.R.S. software product.
Client acquisition expenses. Client acquisition expenses increased 203.7%
to $1.0 million for the six months ended June 30, 1999 from $0.3 million for the
corresponding period in 1998. The increase was due to salary and benefit
expenses related to adding sales, marketing and implementation personnel and
costs associated with the infrastructure required to support these personnel.
Compensation expense is related to our incentive compensation plan which
went into effect on January 1, 1999. This plan was terminated on August 4, 1999
subject to the effectiveness of our initial public offering. See
"Management -- Stock Plans."
Years Ended December 31, 1998 and 1997
Revenue. Revenue decreased 12.2% to $4.7 million in 1998 from $5.3 million
in 1997, primarily due to a decrease in affiliate revenue from $3.1 million in
1997 to $2.2 million in 1998. This decrease in affiliate revenue was primarily
due to the disposal by an affiliate of certain of its business units for which
we provided contract services. Contract service revenue increased 9.1% to $2.5
million for the year ended December 31, 1998 from 2.3 million for the year ended
December 31, 1997. During this period, the number of our S.T.A.R. clients
increased to 13 in 1998 from 11 in 1997 and the number of ReFOCOS clients
increased to 14 in 1998 from 5 in 1997. A number of the new contract service
clients began service late in 1998 so we did not benefit from a full year of
revenue from these clients.
Cost of providing services. Cost of providing services increased 58.5% to
$4.6 million in 1998 from $2.9 million in 1997. The increase was partially due
to the increase in the number of clients serviced which required us to add
personnel in our operations group resulting in additional salaries and benefits
for these personnel, increased hiring expense and additional overhead necessary
to support these personnel. The increase was also caused by increased
amortization for software that we purchased in the first quarter of 1998.
General and administrative expenses. General and administrative expenses
increased 1.8% to $2.1 million in 1998 from $2.0 million in 1997. The increase
was primarily due to the hiring of additional management and administrative
personnel to support our operations resulting in additional salaries and
benefits for these personnel, increased hiring expense and additional overhead
necessary to support these personnel.
Research and development expenses. Research and development expenses
increased 303.9% to $2.3 million in 1998 from $0.6 million in 1997. The increase
was primarily due to hiring additional full-time and contract personnel to
develop enhancements and new features to our M.A.R.S software product.
Client acquisition expenses. Client acquisition expenses increased 121.1%
to $1.1 million in 1998 from $0.5 million in 1997. The increase in was primarily
due to salaries, benefits and travel expenses associated with hiring additional
sales and implementation personnel for the M.A.R.S and ReFOCOS services as well
as hiring additional implementation consultants to transition our existing
ReFOCOS clients to our Web-enabled ReFOCOS service.
Years Ended December 31, 1997 and 1996
Revenue. Revenue increased 354.5% to $5.3 million in 1997 from $1.2 million
in 1996. Contract service revenue increased 91.9% to $2.3 million in 1997 from
$1.2 million in 1996. This increase was the result of adding additional S.T.A.R.
clients and, to a lesser extent, adding an additional ReFOCOS client. During
this period, the number of our S.T.A.R. clients increased to 11 in 1997 from six
in 1996 and the number of ReFOCOS clients increased to five in 1997 from four in
1996. We recognized affiliate revenue of $3.1 million in 1997, but did not
recognize any affiliate revenues in 1996. Prior to January 1, 1997, we operated
as part of Phoenix Leasing and accordingly did not recognize revenues for
services that we provided to affiliates.
20
<PAGE> 25
Cost of providing services. Cost of providing services increased 404.2% to
$2.9 million in 1997 from $0.6 million in 1996. The increase was due primarily
to providing additional services to affiliates, which required us to include
personnel in our operations group who formerly were included in the financial
results of Phoenix Leasing.
General and administrative expenses. General and administrative expenses
increased 582.9% to $2.0 million in 1997 from $0.3 million in 1996. The increase
was due to providing additional services to affiliates, which required us to
include personnel who formerly were included in the financial results of Phoenix
Leasing.
Research and development expenses. Research and development expenses
increased to $0.6 million in 1997 from zero in 1996. The increase is due to
hiring full-time employees and consultants to develop our M.A.R.S. product,
which resulted in salary and expenses, fees paid to consultants, hiring expense
and overhead necessary to support these personnel. The initial development
effort began in 1997.
Client acquisition expenses. Client acquisition expenses increased 22.7% to
$0.5 million in 1997 from $0.4 million in 1996. The increase is primarily due to
an increase in salaries, benefits and commissions paid to our sales force and
additional travel expense associated with the sales force.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth selected unaudited quarterly consolidated
financial information for each of the eight quarters in the period ended June
30, 1999, as well as such data expressed as a percentage of our revenue for the
periods presented. This information has been derived from unaudited consolidated
statements of operations data that, in the opinion of management, are stated on
a basis consistent with the audited consolidated financial statements and
include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of such information in accordance with
generally accepted accounting principles. Our results of operations for any
quarter are not necessarily indicative of the results to be expected in any
future period.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1998 1998 1998 1998
------------- ------------ --------- -------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Contract service revenue...................... $ 598 $ 608 $ 664 $ 575 $ 578 $ 643
Software revenue.............................. -- -- -- 39 3 2
Affiliate revenue............................. 912 908 553 481 589 559
------ ------ ------- ------- ------- -------
Total revenue........................... 1,510 1,516 1,217 1,095 1,170 1,204
Operating expense:
Cost of providing services.................... 884 793 1,177 1,134 1,189 1,055
General and administrative.................... 670 705 338 412 503 819
Research and development...................... 177 354 289 385 649 963
Client acquisition............................ 125 114 164 164 249 557
Depreciation and amortization................. 35 43 68 73 80 86
Stock-related compensation.................... -- -- -- -- -- --
------ ------ ------- ------- ------- -------
Total operating expenses................ 1,891 2,009 2,036 2,168 2,670 3,480
------ ------ ------- ------- ------- -------
Loss from operations........................... (381) (493) (819) (1,073) (1,500) (2,276)
Other income (expense)......................... 16 12 (20) (21) 49 3
------ ------ ------- ------- ------- -------
Net loss....................................... $ (365) $ (481) $ (839) $(1,094) $(1,451) $(2,273)
====== ====== ======= ======= ======= =======
<CAPTION>
QUARTER ENDED
--------------------
MARCH 31, JUNE 30,
1999 1999
--------- --------
(IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Contract service revenue...................... $ 923 $ 913
Software revenue.............................. 95 1,394
Affiliate revenue............................. 478 435
------- -------
Total revenue........................... 1,496 2,742
Operating expense:
Cost of providing services.................... 1,122 1,437
General and administrative.................... 600 542
Research and development...................... 725 825
Client acquisition............................ 401 595
Depreciation and amortization................. 91 137
Stock-related compensation.................... 2,358 2,933
------- -------
Total operating expenses................ 5,297 6,469
------- -------
Loss from operations........................... (3,801) (3,727)
Other income (expense)......................... 9 8
------- -------
Net loss....................................... $(3,792) $(3,719)
======= =======
</TABLE>
21
<PAGE> 26
<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUE
-------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1997 1997 1998 1998 1998
------------- ------------ --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Revenue:
Contract service revenue...................... 39.6% 40.1% 54.6% 52.5% 49.4%
Software revenue.............................. -- -- -- 3.6 0.3
Affiliate revenue............................. 60.4 59.9 45.4 43.9 50.3
Total revenue........................... 100.0 100.0 100.0 100.0 100.0
Operating expense:
Cost of providing services.................... 58.5 52.3 96.7 103.6 101.6
General and administrative.................... 44.4 46.5 27.8 37.6 43.0
Research and development...................... 11.7 23.4 23.7 35.2 55.5
Client acquisition............................ 8.3 7.5 13.5 15.0 21.3
Depreciation and amortization................. 2.3 2.8 5.6 6.7 6.8
Stock-related compensation.................... -- -- -- -- --
------ ------ ------- ------- -------
Total operating expenses................ 125.2 132.5 167.3 198.1 228.2
------ ------ ------- ------- -------
Loss from operations........................... (25.2) (32.5) (67.3) (98.1) (128.2)
------ ------ ------- ------- -------
Other income (expense)......................... 1.1 0.8 (1.6) (1.9) 4.2
Net loss....................................... (24.1)% (31.7)% (68.9)% (100.0)% (124.0)%
====== ====== ======= ======= =======
<CAPTION>
AS A PERCENTAGE OF REVENUE
-----------------------------------
DECEMBER 31, MARCH 31, JUNE 30,
1998 1999 1999
------------ --------- --------
<S> <C> <C> <C>
Revenue:
Contract service revenue...................... 53.4% 61.7% 33.3%
Software revenue.............................. 0.2 6.3 50.8
Affiliate revenue............................. 46.4 32.0 15.9
Total revenue........................... 100.0 100.0 100.0
Operating expense:
Cost of providing services.................... 87.6 75.0 52.4
General and administrative.................... 68.0 40.1 19.8
Research and development...................... 80.0 48.5 30.1
Client acquisition............................ 46.3 26.8 21.7
Depreciation and amortization................. 7.1 6.1 5.0
Stock-related compensation.................... -- 157.6 107.0
------- ------- -------
Total operating expenses................ 289.0 354.1 236.0
------- ------- -------
Loss from operations........................... (189.0) (254.1) (136.0)
------- ------- -------
Other income (expense)......................... 0.2 0.6 0.3
Net loss....................................... (188.8)% (253.5)% (135.7)%
======= ======= =======
</TABLE>
Revenue. Our revenue have fluctuated over the last eight quarters primarily
as a result of decreases in affiliate revenue, the introduction of our M.A.R.S.
software product and changes in contract service revenue. The increase in
revenue for the three quarters ended June 30, 1999 was due to the addition of
sales and marketing personnel beginning in October 1998 and the introduction of
our M.A.R.S. product in March 1999. Contract service revenues increased from
$0.6 million for the quarter ended September 30, 1997 to $0.9 million for the
quarter ended June 30, 1999, primarily as a result of adding additional ReFOCOS
clients. We recognized $1.4 million in software license revenue from our
M.A.R.S. software product during the quarter ended June 30, 1999. Software
revenue in the quarter ended June 30, 1999 includes $0.6 million of revenue
deferred in prior periods, which was recognized at the time of final
installation and acceptance of our M.A.R.S. product by some of our customers.
Affiliate revenues has fluctuated as a result of the disposition of certain
affiliate companies.
Cost of providing services. Cost of providing services has generally
increased over the eight quarters ended June 30, 1999. These increases were
primarily due to the addition of additional personnel and infrastructure to
service new clients. Cost of providing services decreased in the quarter ended
December 31, 1998, primarily as a result of a decrease in consulting related
expenses. Cost of providing services increased from the quarter ended March 31,
1998 through the quarter ended June 30, 1998. The increase was primarily due to
the increase in the number of contract services offered coupled with additions
to our operations infrastructure. Some of these operational infrastructure costs
will be spread over future clients and as a result we expect that these costs as
a percentage of revenue will decline in the future. The reduction in costs as a
percentage of revenue for the quarter ended June 30, 1999 was due primarily to
the recognition of the deferred M.A.R.S. revenue.
General and administrative expenses. General and administrative expenses
have fluctuated on a quarter-to-quarter basis as a result of the addition of
additional personnel and infrastructure to service new clients. The increase in
general and administrative expenses for the quarter ended December 31, 1998 was
primarily the result of an accrual for estimated legal fees.
Research and development expenses. Research and development expenses
increased due to increases in personnel and infrastructure. Research and
development expenses increased for the quarter ended December 31, 1998 due to
the hiring of an increased number of outside consultants to complete the
development of our M.A.R.S software product.
Client acquisition expenses. Client acquisition expenses have increased on
a quarter-to-quarter basis due to an increase in the number of new clients,
increases in our personnel and investments in
22
<PAGE> 27
infrastructure. We completed the initial installations of our web-enabled
ReFOCOS service during the quarter ended December 31, 1998 and the increase in
client acquisition expenses reflects the use of outside consultants working in
conjunction with our internal implementation group to complete these projects.
Our quarterly operating results have in the past and will in the future
vary significantly depending on a variety of factors, including the number and
size of new clients starting services, the decision of one or more clients to
delay or cancel implementation or ongoing services, our ability to design,
develop and introduce new services and features for existing services on a
timely basis, transition costs to new technologies, expenses incurred for
geographic expansion, price competition, and general economic factors. A
substantial majority of our operating expenses particularly personnel and
related costs, depreciation and rent, is relatively fixed in advance of any
particular quarter. Our agreements with our clients generally do not have
significant penalties for cancellation. As a result, any decision by a client to
delay or cancel implementation of our services or our underutilization of
personnel may cause significant variations in operating results in a particular
quarter and could result in additional losses for such quarter. In addition, our
business may be affected by the risks set forth in "Risk Factors." Our future
revenue and results of operations may vary substantially.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through equity
contributions from our sole stockholder.
At June 30, 1999, we had approximately $0.1 million of cash and cash
equivalents. Net cash used in operating activities in 1998 and 1997 was $4.1
million and $0.7 million, respectively. The increase in cash used in operating
activities in 1998 compared to 1997 was primarily the result of net losses.
Net cash used in investing activities was $0.3 million, $0.5 million and
zero in 1998, 1997 and 1996, respectively. The net cash used in investing
activities resulted primarily from capital expenditures for data processing
equipment, and furniture and fixtures. We expect to make additional capital
expenditures for new office space, furniture, equipment and fixtures to support
the continued growth of our operations.
Net cash provided by financing activities was $4.8 million, $1.2 million
and $0.1 million in 1998, 1997 and 1996, respectively. Net cash provided by
financing activities in 1998, 1997 and 1996 was primarily a result of equity
investments by our sole stockholder.
We believe that the net proceeds from this offering, together with existing
cash balances and anticipated cash flows from operations will be sufficient to
meet our working capital and capital expenditure requirements for at least the
next 12 months. We may also utilize cash to acquire or invest in complementary
businesses or to obtain the right to use complementary technologies, although we
do not have any pending plans to do so. We may sell additional equity or debt
securities or enter into new credit facilities.
YEAR 2000
Many currently installed computer systems and software products are unable
to distinguished between twentieth century dates and twenty-first century dates
because such systems were developed using two digits rather than four to
determine the applicable year. For example, computer programs that have date-
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000. This error could result in system failures or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities. As a result, many companies' software and computer systems
may need to be upgraded or replaced to comply with such "year 2000"
requirements.
23
<PAGE> 28
State of Readiness. Our business is dependent on the operation of numerous
systems that could potentially be affected by year 2000-related problems. Those
systems include, among others:
- the M.A.R.S. software product that we license to customers;
- hardware and software systems that we use in our operations, including
our proprietary software systems as well as software supplied by third
parties;
- communications networks such as our client/server network, the Internet
and our private intranet;
- the hardware and software systems of our customers and suppliers; and
- non-information technology systems and services, such as utilities,
telephone systems and building systems.
We are currently reviewing the year 2000 readiness of our hardware,
software and systems we depend on to run our operations. The phases of our year
2000 program are as follows:
- assignment of responsibility for issues, such as systems, facilities,
equipment, software and legal audit;
- inventory of all aspects of our operations and relationships subject to
the year 2000 problem;
- communication as necessary with significant suppliers to determine the
readiness of their products and systems;
- comprehensive analysis, including impact analysis and cost analysis, of
our year 2000 readiness; and
- testing and remediation.
To date, we have not encountered any material year 2000 problems with the
hardware and software systems we use in our operations that have not been
corrected. In addition, our vendors have certified to us that the hardware and
software they provide to us are year 2000-compliant. In the event that any such
vendors' products, services or systems do not meet the year 2000 requirements on
a timely basis, our business could be seriously harmed.
Based on our review of the use of dates within our ReFOCOS and S.T.A.R.
system, we believe that the current version of these systems is year
2000-compliant -- that is, it is capable of adequately distinguishing 21st
century dates from 20th century dates when used in accordance with the related
documentation, and subject to the year 2000 compliance of the underlying system
of the host machine and any other software used in conjunction with our
products. We are still in the process of completing our review of our M.A.R.S.
software.
Risks. Year 2000-related errors or defects that affect the operation of our
software could result in:
- delay or loss of revenue;
- cancellation of customer contracts;
- diversion of development resources;
- damage to our reputation;
- increased customer support and warranty costs; and
- litigation costs.
Success of our year 2000 compliance efforts may also depend on the success
of our customers in dealing with their year 2000 issues. Our M.A.R.S. product is
generally integrated into enterprise systems involving sophisticated hardware
and complex software products which may not be year 2000 compliant and this may
have an adverse impact on or demand for our M.A.R.S. product.
Although we have not been a party to any litigation or arbitration
proceeding to date involving our products or services and related to year 2000
compliance issues, we cannot assure you that we will not in
24
<PAGE> 29
the future be required to defend our products or services in such proceedings,
or to negotiate resolutions of claims based on year 2000 issues. The costs of
defending and resolving year 2000-related disputes, regardless of the merits of
such disputes, and any liability for year 2000-related damages, including
consequential damages, would seriously harm our business, financial condition
and operating results.
In addition, we believe that purchasing patterns of customers and potential
customers may be affected by year 2000 issues as companies expend significant
resources to correct or upgrade their current software systems for year 2000
compliance or defer additional software purchases until after 2000. As a result,
some customers and potential customers may have more limited budgets available
to purchase software products such as those offered by us, and others may choose
to refrain from changes in their information technology environment until after
2000. Still other companies are accelerating purchases of software products
prior to 2000, causing an increase in short-term demand which may, in turn,
cause a corresponding decrease in long-term demand for software products. To the
extent year 2000 issues cause significant change in, delay in, or cancellation
of, decisions to purchase our products or services, our business could be
materially adversely affected.
Contingency plan. We could experience material adverse effects on our
business if we fail to identify all year 2000 dependencies in our systems and in
the systems of our suppliers, customers and financial institutions. Therefore,
we plan to develop contingency plans for continuing operations in the event such
problems arise. We currently have a comprehensive contingency plan for handling
year 2000 problems that are not detected and are correcting any identified
problems prior to their occurrence.
Costs. To date, we have not incurred any material costs directly associated
with our year 2000 compliance efforts, except for compensation expense
associated with our salaried employees who have devoted some of their time to
our year 2000 assessment and remediation efforts. We do not expect the total
cost of year 2000 problems to be material to our business, financial condition
and operating results. However, we have not completed our year 2000
investigation and we will continue to evaluate our products, software provided
by third parties and infrastructure systems that we rely on. Despite our
efforts, we may not identify and remediate all significant year 2000 problems on
a timely basis, remediation efforts may involve significant time and expense,
and unremediated problems may have a material adverse effect on our business.
See "Risk Factors -- If our computer systems and software products are not year
2000 compliant, our services could be disrupted."
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard, or SFAS, No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes methods for
derivative financial instruments and hedging activities related to those
instruments, as well as other hedging activities. Because we do not currently
hold any derivative instruments and do not currently engage in hedging
activities, we expect that the adoption of SFAS No. 133 will not have a material
impact on our financial position or results of operations.
In December 1998, the AICPA issued SOP 98-9, Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions. SOP 98-9
amends SOP 97-2 and SOP 98-4 extending the deferral of the application of
certain provisions of SOP 97-2 amended by SOP 98-4 through fiscal years
beginning on or before March 15, 1999. All other provisions of SOP 98-9 are
effective for transactions entered into in fiscal years beginning after March
15, 1999. We do not expect the adoption of SOP 98-9 to have a material effect on
our results of operations or financial condition.
25
<PAGE> 30
BUSINESS
OVERVIEW
ReSourcePhoenix.com is a leading provider of outsourced financial and
management reporting, accounting management, transaction processing and record
keeping services. We allow our clients to focus on their core business by
outsourcing the infrastructure and operations of these critical back-office
functions.
We are pioneering the use of the Internet to integrate leading enterprise
resource planning software applications with the expertise of information
technology, finance, accounting and transaction processing professionals. Our
solution offers the cost-effective benefits of outsourcing while providing the
flexibility, control, customization, integration and scalability of an in-house
system. We offer our clients access to leading enterprise resource planning
software applications, which often are too costly and complex for early stage
and middle market companies to obtain and operate.
INDUSTRY BACKGROUND
Businesses increasingly need financial and management reporting systems
that can collect, organize and disseminate information quickly and accurately
for strategic, financial and competitive reasons. This trend has increased the
competitive pressures on these companies to automate business processes and
invest in more complex technology as a way to improve their information
technology systems.
Shortfalls of traditional business information systems
Current solutions are complex and costly. We believe that many of the
leading enterprise resource planning software packages remain too complex and
costly to be effective business process automation solutions for early stage and
middle market companies. While many enterprise resource planning providers offer
products that are targeted for these companies, the initial purchase,
implementation, integration and operation of these packages generally require
specialized knowledge and take up to twelve months, and frequently longer.
Additionally, the infrastructure required to support these packages, once
implemented, is frequently cost prohibitive for many early stage and middle
market businesses. Faced with these challenges, many of these companies choose
to forgo the capabilities of leading enterprise resource planning software
packages in favor of less functional products.
Personnel gap. The high cost of automating business processes has been
exacerbated by the level of technical skill necessary to manage this technology
and the shortage of qualified information technology, accounting, finance, and
transaction processing professionals. There are indications that this shortage
will continue and become more severe. Management consulting firm A.T. Kearney
recently estimated that the shortage of high technology workers in Silicon
Valley resulted in one in three jobs requiring special recruitment efforts or
going unfilled, which leads to a loss of over $3 billion per year in lost
production and additional recruiting costs. A 1998 study by the Information
Technology Association of America found a shortage of 346,000 programmers,
systems analysts and computer scientists.
The emergence of ASPs and their limitations. Traditionally, companies
wanting to implement Internet-enabled applications had to develop their own
software applications or customize existing software packages. Recently, a
number of companies, known as application service providers, or ASPs, began
providing integrated software applications for business enterprises. ASPs manage
the hardware and software at their data centers and provide access to clients
over the Internet. ASPs do not, however, provide the accounting, financial
analysis, data compilation or transaction processing professionals and
infrastructure that is required to effectively operate these software
applications. Moreover, ASPs can exacerbate an existing problem by putting more
complicated technology in the hands of users without providing the additional
training or support that is required to operate this technology effectively.
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<PAGE> 31
Need for an outsourced solution
International Data Corporation estimates that outsourcing spending in the
United States will grow from approximately $51 billion in 1998 to more than $81
billion in 2003. Reasons for the growth in outsourcing include:
- the desire by companies to focus on their core business;
- the difficulties of attracting and retaining qualified personnel in
information technology, accounting, finance, transaction processing and
other business specialties;
- the time and expense required to keep these personnel current in their
skills;
- the inability of many companies to effectively adopt and implement
advanced business processes;
- the challenges inherent in developing and maintaining software
applications, and data and communications networks; and
- the ongoing cost to keep up with leading technologies.
Designing, developing and implementing information technology solutions for
individual businesses has become increasingly complex. Companies can improve
their core business processes, reduce costs and enhance their competitive
position by outsourcing these processes to an affordable, single-source provider
that integrates the functionality of leading enterprise resource planning
software applications with the expertise of information technology, accounting,
finance and transaction processing professionals.
OUR SOLUTION
We provide our clients with a single-source, cost-effective outsourced
financial and management reporting solution, which allows our clients to:
- Maintain focus on growing their businesses. Our solution allows our
clients to focus on executing their business strategy. By outsourcing to
us these critical back-office functions, our clients minimize the
distractions of managing the personnel and technology necessary to
perform these tasks and instead focus on their core business.
- Receive better business information. We allow our clients to utilize and
benefit from leading enterprise resource planning software applications,
which are often too costly and complex for early stage and middle market
companies to obtain and operate. These applications can provide more
detailed information on costs, expenses, trends, budgeting, sales and
other areas more quickly than less functional solutions.
- Reduce costs. Early stage and middle market companies often are
financially constrained and seek to reduce the use of capital for
non-core functions. By outsourcing these functions, these companies can
reduce or eliminate the costs of:
-- purchasing enterprise resource planning and other functional software
and computer hardware
-- integrating and implementing the software and hardware with existing
systems
-- recruiting, hiring and training an extensive staff of information
technology, accounting, finance, transaction processing and other
business professionals
-- ongoing training of these personnel in their respective operational
areas
-- expanding overhead to support the growing organization
-- ongoing technology and process upgrades
- Gain access to the most advanced enterprise resource planning
applications available. We are committed to providing our clients with
the most advanced enterprise resource planning applications available. We
currently employ a dedicated information technology group whose function
is to
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continually evaluate new applications and technologies, as well as
integrate new releases of existing software applications into our service
offerings. As a result, our clients have access to leading applications,
such as Oracle financial reporting and database applications, while
avoiding the complexity of keeping current with multiple product and
service roll-outs.
- Gain access to the expertise of a broad range of professionals. We offer
our clients access to a broad range of professionals who are
highly-qualified and specialized in areas of information technology,
accounting, finance and transaction processing. Our business
professionals assess each client's needs, reengineer and design each
client's business processes and implement a value-added solution. The
skills offered by these professionals generally are in short supply and
difficult for many companies to acquire. We believe that we are well
positioned to attract and retain these professionals because we offer
expanded opportunities for development and career advancement and
exposure to leading-edge technologies not customarily found at many early
stage and middle market companies.
OUR STRATEGY
Our objective is to become the leading single-source provider of financial
and management reporting services for early stage and middle market companies,
and selected financial services companies. Key elements of our strategy include:
- Target early stage and middle market companies. We plan to focus our
marketing efforts on early stage and middle market companies. These
companies often have difficulty collecting, organizing and disseminating
financial and business information and often are more receptive to
outsourcing as a means of solving these problems. We plan to establish
early relationships with these companies and grow with them as their
needs in these areas expand and become more complex.
- Build recurring revenue by continuing to emphasize client service. We
plan to continue to build recurring revenue by supporting our clients'
needs as they grow. We believe that our client service focus will enable
us to expand our existing client relationships and to add new clients.
- Extend technology leadership. We believe that our ability to offer the
latest, most technologically advanced services possible is critical to
expanding our current client relationships and client base. To this end,
we employ a sizable staff of business and information technology
professionals whose function is to expand and update our service
offerings so that our clients can benefit from the latest technology
available. We also aggressively recruit key professionals in
implementation and information technology management.
- Strengthen our brand. We believe that a strong brand is critical to
attracting and expanding our client base. Until now we have relied on our
own sales and marketing professionals, and referrals from our current
clients and strategic partners as our primary means to attract new
clients. We plan to increase brand awareness by launching a comprehensive
advertising campaign, which includes Internet, radio and print
advertisements, scheduled to begin in September 1999.
- Broaden service offerings. We plan to broaden our service offerings,
including payroll and human resource management services, through
strategic alliances. These alliances could include co-marketing or
co-branding relationships. We believe that by offering these additional
services, we will be able to provide a more comprehensive solution to
alleviate the problems encountered by our clients performing these
functions internally.
- Develop additional relationships with trusted business partners of early
stage and middle market companies. We plan to leverage and expand our
relationships with the professional advisors, key suppliers and other
trusted business partners of early stage and middle market companies who
have the ability to refer business to us. For example, we currently have
relationships with Silicon Valley Bank and Imperial Bank, two leading
banking institutions for venture-backed, early stage companies, and with
Cisco, a leading producer of network infrastructure, in which these
companies have agreed to provide referrals for prospective clients to us.
We plan to develop additional
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<PAGE> 33
relationships with leading law firms, venture capital firms and other
professional services firms that service early stage and middle market
companies.
OUR OFFERINGS
Each of our service offerings is summarized below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PRODUCT TARGET MARKET SERVICES OFFERED
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
REFOCOS (Financial - Early stage and - Reporting, including: management reporting;
Outsourcing Corporate middle market investor and bank reporting; statutory reporting;
Online Services) companies regulatory reporting; and income, VAT, property,
sales and use tax reporting
- Accounting, including: month-end, quarter-end and
year-end closings; and account reconciliations
- Transaction processing, including accounts
payable, disbursements, travel and entertainment
expense report processing, billing, cash receipts
and collections activities
- Budgeting and analysis
- Operation of financial and management reporting
software, databases, hardware, network and other
communications infrastructure
- -------------------------------------------------------------------------------------------------------
M.A.R.S. (Marketing And - Mutual funds - Sales tracking
Representative Sales)
- Issuers of variable - Contact management
annuities - Fulfillment/inventory tracking
- -------------------------------------------------------------------------------------------------------
S.T.A.R. (Syndication - Sponsors of limited - Transfer agency and investor servicing through
Tracking And Reporting) partnerships call center support
- Distribution processing
- Sponsors of real
estate investment - Tax (K-1 and 1099) reporting
trusts - Sales and marketing support
- Blue sky and compliance reporting
- Multi-level support of broker selling agreements
- Investor proxy support
- Investor and broker contact management and
follow-up
- -------------------------------------------------------------------------------------------------------
</TABLE>
Our ReFOCOS service is a financial outsourcing solution that includes
reporting, accounting, transaction processing, budgeting and analysis solutions.
We target our ReFOCOS service to early stage and middle market companies. We
perform the accounting, transaction processing and management reporting
functions for our clients. We also manage the applications, related databases,
hardware, communications network and infrastructure. Our ReFOCOS service is
delivered via the Internet.
M.A.R.S. is a sales force automation software application aimed at the
mutual fund and variable annuity industries. We currently license our M.A.R.S.
software to clients who operate the software using their own staff and
equipment. We recently began to market M.A.R.S. as a hosted application in which
our clients can outsource to us several functions, including database
management, call center services, telemarketing services and sales transaction
processing. Our strategy is to emphasize hosting M.A.R.S. in our data centers
while continuing to offer M.A.R.S. as a licensed software product to our clients
that prefer a software-only solution.
Our S.T.A.R. services are similar to ReFOCOS, but are designed to provide
investor services to sponsors of limited partnerships and real estate investment
trusts. We begin by implementing the client on the S.T.A.R. application. This
typically requires minimal customization but substantial data conversion.
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<PAGE> 34
Once implemented, we manage the applications, related databases, hardware,
communications network and infrastructure. Our clients access the system using
dedicated point-to-point connections. In addition to technology implementation
and management, we perform a full range of investor services including transfer
agency, call center, distribution processing, tax and other reporting.
CLIENT SERVICE
We believe that providing high levels of client service creates a
competitive advantage in the market for outsourced financial and management
reporting services. By assessing each client's needs, we create value-added
solutions through business process reengineering. Our client team includes a
sales representative, a client service manager and numerous functional and
technical support specialists to provide service to our clients.
We recently implemented a process to monitor the quality of our service
through client feedback mechanisms. Our policy is to solicit formal feedback
from our clients four times each year, twice in writing and twice in person, to
measure their level of satisfaction with our service. We use this information to
help develop and identify new service offerings and enhance existing offerings
provided to our clients to improve the levels of service. We also use client
feedback as a basis to recognize the achievements of our employees.
Sales. Since we believe that client service begins with the sales process,
we assign a sales representative to work closely with our information
technology, accounting, finance, transaction processing and other business
professionals to assess a potential client's needs. Using this assessment, the
sales representative identifies opportunities to add value through business
process reengineering and designs solutions that integrate the client's business
needs effectively. Our sales cycle typically ranges from two to six months.
Implementation and integration. Upon engagement by a client, a client
service manager works with a team of technical support specialists to transition
the client from their former system to our system. The team creates new
processes and reports, converts client data and integrates the client's existing
hardware and software to our systems. This process generally takes from one to
four months depending on the scope of the service that we provide.
Operations. After supervising the implementation, the client service
manager, together with our business process operations group, is the primary
interface for day-to-day contact with the client, coordinating the efforts of
both functional and technical support specialists as necessary. By visiting each
client regularly and tracking all correspondence and feedback, the client
service manager can ensure that all of the client's needs are addressed. Our
client-to-manager ratio is kept low to offer the most responsive service.
Specialized client support. Each client is supported by information
technology, accounting, finance and transaction processing professionals. Each
specialist is available to support the client directly, onsite or over the
phone, or indirectly through the client service manager and business process
operations group.
OUR PEOPLE
Attracting, training and retaining high quality information technology,
accounting, finance, transaction processing professionals is essential to our
growth. We believe that we are well-positioned to attract and retain these
professionals primarily for the following reasons:
- Financial and management reporting, accounting management, transaction
processing and record keeping services are our core businesses rather
than support functions. As a result, we can offer expanded opportunities
for development and career advancement, and exposure to the business
processes of multiple organizations and leading-edge technology.
- Our integration and implementation specialists are not required to spend
extended periods on out-of-town client assignments, which would typically
be required of these professionals if they worked
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<PAGE> 35
for a consulting firm. As a result, we can offer more attractive
opportunities than many other competing employers.
We hire motivated individuals with strong substantive skills and leadership
traits and provide them with ongoing technology and leadership skills training.
We emphasize retaining our information technology, accounting, finance and
transaction processing professionals through challenging work assignments and
incentive programs, including rewarding outstanding performance and client
service. Since July 1, 1997, our average annual retention rate for our
information technology, accounting, finance and transaction processing
professionals has been greater than 93%.
OUR NETWORK
Our information technology strategy focuses on delivering reliable, high
performance, integrated financial and management reporting solutions to anyone,
anytime, anywhere. To this end, our application, server and networking
architecture is designed to provide:
- scalability;
- customizable and reliable security;
- flexible communication and networking worldwide;
- high availability (uptime); and
- flexible application hosting and integration capability.
Scalability
We have installed hardware and software that are designed to operate in
parallel, to enable efficient expansion of our network infrastructure as needed.
We recently signed contracts with Sprint and Electric Light Wave as additional
Internet service providers, which services will commence later this year. These
additional Internet service providers will allow us to increase bandwidth and
network redundancy.
Customizable and reliable security
We deploy a multi-layered security defense against unauthorized data
access. Our defenses consist of electronic and procedural controls to regulate
physical access to sensitive locations within our data operations center,
network access control using CiscoSecure authentication components, server
operating system level controls with Cisco firewall and router based lock-down
of network protocols, IP addresses and ports, database access controls for
applications, and for development and operations personnel, and application
access controls at the application, user, data and business function levels.
Flexible communication and networking worldwide
We support four client communication models, consisting of Internet
websites using secure socket layer technology, secure Internet-based virtual
private networks, or VPN, based on 56 to 168 bit encryption, secure dial-up
networks, and wide area networks using dedicated leased lines. Our VPN
architecture is a key differentiator between us and the typical ASP. With our
VPN networking option, we can run network based applications across multiple
customer locations around the world as if the servers, printers and system
interfaces were local at each and every site. This secure network solution works
well for distributed offices, telecommuters and travelers because it can be
deployed anywhere a customer can gain access to the Internet.
High availability (uptime)
Our data operations center is designed to promote high availability. We use
industry leading hardware and service providers with proven compatibility, which
allows us to maintain availability during system maintenance. These providers
include Cisco ISP class networking hardware, software and security; Red
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Creek hardware accelerated virtual private networks; UUNet Internet service
provider; Sun Enterprise UNIX servers and arrays; Dell multi-processor Intel
based NT servers; Microsoft operating systems, security, SMS and applications;
Oracle databases and applications; and Necho Systems applications.
Flexible application hosting and integration capability
Our integrated systems model is designed to provide seamless integration of
industry leading Internet-based applications. In addition, we also have the
ability to deliver traditional client-server and "terminal-based" applications.
We have the ability to host a wide range of business applications on industry
leading operating system platforms that include Sun Solaris and Microsoft NT.
We efficiently support contemporary web-enabled software applications that
are designed to give the modern "terminal," or web browser, on a user's desktop
secure access to remote application servers at the hosting site. Moreover, the
VPN-based integration of our local area networks, or LANs, with our customers'
LANs also allows us to run software applications that were originally only
designed to run on private LANs or wide area networks. This class of software
includes client-server-based applications such as M.A.R.S. or Oracle Financial
Analyses, and terminal based applications such as S.T.A.R.
This cost-effective and secure VPN with our clients and us enables us to
initiate printing from desktops or our servers to local printers at our, and our
clients' remote sites. It also enables us to seamlessly integrate our hosted
applications, those of third-party partners, and our customers' applications
that they have chosen not to outsource, as if they were all on the same LAN in
the same data center.
SALES AND MARKETING
We market our services through a direct sales organization based in the
United States. Our sales force is organized by industry, with each sales
professional having responsibility for one or more target industries. We believe
that having an industry focus allows our sales professionals to leverage their
experience to deliver a better solution to existing and prospective clients.
Our sales force has, on average, 15 years of business experience. Because
the sale of our services requires a strong understanding of business functions
as well as the use of technology to facilitate business process and decision
support, we recruit our sales force from sources of those skills. For example,
two of our sales people had over ten years experience at Arthur Andersen LLP,
including our Group Vice President, Sales and Marketing who was previously a
partner at Arthur Andersen.
Our marketing strategy includes building awareness of our brand and
developing strategic partner relationships. To this end, we plan to launch a
comprehensive advertising campaign scheduled to begin in September 1999.
ReFOCOS
Our primary focus is to target early stage and middle market companies,
which we believe embrace outsourcing as a business concept, and are more likely
to be receptive to our service offerings. Typically, there is less initial risk
of adoption for early stage companies because these companies generally do not
have a significant investment in hardware, software and human resource
infrastructure. Additionally, we believe that our solution is attractive to
early stage companies because it requires minimal up-front cost, is an
economical ongoing solution, and is designed to scale in a manner that is
transparent to the client and which allows the client to manage its growth more
effectively. Moreover, early stage and middle market companies can exhibit above
average business growth, which can result in increased service revenue as we
expand our relationships with them.
M.A.R.S. and S.T.A.R.
We currently market our M.A.R.S. software and services to the mutual fund
and variable annuity industries, money management firms and banks that sponsor
mutual funds. We plan to expand the industries to which we market our M.A.R.S.
software and service to include insurance and no-load mutual
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fund companies. Our strategy is to emphasize hosting M.A.R.S. in our data
centers while continuing to offer M.A.R.S. as a licensed software product to our
clients that prefer a software-only solution. We market our S.T.A.R. service to
sponsors of limited partnerships and real estate investment trusts. We will
continue to devote resources to the marketing of our S.T.A.R. services and
intend to pursue additional sales opportunities as they arise.
CLIENTS
As of August 1, 1999, we provided services to 77 clients, including 35
unaffiliated clients and 42 clients that are affiliated to us. Of these clients,
54 were ReFOCOS clients, 10 were M.A.R.S. clients and 20 were S.T.A.R. clients.
Set forth below is a representative list of our unaffiliated clients.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
REFOCOS CLIENTS M.A.R.S. CLIENTS S.T.A.R. CLIENTS
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
Thomas Weisel Partners John Hancock Advisors GE Capital Aviation
Services/PIMC
- -----------------------------------------------------------------------------------------------
GE Capital Aviation Aetna Insurance Co. Paine Webber/Pegasus
Services/PIMC
- -----------------------------------------------------------------------------------------------
GE Capital Aviation Heritage Asset Management Starwood Hotels and
Services/Aircraft Finance Trust Resorts
- -----------------------------------------------------------------------------------------------
Paine Webber/Pegasus Blackrock Fund Advisors CIGNA Financial Services
- -----------------------------------------------------------------------------------------------
Blackstone Cable Deutsche Bank W.P. Carey
- -----------------------------------------------------------------------------------------------
</TABLE>
We believe that our high quality service is the reason why we have never
lost a client due to client service issues. Our client contracts can generally
be terminated without significant penalties for cancellation.
BUSINESS PARTNERS
In developing our service offerings, we have formed relationships with some
of the leading product and service providers whose offerings support essential
business processes. These partners include Oracle, Necho, Cisco, Sun and Core
Technologies, Inc.
We believe that we can help establish our partners in markets that are
difficult to reach. Early stage middle market companies are unlikely to purchase
a leading ERP solution directly from the ERP application vendor because of the
significant resource commitments, that implementing such an application
requires. However, these companies may purchase a financial and management
reporting solution from us because we offer an outsourced, turn-key solution
that substantially reduces the resource commitments necessary to implement an
ERP application. As a result, our business partners benefit from increased
market share, and their ability to expand the relationships that we have
initiated into difficult to reach markets.
Each of our agreements with our software application partners allows us to
deploy packaged application software as a service without the need to establish
a separate licensing arrangement for each client. We plan to enter into
additional agreements with other software vendors from time to time.
Each of our key business relationships is described below:
Oracle Corporation. We have a contract with Oracle that permits us to
license their applications and use the software for the benefit of our
customers. The contract requires that we pay a one-time software license fee and
annual maintenance fees, and pay additional amounts incrementally as we add
users. The contract continues for an indefinite term.
Necho Systems Corp. We have an agreement with Necho that permits us to
license their web-based travel and expense reporting application, NavigatER, and
use the software for the benefit of our customers.
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This agreement requires that we pay an initial software license fee, and pay
additional amounts incrementally as we add users. This agreement is for an
indefinite term. In addition, the agreement permits us to privately label the
application. Necho has also agreed to provide us with product demonstrations,
collateral materials, sales force training and sales and technical support.
Finally, we have agreed to co-market our products and services and Necho has
established a referral link on their website to ours for prospective clients
with fewer than 200 users.
Cisco Systems, Inc. We purchase equipment and services from Cisco for use
in our data operations center as well as at client locations. We have conferred
with Cisco technical personnel on the design of our VPN communication solution.
As a result of meeting Cisco's stringent criteria for quality of service and
support, we have been designated as a Cisco Powered Network Partner. As a result
of our Cisco Powered Network Partner designation, we are eligible for
co-marketing programs, technology sharing benefits and joint selling benefits.
Sun Microsystems, Inc. We purchase equipment and services from Sun for use
in our data center. Sun has assigned us "named account" status, a status that is
reserved for accounts that Sun has determined merit dedicated special technical
and business support. Being designated a "named account" gives us the following
benefits:
- Executive level discussions of Sun's technical and business plans.
- Free technical design, capacity planning, evaluation equipment and
systems implementation.
- Special payment terms for Sun's largest servers, allowing us to install
fully loaded servers with excess performance and scalability, with tiered
payments deferred until hardware resources are actually used.
Core Technologies, Inc. Core Technologies provides to us various Oracle
technology consulting services. We have entered into a relationship whereby we
have agreed to use Core Technologies for implementation and integration services
on any prospective clients they refer to us with whom we ultimately sign a
contract.
Silicon Valley Bank. We have a contract with Silicon Valley Bank, through
its eSource unit, under which we are included on the eSource website as a
Silicon Valley Bank preferred provider. We believe that we are currently the
only preferred provider of the type of services we offer. The eSource website is
targeted to Silicon Valley Bank clients seeking help with particular business
problems. The agreement requires that we pay fees to Silicon Valley Bank for
clients they refer to us with whom we ultimately sign contracts. The agreement
also provides us with periodic access to Silicon Valley Bank's lenders and
business developers in order to educate them about our service offerings.
Imperial Bank. We have a relationship with Imperial Bank's Emerging Growth
Division which gives us periodic opportunities to meet with their lenders and
business developers to educate them about our service offerings. We have agreed
to pay Imperial fees for clients they refer to us with whom we ultimately sign
contracts.
COMPETITION
The market for outsourced financial and management reporting solutions is
extremely competitive. We anticipate that competition will continue to intensify
as the use of the Internet grows. In the market for outsourced financial process
and management reporting solutions, we anticipate that we will compete on the
basis of service, performance, price, software functionality and overall network
design. While our potential competitors come from many industry segments, we
believe no single company provides the cost-effective, single-source financial
and management reporting solution that we provide. Prospective competitors
include the following:
Application service providers. Our potential competitors include
application service providers such as USInternetworking, Oracle and Corio.
Oracle, a business partner of ours, recently introduced a hosted service
offering based on its web-enabled enterprise resource planning software that it
markets directly to
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middle market companies. Some of these companies have significantly greater
market presence, brand recognition, and financial, technical and personnel
resources than we do.
Accounting firms. Our potential competitors include international, national
and regional accounting firms who provide systems integration and outsourced
finance and accounting services for their clients. Many of these firms have
greater name recognition or more extensive experience than we do.
PricewaterhouseCoopers LLP, KPMG LLP, and Ernst & Young LLP, among others,
provide professional consulting services in the use and integration of software
applications in single project client engagements and provide outsourced finance
and accounting services.
Software and systems integrators. Our potential competitors, who include
national, regional, and local commercial systems integrators who bundle their
services with software and hardware providers and perform a facilities
management outsourcing role for the customer, generally have greater name
recognition or more extensive experience than we do. EDS, Perot Systems,
Andersen Consulting and PricewaterhouseCoopers LLP, among others, provide
professional consulting services in the use and integration of software
applications in single-project client engagements. Large systems integrators may
establish strategic relationships with software vendors to offer services
similar to our ReFOCOS offerings. We expect that regional systems integrators
are likely to compete with us. Additionally, regional systems integrators may
align themselves with ISPs to offer complex web site management combined with
professional implementation services.
Hardware and software companies. Our potential competitors include hardware
and software companies providing packaged application solutions as well as
network infrastructure. In order to build market share, both hardware and
software providers may establish strategic relationships in order to enhance
their service offerings. Oracle, a business partner of ours, recently introduced
a hosted service offering based on its web-enabled enterprise resource planning
software that it markets directly to middle market companies. IBM Solutions
currently provides applications outsourcing around its Lotus Notes products and
delivers the service via the IBM network infrastructure. J.D. Edwards & Company,
a developer of enterprise resource planning software, has announced that it will
offer its software in an outsourced model. SAP AG has formed an outsourcing
organization to develop key partnerships with leading consulting firms with the
intent of offering SAP software. We believe that additional hardware and
software providers, potentially including our strategic partners, may enter the
outsourcing market in the future.
Other potential competitors. It is possible that new competitors or
alliances may emerge and gain market share. Such competitors could materially
affect our ability to obtain new contracts. Further, competitive pressure could
require us to reduce the price of our products and services thus affecting our
business, financial condition and results from operations.
EMPLOYEES
As of August 1, 1999, we had 159 full-time employees, including 12 in sales
and marketing, eight in management, 125 in operations and 14 in research and
development. None of our employees are covered by collective bargaining
agreements. We believe that our relations with our employees are good.
FACILITIES
Our principal executive offices are located in San Rafael, California, in a
40,000 square-foot facility that we lease from one of our affiliates. We believe
that we will need to acquire additional facilities in the next twelve months.
However, we may not be able to lease additional space on commercially reasonable
terms. See "Relationship with Phoenix Companies and Certain
Transactions -- Intercompany Agreements."
LEGAL PROCEEDINGS
We are not currently involved in any material legal proceedings. We are not
aware of any legal proceedings pending against us.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our executive officers and directors and their ages are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gus Constantin........................... 61 Chairman of the Board and Chief Executive Officer
Bryant Tong(2)........................... 44 President, Chief Operating Officer and Director
David W. Brunton......................... 49 Chief Financial Officer
Michael J. D'Almada-Remedios............. 36 Chief Technology Officer
W. Corey West............................ 37 Group Vice President Sales & Marketing
Glenn McLaughlin(1)(2)................... 64 Director
Roger Smith(1)(2)........................ 58 Director
</TABLE>
- ---------------
(1) Member of compensation committee of the board of directors.
(2) Member of audit committee of the board of directors.
GUS CONSTANTIN has served as our Chairman of the Board and Chief Executive
Officer since founding the company in 1996. In 1972, Mr. Constantin founded
Phoenix Leasing Inc., a company specializing in lease financing for businesses.
Mr. Constantin currently serves as Chairman of the Board and Chief Executive
Officer of Phoenix Leasing, as well as Phoenix Cable Inc., Phoenix Precision
Graphics Inc. and Phoenix American Inc. From 1969 to 1972, he served as
Director, Computer and Technical Equipment of DCL Incorporated (formerly Diebold
Computer Leasing Incorporated), a corporation formerly listed on the American
Stock Exchange, and as Vice President and General Manager of DCL Capital
Corporation, a wholly-owned subsidiary of DCL Incorporated. Mr. Constantin was
actively engaged in marketing manufacturer leasing programs to computer and
medical equipment manufacturers and in directing DCL Incorporated's IBM
System/370 marketing activities. Prior to 1969, Mr. Constantin was employed by
IBM Corporation as a data processing systems engineer for four years. Mr.
Constantin received his B.S. in engineering from University of Michigan and his
Master's in management science from Columbia University.
BRYANT TONG has served as our President and Chief Operating Officer since
May 1, 1999 and as a director since we commenced operations. Prior to assuming
his current positions, Mr. Tong served as our Executive Vice President and Chief
Operating Officer from January 1, 1998 to April 30, 1999 and as our Senior Vice
President, Financial Operations since we commenced operations. Mr. Tong served
as Senior Vice President, Financial Operations of Phoenix Leasing Inc. from
January 1993 to December 31, 1997. Since 1982, Mr. Tong has served as Senior
Vice President, Financial Operations for Phoenix American Inc., Phoenix Leasing
Associates IV Inc. and Phoenix Growth Capital Corp. At various times throughout
his tenure with Phoenix Leasing Inc, Mr. Tong served as an instructor at Golden
Gate University, teaching Advanced Accounting. Mr. Tong received his B.S. in
accounting and finance from the University of California at Berkeley and is a
Certified Public Accountant.
DAVID W. BRUNTON has served as Vice President and Chief Financial Officer
since January 1997. From February 1987 to December 1996, Mr. Brunton served as
Corporate Controller of Phoenix Leasing Inc. and Phoenix American Inc. Mr.
Brunton is currently an Assistant Vice President and Corporate Controller of
Phoenix Securities Inc., a registered broker/dealer. Mr. Brunton received his
B.A. in social welfare from the University of California at Chico and is a
Certified Public Accountant.
MICHAEL J. D'ALMADA-REMEDIOS has served as Vice President and Chief
Technology Officer since September 1998. From February 1992 to September 1998,
Dr. D'Almada-Remedios was with Wells Fargo Bank, most recently as a vice
president responsible for selecting technologies, developing applications and
running operations to support numerous areas of consumer and business banking.
Dr. D'Almada-Remedios received his B.Sc. in physics and computer science from
Kings College, University of London and his Ph.D. in fluid dynamics and computer
control from Nottingham (Trent) University, England.
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<PAGE> 41
W. COREY WEST has served as Group Vice President Sales and Marketing since
October 1998. From July 1989 to October 1998, Mr. West was with Arthur Andersen
LLP, most recently as a partner. Mr. West received his B.S. in accounting and
finance from the University of Washington and is a Certified Public Accountant.
GLENN MCLAUGHLIN has been a director since August 1999. Since December
1986, Mr. McLaughlin has served as President, Chief Executive Officer and a
director of Venture Leasing Associates, a general equipment leasing company.
From 1982 to 1990, Mr. McLaughlin was a director of Phoenix American Inc. From
1995 to 1998, Mr. McLaughlin was a director of Phoenix Receivables I, Inc. Mr.
McLaughlin currently serves on the Board of Directors of Phoenix Receivables II,
Inc. and Phoenix Receivables III, Inc. Mr. McLaughlin is also a director of
Greater Bay Bancorp, a bank holding company and several other privately-held
companies. Mr. McLaughlin received his B.A. in accounting and business
administration from the University of Oklahoma and his M.B.A. in finance and
business administration from Harvard University.
ROGER SMITH has been a director since August 1999. Since January 1999, Mr.
Smith has been the owner of Smith Venture Group, a venture capital firm, a
position he also held from February 1994 to March 1998. From March 1998 to
January 1999, Mr. Smith was President of Venture Banking at Greater Bay Bancorp,
a bank holding company. Since July 1994, Mr. Smith has served on the board of
directors of Venture Lending and Leasing Inc., an investment company. Mr. Smith
received his B.S. in business administration from the University of Colorado and
his M.B.A. from the University of Santa Clara.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee was established in August 1999. Prior to that
time, the entire board of directors participated in compensation decisions. In
particular, Mr. Tong and Mr. Constantin, each an executive officer of
ReSourcePhoenix.com, participated in the deliberations concerning executive
officer compensation.
Mr. Tong is also the Senior Vice President, Financial Operations for
Phoenix American Inc., Phoenix Leasing Associates IV Inc. and Phoenix Growth
Capital Corp. Mr. Constantin is the Chairman, Chief Executive Officer and
controlling shareholder of Phoenix America and also the controlling shareholder
of Phoenix Leasing Associates IV and Phoenix Growth Capital.
We provide services to Phoenix Leasing Inc., Phoenix Cable Inc. and Phoenix
Precision Graphics, Inc., and we lease real estate from Phoenix American Inc.
Mr. Constantin, our Chairman, Chief Executive Officer and controlling
shareholder, is also the Chairman, Chief Executive Officer and controlling
shareholder of Phoenix Leasing, Phoenix Cable, Phoenix Precision Graphics and
Phoenix American. We believe that the terms of these agreements are no less
favorable to us than we could have received from an unaffiliated third party.
See "Relationship with Phoenix Companies and Certain Transactions --
Intercompany Agreements."
Mr. McLaughlin, a director of ours and a member of our compensation
committee, is also a director of Phoenix Receivables II, Inc. and Phoenix
Receivables III, Inc. Mr. Constantin is the controlling shareholder of Phoenix
Receivables II and Phoenix Receivables III.
DIRECTOR COMPENSATION
Directors do not currently receive any cash compensation for their service
as directors, but are reimbursed for reasonable expenses incurred in attending
meetings. Each director will be granted on a quarterly basis an option to
purchase 750 shares of our Class A common stock at an exercise price equal to
the fair market value of our Class A common stock on the date of grant. These
options are fully vested at the time of the grant.
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<PAGE> 42
EXECUTIVE COMPENSATION
The following table summarizes all compensation earned by or paid to our
Chief Executive Officer and to each of our most highly compensated executive
officers other than the Chief Executive Officer whose total annual salary and
bonus exceeded $100,000 for services rendered in all capacities to us during the
fiscal year ended December 31, 1998. These officers are referred to as the
"named executive officers" here and elsewhere in this prospectus.
SUMMARY COMPENSATION TABLE FOR LAST FISCAL YEAR
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
--------------------------- -------- ------- ------------
<S> <C> <C> <C>
Gus Constantin, Chairman and Chief Executive Officer...... $ -- $ -- $ --
Bryant Tong, President and Chief Operating Officer........ 179,624 7,750 7,800(1)
David Brunton, Chief Financial Officer.................... 100,000 10,160 --
</TABLE>
- ---------------
(1) Consists of an automobile allowance paid to Mr. Tong.
STOCK PLANS
Prior Plan
On January 1, 1999, we adopted an incentive plan for our key employees.
This plan allowed us to grant share appreciation and dividend income rights to
our employees. We terminated this plan on August 4, 1999 subject to the
effectiveness of this offering, and replaced all awards outstanding under the
plan with options granted pursuant to our 1999 stock plan.
1999 Stock Option Plan
We have established a stock option plan pursuant to which a total of
1,750,000 shares of Class A common stock have been reserved for issuance to
provide additional incentive to its employees, officers, directors and
consultants. Under the stock option plan, we may grant stock options and stock
purchase rights to our employees, officers, directors and consultants. Our board
of directors, or a committee to whom the board has delegated authority, which we
refer to as the "plan administrator", selects the individuals to whom options
and stock purchase rights are granted, interprets and adopts rules for the
operation of the stock option plan and specifies the vesting, exercise price and
other terms of options and stock purchase rights. As of August 4, 1999, options
to purchase an aggregate of 1,175,458 shares of Class A common stock had been
granted, at a weighted average exercise price of $1.50 per share.
The maximum term of an incentive stock option granted under the plan is
generally limited to ten years. If an optionee terminates his or her service
with us, the optionee generally may exercise only those options vested as of the
date of termination of service. Unless otherwise specified in the option
agreement, the optionee must effect such exercise within three months of
termination of service for any reason other than death or disability, and within
one year after termination due to death or disability. The exercise price of
incentive stock options granted under the stock option plan must be at least
equal to the fair market value of our Class A common stock on the date of grant.
Payment of the exercise price may be made by such methods as determined by the
plan administrator and may include cash, check, a promissory note or shares of
our Class A common stock valued at the fair market value on the date of
exercise.
Terms of any stock purchase rights granted under the stock option plan
shall be determined by the plan administrator at the time such rights are
issued. Upon the termination of a purchaser's service with us, we shall have an
option to repurchase his or her shares at the original price paid by the
purchaser.
In the event we are acquired or merge with another entity or transfer all
or substantially all of our assets, then each outstanding option and stock
purchase right shall automatically vest and become fully
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<PAGE> 43
exercisable unless the successor entity assumes such option or stock purchase
right or replaces it with a comparable option or right.
STOCK OPTION GRANTS TO EMPLOYEES
On August 4, 1999, we granted options to purchase an aggregate of 1,175,458
shares of our Class A common stock to some of our employees under our 1999 stock
option plan. These grants are subject to the effectiveness of this offering and
are intended to replace awards made under our previous incentive plan, which was
terminated. Our executive officers received the following option grants:
<TABLE>
<CAPTION>
NUMBER OF SHARES
EXECUTIVE OFFICER SUBJECT TO OPTION
----------------- -----------------
<S> <C>
Bryant Tong............................................. 558,770
David Brunton........................................... 59,000
Michael D'Almada-Remedios............................... 35,000
W. Corey West........................................... 74,800
</TABLE>
These options have an exercise price of $1.50 per share and will vest fully
upon the effectiveness of this offering.
1999 Employee Stock Purchase Plan
Concurrently with the offering, we intend to establish an Employee Stock
Purchase Plan under which a total of 500,000 shares of Class A common stock will
be made available for sale. The purchase plan, which is intended to qualify as
an employee stock purchase plan within the meaning of Section 423 of the
Internal Revenue Code of 1986, as amended, will be administered by our board of
directors or by a committee appointed by the board. Employees are eligible to
participate if they are employed by us or one of our subsidiaries designated by
the board for at least 20 hours per week and for more than five months in any
calendar year. The purchase plan permits eligible employees to purchase Class A
common stock through payroll deductions, which may not exceed 15% of an
employee's compensation, subject to certain limitations. The purchase plan will
be implemented in a series of consecutive, overlapping offering periods, each
approximately six months in duration. Offering periods will begin on the first
trading day on or after April 30 and October 31 of every other year and
terminate on the last trading day in the period six months later. However, the
first offering period shall be the period of approximately 24 months commencing
on the date upon which the registration statement of which this prospectus is a
part is declared effective by the SEC and terminating on the last trading day in
the period ending October 31, 2000. Each participant will be granted an option
to purchase stock on the first day of the six-month purchase period and such
option will be automatically exercised on the last date of each offering period.
The purchase price of each share of Class A common stock under the purchase plan
will be equal to 85% of the lesser of the fair market value per share of Class A
common stock on the start date of that offering period or on the date of
purchase. Employees may modify or end their participation in the offering at any
time during the offering period. Participation ends automatically on termination
of employment with us. The purchase plan will terminate in 2009 unless sooner
terminated by our board.
401(K) PLAN
We have a 401(k) Retirement Savings and Investment Plan covering our
full-time employees located in the United States. The plan is intended to
qualify under Section 401(k) of the Internal Revenue Code of 1986, as amended,
so that contributions to the plan by employees or by us, and the investment
earnings thereon, are not taxable to employees until withdrawn from the plan,
and so that contributions by us, if any, will be deductible by us when made.
Under the plan, eligible employees may elect to make payroll deductions up to
20% of their compensation, up to the statutorily prescribed annual limit, which
was $10,000 in 1998, and to have the amount of such deduction contributed to the
plan. The plan permits, but
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<PAGE> 44
does not require, additional matching contributions by us on behalf of all
participants. To date, we have not made any matching contributions to the plan.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
We have entered into an employment agreement with Bryant Tong, our
President and Chief Operating Officer, dated August 1, 1999. The employment
agreement is for a term of three years and is renewable for one-year periods
thereafter. Under the agreement, we are obligated to pay Mr. Tong an annual
salary of $275,000, current benefits, a car allowance and a bonus based on
certain revenue, expense and net income criteria. Additionally, if Mr. Tong's
employment with us terminates for any reason, we are obligated to pay Mr. Tong a
termination payment equal to his then current base compensation plus the pro
rata portion of his bonus through the termination date.
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<PAGE> 45
RELATIONSHIP WITH PHOENIX COMPANIES AND CERTAIN TRANSACTIONS
RELATIONSHIP WITH PHOENIX COMPANIES
Upon completion of the offering, Gus Constantin will own approximately
% of the common stock outstanding, or % if the underwriters'
over-allotment option is exercised in full. As the sole holder of our Class B
common stock, he controls % ( % if the underwriter's over-allotment
option is exercised in full) of our total voting power. As long as Mr.
Constantin controls a majority of the voting power, he will be able, acting
alone, to:
- elect at least a majority of our Board of Directors;
- amend our Certificate of Incorporation or effect a merger, sale of assets
or other major corporate transaction;
- defeat any non-negotiated takeover attempt;
- determine the amount and timing of dividends paid to himself and to
holders of Class A common stock; and
- otherwise control our management and operations and the outcome of most
matters submitted for a stockholder vote.
Mr. Constantin is also the controlling shareholder of several other companies,
known generally as the Phoenix companies. We provide services to several of the
Phoenix companies and lease real estate from one of the Phoenix companies.
INTERCOMPANY AGREEMENTS
In the normal course of business, we have from time-to-time entered into
various business transactions and agreements with several of the Phoenix
companies. We may enter into additional transactions with the Phoenix companies
in the future. The following is a summary of each of the material agreements
that we have entered into with the Phoenix companies. Such summaries are
qualified in their entirety by those agreements, which are filed as exhibits to
the registration statement of which this prospectus is a part.
Administrative Services Agreement
We have entered into Administrative Services Agreements with each of
Phoenix Leasing Inc., Phoenix Cable Inc. and Phoenix Precision Graphics, Inc.
under which we provide accounting, tax, legal administrative, financial, data
processing and other consulting services to these companies for a monthly fee.
These agreements are substantially identical. To date, we have been paid $5.2
million by Phoenix Leasing Inc., $0.6 million by Phoenix Cable Inc. and $0.3
million by Phoenix Precision Graphics, Inc. under prior agreements. Under the
new agreements, Phoenix Leasing will pay us $246,000 per month, Phoenix Cable
will pay us $47,000 per month and Phoenix Precision Graphics will pay us $35,000
per month. We believe that the terms of these agreements are no less favorable
to us than we could have received from an unaffiliated third party. Gus
Constantin, our Chairman, Chief Executive Officer and controlling shareholder,
is also the Chairman, Chief Executive Officer and controlling shareholder of
each of Phoenix Leasing, Phoenix Cable and Phoenix Precision Graphics.
Real Estate Lease
We lease approximately 40,000 square feet of the building that contains our
principal executive offices and our data operations center from Phoenix American
Inc. The lease is for a term of two years, with five successive options to renew
for one-year terms. Under the lease, we pay $53,650 per month in rent and have a
right of first refusal to lease additional space in the building if and when it
becomes available. We believe that the terms of our lease agreement are no less
favorable to us than we could have received from
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<PAGE> 46
an unaffiliated third party. Mr. Constantin is the Chairman, Chief Executive
Officer and controlling shareholder of Phoenix Leasing.
All future transactions between us and our officers, directors and
principal stockholders and their affiliates will be approved by a majority of
the board, including a majority of the independent and disinterested directors
of the board.
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<PAGE> 47
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of common stock as of August 5, 1999 by:
- each person or entity known to us to own beneficially more than 5% of
either class of our common stock;
- each of our directors;
- each of our named executive officers; and
- all executive officers and directors as a group.
The address of each person listed below is c/o ReSourcePhoenix.com, 2401
Kerner Boulevard, San Rafael, CA 94901-5529.
<TABLE>
<CAPTION>
CLASS B
CLASS A COMMON STOCK COMMON
------------------------------------- STOCK PERCENT OF TOTAL
PERCENT OF OWNERSHIP ------------ VOTING POWER
SHARES ---------------------- SHARES ----------------------
BENEFICIALLY BEFORE AFTER BENEFICIALLY BEFORE AFTER
NAME OWNED OFFERING OFFERING(1) OWNED OFFERING OFFERING(1)
---- ------------ -------- ----------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gus Constantin(2)................... -- -- -- 10,000,000 100.0%
Bryant Tong(3)...................... 558,770 5.3% -- 1.1%
David Brunton(3).................... 59,000 * * -- * *
Glenn McLaughlin.................... -- -- -- -- -- --
Roger Smith......................... -- -- -- -- -- --
All directors and executive officers
as a group (7 persons)(4)......... 727,570 100.0% 10,000,000 100.0%
</TABLE>
- ---------------
* Less than one percent.
Beneficial ownership is determined in accordance with the rules of the SEC.
In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Class A common stock subject
to options held by that person that are currently exercisable or
exercisable within 60 days of August 5, 1999 are deemed outstanding. Such
shares, however, are not deemed outstanding for the purpose of computing
the percentage ownership of any other person. Except as indicated in the
footnotes to this table and pursuant to applicable community property laws,
each stockholder named in the table has sole voting and investment power
with respect to the shares set forth opposite such stockholder's name.
(1) Assumes no exercise of the underwriters' over-allotment option.
(2) All of these shares are held by the Gus and Mary Constantin 1978 Living
Trust, of which Mr. Constantin is the co-trustee.
(3) Consists of shares of Class A Common Stock subject to options that will
fully vest upon the effectiveness of our initial public offering.
(4) Includes 727,570 shares of Class A Common Stock subject to options that will
fully vest upon the effectiveness of our initial public offering or that are
exercisable within 60 days of August 1, 1999.
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<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
Pursuant to our certificate of incorporation, we have authority to issue an
aggregate of 30,000,000 shares of capital stock, consisting of 15,000,000 shares
of Class A common stock, par value $0.001 per share, 10,000,000 shares of Class
B common stock, par value $0.001 per share, and 5,000,000 shares of preferred
stock, par value $0.001 per share.
Set forth below is a description of the common stock and the preferred
stock that may be issued under our certificate of incorporation.
COMMON STOCK
Shares of Class A common stock and Class B common stock are identical in
all respects, except for voting rights and certain conversion rights, as
described below.
Voting rights. Each outstanding share of Class A common stock is entitled
to one vote on all matters submitted to a vote of our stockholders, including
the election of directors, and each share of Class B common stock is entitled to
five votes on each such matter. Except as required by applicable law, holders of
the Class A common stock and Class B common stock vote together as a single
class on all matters. There is no cumulative voting in the election of
directors.
For so long as there are any shares of Class B common stock outstanding,
any action that may be taken at a meeting of the stockholders may be taken by
written consent in lieu of a meeting if we receive consents signed by
stockholders having the minimum number of votes that would be necessary to
approve the action at a meeting at which all shares entitled to vote on the
matter were present and voted. This could permit the holders of Class B common
stock to take action regarding certain matters without providing other
stockholders the opportunity to voice dissenting views or raise other matters.
The right to take such action by written consent of stockholders will expire
when there are no longer any shares of Class B common stock outstanding.
Dividends, distributions and stock splits. Holders of Class A common stock
and Class B common stock are entitled to receive dividends at the same rate if,
as and when such dividends are declared by our Board of Directors out of assets
legally available therefor after payment of dividends required to be paid on
shares of preferred stock, if any.
In the case of dividends or distributions payable in Class A common stock
or Class B common stock, only shares of Class A common stock will be distributed
with respect to the Class A common stock and only shares of Class B common stock
will be distributed with respect to the Class B common stock. In the case of
dividends or other distributions consisting of other voting shares, we will
declare and pay such dividends in two separate classes, identical in all
respects except that the voting rights of each such security paid to the holders
of the Class A common stock shall be one-fifth of the voting rights of each such
security paid to the holders of Class B common stock. In the case of dividends
or other distributions consisting of non-voting securities convertible into, or
exchangeable for, our voting securities, we will provide that such convertible
or exchangeable securities and the underlying securities be identical in all
respects, except that the voting rights of each security underlying the
convertible or exchangeable security paid to the holders of the Class A common
stock shall be one-fifth of the voting rights of each security underlying the
convertible or exchangeable security paid to the holders of Class B common
stock, and such underlying securities paid to the holders of Class B common
stock shall convert into the security paid to the holders of the Class A common
stock upon the same terms and conditions applicable to the conversion of Class B
common stock into Class A common stock.
Neither the Class A common stock nor the Class B common stock may be
subdivided or combined in any manner unless the other class is subdivided or
combined in the same proportion.
Conversion. The shares of Class A common stock are not convertible.
Each share of Class B common stock is convertible into one share of Class A
common stock at any time at the option of the holder. Each share of Class B
common stock will automatically convert into one
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<PAGE> 49
share of Class A common stock upon the sale or transfer of such share of Class B
common stock other than to an entity that he controls. The holders of Class B
common stock shall have, upon conversion of their shares of Class B common stock
into shares of Class A common stock, one vote per share of Class A common stock
held.
Liquidation. In the event of any dissolution, liquidation, or winding up of
our affairs, whether voluntary or involuntary, after payment of our debts and
other liabilities and making provision for the holders of preferred stock, if
any, our remaining assets will be distributed ratably among the holders of the
Class A common stock and the Class B common stock, treated as a single class.
Mergers and other business combinations. Upon a merger, combination, or
other similar transaction in which shares of common stock are exchanged for or
changed into other stock or securities, cash and/or any other property, holders
of the Class A common stock and Class B common stock will be entitled to receive
an equal amount per share of stock, securities, cash, and/or any other property,
as the case may be, into which or for which each share of any other class of
common stock is exchanged or changed; provided that in any transaction in which
shares of capital stock are distributed, such shares so exchanged for or changed
into may differ as to voting rights and conversion rights to the extent and only
to the extent that the voting rights and conversion rights of Class A common
stock and Class B common stock differ at that time.
All shares of Class A common stock and Class B common stock outstanding are
fully paid and nonassessable, and all the shares of Class A common stock and
Class B common stock to be outstanding upon completion of this offering will be
fully paid and nonassessable.
PREFERRED STOCK
Upon consummation of the offering, 5,000,000 shares of undesignated
preferred stock will be authorized, and no shares will be outstanding. Our board
has the authority to issue preferred stock in one or more series and to
establish the rights and restrictions granted to or imposed on any unissued
shares of preferred stock and to fix the number of shares constituting any
series without any further vote or action by the stockholders. Our board has the
authority, without approval of the stockholders, to issue preferred stock that
has voting and conversion rights superior to the common stock, which could have
the effect of delaying or preventing a change in control. We currently have no
plans to issue any shares of preferred stock.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
Our certificate of incorporation and bylaws and the Delaware General
Corporation Law contain certain provisions that could discourage potential
takeover attempts and make it more difficult for our stockholders to change
management or receive a premium for their shares.
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, an anti-takeover law. In general, the statute 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
business combination is approved in a prescribed manner including approval by at
least 66.7% of the outstanding stock not owned by the interested stockholder. A
"business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the stockholder. For purposes of Section
203, an "interested stockholder" is defined to include any person that is:
- the owner of 15% or more of the outstanding voting stock of the
corporation;
- an affiliate or associate of the corporation and was the owner of 15% or
more of the voting stock outstanding of the corporation, at any time
within three years immediately prior to the relevant date; and
- an affiliate or associate of the persons described in the foregoing
bullet points.
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<PAGE> 50
Stockholders may, by adopting an amendment to the corporation's certificate of
incorporation or bylaws, elect for the corporation not to be governed by Section
203, effective 12 months after adoption. Neither our certificate of
incorporation nor our bylaws exempt us from the restrictions imposed under
Section 203. It is anticipated that the provisions of Section 203 may encourage
companies interested in acquiring us to negotiate in advance with our board
because stockholder approval of the transaction, as discussed above, requirement
would be unnecessary.
Annual meetings of stockholders shall be held to elect our board and
transact such other business as may be properly brought before the meeting.
Special meetings of stockholders may be called by the Chairman or the Chief
Executive Officer or by a majority of the board. Our certificate of
incorporation and bylaws provide that any action required or permitted to be
taken by our stockholders may be effected at a duly called annual or special
meeting of the stockholders or may be taken by a consent in writing by
stockholders.
Our certificate of incorporation may be amended with the approval of a
majority of the board and the holders of a majority of our outstanding voting
securities.
The number of directors shall be fixed by resolution of the board. The size
of the board is currently fixed at four members. The directors shall be elected
at the annual meeting of the stockholders, except for filling vacancies.
Directors may be removed with the approval of the holders of a majority of our
voting power present and entitled to vote at a meeting of stockholders.
Vacancies and newly-created directorships resulting from any increase in the
number of directors may be filled by a majority of the directors then in office,
a sole remaining director, or the holders of a majority of the voting power
present and entitled to vote at a meeting of stockholders.
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast by the stockholders entitled to vote generally shall
constitute a quorum for stockholder action at any meeting.
LIMITATION OF LIABILITY; INDEMNIFICATION
Our certificate of incorporation contains certain provisions permitted
under the Delaware General Corporation Law relating to the liability of
directors. These provisions eliminate a director's personal liability for
monetary damages resulting from a breach of fiduciary duty, except in certain
circumstances involving certain wrongful acts, including:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law relating to
unlawful stock repurchases or dividends; or
- for any transaction from which the director derives an improper personal
benefit.
These provisions do not limit or eliminate our rights or those of any
stockholder to seek non-monetary relief, such as an injunction or rescission, in
the event of a breach of a director's fiduciary duty. These provisions will not
alter a director's liability under federal securities laws.
Our bylaws also contain provisions indemnifying our directors and officers
to the fullest extent permitted by the Delaware General Corporation Law. We plan
to enter into separate indemnification agreements with our directors and
officers that may, in some cases, be broader than the specific indemnification
provisions contained in our certificate of incorporation, bylaws or the Delaware
General Corporation Law. The indemnification agreements may require us, among
other things, to indemnify the officers and directors against certain
liabilities, other than liabilities arising from willful misconduct, that may
arise by reason of their status or service as directors or officers. These
agreements also may require us to advance the expenses incurred by the officers
and directors as a result of any proceeding against them
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<PAGE> 51
as to which they could be identified. We believe that these indemnification
arrangements are necessary to attract and retain qualified individuals to serve
as directors and officers.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Class A common stock will be Chase
Mellon Shareholder Services LLC.
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<PAGE> 52
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have shares of
Class A common stock and 10,000,000 shares of Class B common stock outstanding
assuming no exercise of the underwriters' over-allotment option. Of this amount,
the shares of Class A common stock offered by this prospectus
will be available for immediate sale in the public market as of the date of this
prospectus. Approximately 1,175,405 shares of Class A common stock that are
currently subject to outstanding options and 10,000,000 shares of Class B common
stock will be available for sale in the public market following the expiration
of 180-day lock-up agreements with the representatives of our underwriters,
subject in some cases to compliance with the volume and other limitations of
Rule 144.
<TABLE>
<CAPTION>
DAYS AFTER THE DATE OF THIS APPROXIMATE SHARES
PROSPECTUS ELIGIBLE FOR FUTURE SALE COMMENT
--------------------------- ------------------------ ---------------------------------------
<S> <C> <C>
Upon effectiveness Freely tradable shares sold in offering
180 days 11,175,405 Lock-up released, subject in some cases
to volume limitations
</TABLE>
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least one year is entitled to sell within any
three-month period commencing 90 days after the date of this prospectus a number
of shares that does not exceed the greater of (a) 1% of the then outstanding
shares of common stock (approximately shares immediately after
the offering) or (b) the average weekly trading volume during the four calendar
weeks preceding the sale, subject to the filing of a Form 144 with respect to
the sale. A person who is not deemed to have been an affiliate of ours at any
time during the 90 days immediately preceding the sale and who has beneficially
owned his or her shares for at least two years is entitled to sell these shares
under Rule 144(k) without regard to the limitations described above. Persons
deemed to be affiliates must always sell under Rule 144, even after the
applicable holding periods have been satisfied.
We are unable to estimate the number of shares that will be sold under Rule
144, since this will depend on the market price for our common stock, the
personal circumstances of the sellers and other factors. Prior to the offering,
there has been no public market for the common stock, and there can be no
assurance that a significant public market for the Class A common stock will
develop or be sustained after the offering. Any future sale of substantial
amounts of Class A common stock in the open market may adversely affect the
market price of the Class A common stock offered by this prospectus.
Our directors, executive officers, and other significant stockholders have
agreed that they will not sell any common stock without the prior written
consent of BancBoston Robertson Stephens Inc. for a period of 180 days from the
date of this prospectus. We have also agreed not to issue any shares during the
lock-up period without the consent of BancBoston Robertson Stephens Inc., except
that we may, without this consent, grant options and sell shares under our stock
incentive and purchase plans although the shares may not be resold into the
public market during the lock-up period.
We intend to file a registration statement on Form S-8 under the Securities
Act shortly after the completion of the offering to register the shares of Class
A common stock subject to outstanding stock options that may be issued under
these plans, which will permit the resale of these shares in the public market
without restriction after the lock-up period expires.
48
<PAGE> 53
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc. and Thomas Weisel Partners LLC, have
severally agreed with us, subject to the terms and conditions set forth in the
underwriting agreement, to purchase from us the number of shares of Class A
common stock set forth opposite their names below. The underwriters are
committed to purchase and pay for all such shares if they are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
BancBoston Robertson Stephens Inc...........................
Thomas Weisel Partners LLC..................................
--------
Total.............................................
========
</TABLE>
We have been advised by the representatives that the underwriters propose
to offer the shares of Class A common stock to the public at the initial public
offering price set forth on the cover page of this prospectus and to make
certain dealers at such price less a concession of not in excess of $ per
share, of which $ may be reallowed to other dealers. After the initial
public offering, the public offering price, concession and reallowance to
dealers may be reduced by the representatives. No such reduction shall change
the amount of proceeds to be received by us as set forth on the cover page of
this prospectus. The Class A common stock is offered by the underwriters as
stated in this prospectus, subject to receipt and acceptance by them and subject
to their right to reject any order in whole or in part.
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Over-allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of Class A common stock at the
same price per share as we will receive for the shares that the
underwriters have agreed to purchase. To the extent that the underwriters
exercise this option, each of the underwriters will have a firm commitment to
purchase approximately the same percentage of these additional shares that the
number of shares of Class A common stock to be purchased by it shown in the
above table represents as a percentage of the shares offered in
this offering. If purchased, such additional shares will be sold by the
underwriters on the same terms as those on which the shares are
being sold. We will be obligated, according to the option, to sell shares to the
extent the option is exercised. The underwriters may exercise this option only
to cover over-allotments made in connection with the sale of the shares of Class
A common stock offered in this offering. If this option is exercised in full,
the total public offering price of the shares we sell to the
underwriters, underwriting discounts and commissions on such shares and total
proceeds to us from the sale of these shares will be $ , $ and
$ , respectively.
The following table summarizes the compensation to be paid to the
underwriters by us:
<TABLE>
<CAPTION>
TOTAL
----------------------
WITHOUT WITH
PER OVER- OVER-
SHARE ALLOTMENT ALLOTMENT
------ --------- ---------
<S> <C> <C> <C>
Underwriting discounts and commissions payable by
us................................................ $ $ $
</TABLE>
We estimate that expenses payable by us in connection with this offering,
other than the underwriting discounts and commissions referred to above, will be
approximately $ .
49
<PAGE> 54
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including liabilities
under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-up Agreements. With the exception of holders of options to purchase
shares of Class A common stock, each of our executive officers,
directors, stockholders, and optionholders has agreed with the representatives,
for a period of 180 days after the date of this prospectus, subject to certain
exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to any shares of common stock,
any options or warrants to purchase any shares of common stock, or any
securities convertible into or exchangeable for shares of common stock owned as
of the date of this prospectus or, with certain exceptions, thereafter acquired
directly by such holders or with respect to which they have or hereafter acquire
the power or disposition, without the prior written consent of BancBoston
Robertson Stephens Inc. However, BancBoston Robertson Stephens Inc. may, in its
sole discretion and at any time without notice, release all or any portion of
the securities subject to the lock-up agreements. There are no agreements
between the representatives and any of our stockholders providing consent by the
representatives to the sale of shares prior to the expiration of the period of
180 days after this prospectus.
Future Sales. In addition, we have agreed that during the period of 180
days after this prospectus, we will not, subject to certain exceptions, without
the prior written consent of BancBoston Robertson Stephens Inc.:
- Consent to the disposition of any shares held by stockholders prior to
the expiration of the period of 180 days after this prospectus; or
- Issue, sell, contract to sell or otherwise dispose of any shares of
common stock, any options or warrants to purchase any shares of common
stock or any securities convertible into, exercisable for or exchangeable
for shares of common stock, other than (1) the sale of shares in this
offering, (2) the issuance of common stock upon the exercise or
conversion of outstanding options, warrants or convertible securities,
(3) our issuance of stock options under existing stock option plans and
(4) our issuance of common stock under the Employee Stock Purchase Plan.
See "Shares Eligible for Future Sales."
Listing. We have applied to have our Class A common stock quoted on the
Nasdaq National Market under the symbol RPCX.
No Prior Public Market. Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public offering price for
the Class A common stock offered hereby was determined through negotiations
between us and the representatives. Among the factors considered in such
negotiations were prevailing market conditions, certain of our financial
information, market valuations of other companies that we and the
representatives believed to be comparable to us, estimates of our business
potential, the present state of our development and other factors deemed
relevant.
Stabilization. The representatives have advised us that, pursuant to
Regulation M under the Securities Act, certain persons participating in this
offering may engage in transactions, include stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of the common stock on behalf of
the underwriters for the purpose of fixing or maintaining the price of the
common stock. A "syndicate covering transaction" is the bid for or the purchase
of the common stock on behalf of the underwriters to reduce a short position
incurred by the underwriters in connection with this offering. A "penalty bid"
is an arrangement permitting the representatives to reclaim the selling
concession otherwise accruing to an underwriter or syndicate member in
connection with this offering if the common stock originally sold by such
underwriter or syndicate member is purchased by the representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such underwriter or syndicate
50
<PAGE> 55
member. The representatives have advised us that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
Directed Share Program. At our request, the underwriters have reserved up
to shares of Class A common stock to be issued by us and offered
hereby for sale, at the initial public offering price, to directors, officers,
employees, business associates and related persons of ReSourcePhoenix.com. The
number of shares of common stock available for sale to the general public will
be reduced to the extent such individuals purchase such reserved shares. Any
reserved shares which are not so purchased will be offered by the underwriters
to the general public on the same basis as the other shares offered hereby.
New Underwriter. 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 has been named as a lead or
co-manager on 52 filed public offerings of equity securities, of which 31 have
been completed, and has acted as a syndicate member in an additional 24 public
offerings of equity securities. We provide services to Thomas Weisel Partners,
for which Thomas Weisel Partners paid us $255,000 in the six months ended June
30, 1999.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Class A common
stock offered hereby are being passed upon for ReSourcePhoenix.com by Wilson
Sonsini Goodrich & Rosati, Palo Alto, California. Certain legal matters in
connection with this offering will be passed upon for the underwriters by
Brobeck, Phleger & Harrison LLP, Palo Alto, California.
EXPERTS
The financial statements included in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the shares to be sold in the offering. This
prospectus does not contain all the information contained in the registration
statement. For further information with respect to ReSourcePhoenix.com and the
shares to be sold in the offering, reference is made to the registration
statement and the exhibits and schedules filed with the registration statement.
We have described all material information for each contract, agreement or other
document filed with the registration statement in the prospectus. However,
statements contained in this prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. As a
result, you should refer to the copy of the contract, agreement or other
document filed as an exhibit to the registration statement for a complete
description of the matter involved.
You may read and copy all or any portion of the registration statement or
any reports, statements or other information that we file at the SEC'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 SEC. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. Our SEC filings, including the
registration statement, are also available to you without charge from the SEC
Web site, which is located at http://www.sec.gov.
51
<PAGE> 56
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Changes in Stockholder's
Equity.................................................... F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
Pro Forma Unaudited Consolidated Financial Statements....... F-15
</TABLE>
F-1
<PAGE> 57
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder of
ReSourcePhoenix.com, Inc.:
We have audited the accompanying consolidated balance sheets of
ReSourcePhoenix.com, Inc. (a Delaware corporation) and subsidiary as of December
31, 1998 and 1997, and the related consolidated statements of operations,
stockholder's equity and cash flows each of the three years in the period then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
ReSourcePhoenix.com, Inc. and subsidiary as of December 31, 1998 and 1997 and
the consolidated results of its operations and its cash flows for each of the
three years in the period then ended, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California,
August 4, 1999
F-2
<PAGE> 58
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
-------------------- ENDED
12/31/97 12/31/98 6/30/99
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents................................. $ 106 $ 503 $ 128
Accounts receivable, net of allowance of $11 at December
31, 1997, $8 at December 31, 1998 and $13 at June 30,
1999................................................... 544 419 1,034
Receivable from affiliates................................ 345 182 89
Prepaid expenses and other current assets................. 51 20 159
------ ------ --------
Total current assets.............................. 1,046 1,124 1,410
Property and equipment, net of accumulated depreciation of
$133 at December 31, 1997, $439 at December 31, 1998
and $668 at June 30, 1999.............................. 686 694 1,994
Note receivable from employee............................. -- -- 21
Other assets.............................................. -- 4 --
------ ------ --------
Total assets...................................... $1,732 $1,822 $ 3,425
====== ====== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable and accrued liabilities.................. $ 874 $1,195 $ 962
Deferred revenue.......................................... -- 627 1,001
------ ------ --------
Total current liabilities......................... 874 1,822 1,963
Commitments and Contingencies
Stockholder's Equity:
Preferred stock, $.001 par value 5,000,000 shares
authorized, none issued and outstanding................ -- -- --
Class A common stock, $.001 par value; 15,000,000 shares
authorized, none issued and outstanding................ -- -- --
Class B common stock, $.001 par value; 1,000 shares
authorized, issued and outstanding at December 31, 1997
and 1998; 10,000,000 authorized, issued and outstanding
at June 30, 1999....................................... 1,598 6,397 15,370
Accumulated deficit....................................... (740) (6,397) (13,908)
------ ------ --------
Total stockholder's equity........................ 858 -- 1,462
------ ------ --------
Total liabilities and stockholder's equity........ $1,732 $1,822 $ 3,425
====== ====== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 59
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR YEAR YEAR ENDED ENDED
ENDED ENDED ENDED 06/30/98 06/30/99
12/31/96 12/31/97 12/31/98 (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue:
Contract service revenue................ $ 1,175 $ 2,255 $ 2,460 $ 1,240 $ 1,836
Software revenue........................ -- -- 44 38 1,489
Affiliate revenue....................... -- 3,085 2,182 1,034 913
----------- ----------- ----------- ----------- -----------
Total revenue.................... 1,175 5,340 4,686 2,312 4,238
Operating expenses:
Cost of providing services.............. 570 2,874 4,555 2,311 2,559
General and administrative.............. 298 2,035 2,072 750 1,142
Research and development................ -- 566 2,286 674 1,550
Client acquisition...................... 418 513 1,134 328 996
Stock-related compensation.............. -- -- -- -- 5,291
Depreciation and amortization........... 12 133 307 141 228
----------- ----------- ----------- ----------- -----------
Total operating expenses......... 1,298 6,121 10,354 4,204 11,766
Loss from operations...................... (123) (781) (5,668) (1,892) (7,528)
Other income (expense).................... -- 41 11 (41) 17
----------- ----------- ----------- ----------- -----------
Net loss.................................. $ (123) $ (740) $ (5,657) $ (1,933) $ (7,511)
=========== =========== =========== =========== ===========
Basic and diluted net loss per share...... $ (0.01) $ (0.07) $ (0.57) $ (0.19) $ (0.75)
Shares used in computing basic and diluted
net loss per share...................... 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 60
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CLASS B
COMMON PLI'S TOTAL
STOCK EQUITY IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT THE COMPANY DEFICIT EQUITY
---------- ------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996.................. $ -- $ -- $ -- $ --
Net loss.................................. -- (123) -- (123)
Capital contributed from PLI.............. -- 123 -- 123
---------- ------- ----- -------- -------
BALANCE, DECEMBER 31, 1996................ -- -- -- --
Net loss.................................. -- -- (740) (740)
Capital contribution from stockholder..... 1,000 1,598 -- -- 1,598
---------- ------- ----- -------- -------
BALANCE AT DECEMBER 31, 1997.............. 1,000 1,598 -- (740) 858
Net loss.................................. -- -- (5,657) (5,657)
Capital contribution from stockholder..... 4,799 -- -- 4,799
---------- ------- ----- -------- -------
BALANCE AT DECEMBER 31, 1998.............. 1,000 6,397 -- (6,397) --
Net loss.................................. -- -- (7,511) (7,511)
Capital contribution from stockholder..... 3,682 -- -- 3,682
Cancellation of stock..................... (1,000) -- -- -- --
Issuance of Stock......................... 10,000,000 -- -- -- --
Compensation payable in stock............. 5,291 -- -- 5,291
---------- ------- ----- -------- -------
BALANCE AT JUNE 30, 1999 (UNAUDITED)...... 10,000,000 $15,370 $ -- $(13,908) $ 1,462
========== ======= ===== ======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 61
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR YEAR YEAR ENDED ENDED
ENDED ENDED ENDED 6/30/98 6/30/99
12/31/96 12/31/97 12/31/98 (UNAUDITED) (UNAUDITED)
------------ -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................. $(123) $ (740) $(5,657) $(1,933) $(7,511)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 12 133 307 141 228
Stock-related compensation............................. -- -- -- -- 5,291
Change in operating assets and liabilities:
Accounts receivable.................................. (3) (544) 125 5 (615)
Receivable from affiliates........................... -- (345) 163 277 72
Prepaid expenses and other current assets............ -- (51) 27 37 (135)
Accounts payable and accrued liabilities............. (9) 874 321 (75) (233)
Deferred revenue..................................... -- -- 627 119 374
----- ------ ------- ------- -------
Net cash used in operating activities............. (123) (673) (4,087) (1,429) (2,529)
INVESTING ACTIVITIES
Purchase of property and equipment....................... -- (496) (315) (113) (54)
----- ------ ------- ------- -------
Net cash used in investing activities............. -- (496) (315) (113) (54)
FINANCING ACTIVITIES
Proceeds from capital contribution....................... 123 1,275 4,799 1,624 2,208
----- ------ ------- ------- -------
Net cash provided by financing activities......... 123 1,275 4,799 1,624 2,208
----- ------ ------- ------- -------
Net increase (decrease) in cash and cash equivalents....... -- 106 397 82 (375)
Cash and cash equivalents, beginning of period............. -- -- 106 106 503
----- ------ ------- ------- -------
Cash and cash equivalents, end of period................... $ -- $ 106 $ 503 $ 188 $ 128
===== ====== ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF NON CASH FINANCING ACTIVITIES
Contribution of property and equipment from affiliate.... $ 146 $ 323 $ -- $ -- $ 1,474
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 62
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION:
The consolidated financial statements of ReSourcePhoenix.com, Inc. and
Subsidiary ("the Company") include the accounts of ReSourcePhoenix.com, Inc.
("the Holding Company"), a Delaware corporation, and ReSource/Phoenix, Inc.
("the Subsidiary") a California company incorporated on September 26, 1996. The
Holding Company was formed on July 27, 1999 and on August 4, 1999 the
shareholder of the Subsidiary contributed the shares of the Subsidiary in
exchange for shares of Class B common stock of the Holding Company. The
consolidated financial statements reflect this reorganization. Revenues,
expenses, assets and liabilities of the Subsidiary are included in the
respective line items in the consolidated financial statements for all periods
presented after the elimination of intercompany accounts and transactions. The
Holding Company has no operations.
The Company provides financial, information technology and investor related
services on an outsource basis to unaffiliated third parties. The Company also
provides these services to affiliated companies. In addition, the Company has
developed contact management and sales tracking support software for use by the
mutual fund industry. The Company commenced operating as a division of Phoenix
Leasing Inc. ("PLI") in 1994. On January 1, 1997, the operations were sold to
the controlling shareholder of Phoenix American, Inc., the parent company of PLI
and transferred to the Company. On January 1, and April 1, 1997 certain
personnel of PLI were also transferred to the Company and certain assets of PLI
were sold to the Company. All asset transfers were made at historical cost.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES:
UNAUDITED INTERIM FINANCIAL INFORMATION
The financial information as of June 30, 1999 and for the six months ended
June 30, 1999 and 1998 is unaudited, but includes all adjustments (consisting
only of normal recurring adjustments) that the Company considers necessary for a
fair presentation of the consolidated financial position at such dates and the
operations and cash flows for the periods then ended. Operating results for the
period ended June 30, 1999, are not necessarily indicative of results that may
be expected for the entire year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CARVE OUT ACCOUNTING
The consolidated results of operations for the year ended December 31, 1996
are presented on a carve out basis from the historical accounting records of
PLI. The carved out consolidated financial statements include all revenues and
costs directly attributable to the Company. Only revenues and costs related to
third-party contracts are carved out as the Company derived no revenues from PLI
or affiliates. The results also include allocation of general corporate expenses
of PLI. No income tax provision has been provided as the carved out operations
resulted in losses. Interest on PLI's debt has not been allocated to the Company
for the carved out period.
All of the allocations and estimates in the carved out consolidated
financial statements are based on assumptions that management believes are
reasonable under the circumstances. However, these allocations
F-7
<PAGE> 63
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and estimates are not necessarily indicative of the costs and expenses that
would have resulted if the Company had been operating as a separate entity.
REVENUE RECOGNITION
The Company's revenues are derived from two sources, contract services and
software.
Contract services include monthly contractual payments for ongoing
accounting, finance, data center operations and other functions in addition to
up front implementation fees. Contract service revenue is recognized as the
services are provided. Contract services are also provided to affiliates and
reported as affiliate revenue.
Software revenue consists principally of up front license fees earned from
the licensing of the Company's software, related consulting services, and
training and maintenance, which includes updates and technical support. License
fee revenue includes software maintenance and support, training, customization,
and system implementation consulting. American Institute of Certified Public
Accountants' Statement of Position 97-2, "Software Revenue Recognition" (SOP
97-2) provides guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions. In accordance with SOP 97-2,
revenue from up front software license agreements is recognized when delivery
has occurred, collection is deemed probable, the fee is fixed or determinable
and vendor-specific objective evidence exists to allocate the total fee to all
delivered and undelivered elements of the arrangement. Revenue is deferred in
cases where the license arrangement calls for future delivery of products or
services for which the Company does not have vendor-specific objective evidence
to allocate a portion of the total fee to the undelivered element. In such
cases, revenue is recognized when the undelivered elements are delivered or
vendor-specific objective evidence of the undelivered elements becomes
available. If license arrangements include the rights to unspecified future
products, revenue is recognized over the contractual or estimated economic term
of the arrangement. Consulting service and training revenues are recognized as
services are performed and accepted by the customer. Maintenance revenue is
recognized ratably over the term of the agreement. In instances where software
license agreements include a combination of consulting services, training, and
maintenance, these separate elements are unbundled from the arrangement based on
the element's relative fair value.
DEFERRED REVENUE
Deferred revenue represents amounts received from customers under certain
license, maintenance and service agreements for which the revenue earnings
process has not been completed.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of highly liquid financial instruments,
primarily money market funds, purchased with an original maturity of three
months or less.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and depreciated on a
straight-line basis over estimated useful lives ranging from 3 to 10 years.
SOFTWARE DEVELOPMENT COSTS AND RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Financial
accounting standards require the capitalization of certain software development
costs after technological feasibility of the software is established. In the
development of the Company's new products and enhancements to existing products,
the technological feasibility of the software was not established until
substantially all product development
F-8
<PAGE> 64
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
was complete, including the development of a working model. Internal software
development costs that met the criteria for capitalization were insignificant
and were charged to research and development expense in the accompanying
consolidated statements of operations.
CONCENTRATION OF CREDIT RISK
The Company does not require collateral or other security to support credit
sales, but does perform ongoing credit evaluations of its customers' financial
condition. The Company provides allowances for bad debts based on historical
experience and specific identification, which, to date, have been insignificant.
For the year ended December 31, 1998, two customers, PLI (an affiliate) and
GE Capital Aviation Services/PIMC, accounted for 41% and 20% of the Company's
net revenues. For the six months ended June 30, 1999, three customers, PLI, GE
Capital Aviation Services/PIMC and John Hancock Advisors, accounted for 18%,
10%, and 30% of the Company's net revenues.
SEGMENT REPORTING
Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS 131") establishes
standards for the reporting of financial and descriptive information about
reportable operating segments. Because the Company's financial information is
internally evaluated as a single operating segment and decisions regarding
resource allocation are made considering the Company's operations as a whole, no
separate segment information is presented. All of the Company's operations are
in the United States.
INCOME TAXES
The Company has elected to be treated as a subchapter S corporation as
defined by the Federal Internal Revenue Code. As such, the Company is not
subject to federal taxes on its income and items of income, gain, loss,
deductions and credit are reportable by individual stockholders of the Company.
Accordingly, no liability or provision for such taxes is recorded on the
Company's consolidated financial statements. Upon the completion of the
Company's proposed initial public offering, the Company will terminate its
election to be taxed as a subchapter S corporation.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was issued and,
as amended, is required to be adopted by the Company in fiscal 2001. Because the
Company does not currently use any derivative instruments, management does not
anticipate that the adoption of the new Statement will have a significant effect
on consolidated results of operations or the consolidated financial position of
the Company.
In December 1998, the American Institute of Certified Public Accountants
issued SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With
Respect to Certain Transactions." SOP 98-9 amends SOP 97-2 and SOP 98-4
extending the deferral of the application of certain provisions of SOP 97-2 as
amended by SOP 98-4 through fiscal years beginning on or before March 15, 1999.
All other provisions of SOP 98-9 are effective for transactions entered into in
fiscal years beginning after March 15, 1999. The Company's management does not
expect the adoption of SOP 98-9 to have a material effect on its results of
consolidated operations or consolidated financial position.
F-9
<PAGE> 65
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. PROPERTY AND EQUIPMENT:
Major classes of property and equipment are as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30
DECEMBER 31, DECEMBER 31, 1999
1997 1998 (UNAUDITED)
------------ ------------ -----------
<S> <C> <C> <C>
Furniture, fixtures and equipment.......... $ 527 $ 812 $2,075
Software................................... 292 321 384
Leasehold improvements..................... -- -- 203
----- ------ ------
819 1,133 2,662
Less accumulated depreciation and
amortization............................. (133) (439) (668)
----- ------ ------
Net Property and Equipment................. $ 686 $ 694 $1,994
===== ====== ======
</TABLE>
The Company received a transfer of property and equipment in the amount of
$535,000 less accumulated depreciation of $212,000 from PLI on January 1, 1997
at historical cost. Also, effective June 1, 1999, property and equipment in the
amount of $1,995,000, less accumulated depreciation of $521,000 was transferred
at historical cost from an affiliate to the Company. The Company is continuing
to depreciate these assets based on their original useful lives.
NOTE 4. STOCKHOLDER'S EQUITY
Pursuant to its Amended and Restated Certificate of Incorporation, the
Company is authorized to issue an aggregate of 30,000,000 shares of capital
stock, consisting of 15,000,000 shares of Class A common stock, par value $0.001
per share, 10,000,000 shares of Class B common stock, par value $0.001 per
share, and 5,000,000 shares of preferred stock, par value $0.001 per share.
COMMON STOCK
Shares of Class A common stock and Class B common stock are identical in
all respects, except for voting rights and certain conversion rights, as
described below.
Voting Rights. Each outstanding share of Class A common stock is entitled
to one vote on all matters submitted to a vote of the Company's stockholders,
including the election of directors, and each share of Class B common stock is
entitled to five votes on each such matter. Except as required by applicable
law, holders of the Class A common stock and Class B common stock vote together
as a single class on all matters. There is no cumulative voting in the election
of directors.
For so long as there are any shares of Class B common stock outstanding,
any action that may be taken at a meeting of the stockholders may be taken by
written consent in lieu of a meeting if the Company receives consents signed by
stockholders having the minimum number of votes that would be necessary to
approve the action at a meeting at which all shares entitled to vote on the
matter were present and voted. This could permit the holders of Class B common
stock to take action regarding certain matters without providing other
stockholders the opportunity to voice dissenting views or raise other matters.
The right to take such action by written consent of stockholders will expire
when there are no longer any shares of Class B common stock outstanding.
Dividends, Distributions and Stock Splits. Holders of Class A common stock
and Class B common stock are entitled to receive dividends at the same rate if,
as and when such dividends are declared by the Company's Board of Directors out
of assets legally available therefor after payment of dividends required to be
paid on shares of preferred stock, if any.
Conversion. The shares of Class A common stock are not convertible.
F-10
<PAGE> 66
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Each share of Class B common stock is convertible into one share of Class A
common stock at any time at the option of the holder. Each share of Class B
common stock will automatically convert into one share of Class A common stock
upon the sale or transfer of such share of Class B common stock to any person.
The holders of Class B common stock shall have, upon conversion of their shares
of Class B common stock into shares of Class A common stock, one vote per share
of Class A common stock held.
Liquidation. In the event of any dissolution, liquidation, or winding up of
the Company's affairs, whether voluntary or involuntary, after payment of the
Company's debts and other liabilities and making provision for the holders of
preferred stock, if any, the Company's remaining assets will be distributed
ratably among the holders of the Class A common stock and the Class B common
stock, treated as a single class.
Mergers and Other Business Combinations. Upon a merger, combination, or
other similar transaction in which shares of common stock are exchanged for or
changed into other stock or securities, cash and/or any other property, holders
of the Class A common stock and Class B common stock will be entitled to receive
an equal amount per share of stock, securities, cash, and/or any other property,
as the case may be, into which or for which each share of any other class of
common stock is exchanged or changed; provided that in any transaction in which
shares of capital stock are distributed, such shares so exchanged for or changed
into may differ as to voting rights and conversion rights to the extent and only
to the extent that the voting rights and conversion rights of Class A common
stock and Class B common stock differ at that time.
PREFERRED STOCK
On August 4, 1999, 5,000,000 shares of undesignated preferred stock were
authorized for issuance. The Company's board has the authority to issue
preferred stock in one or more series and to establish the rights and
restrictions granted to or imposed on any unissued shares of preferred stock and
to fix the number of shares constituting any series without any further vote or
action by the stockholders. The Company's board has the authority, without
approval of the stockholders, to issue preferred stock that has voting and
conversion rights superior to the common stock, which could have the effect of
delaying or preventing a change in control.
NOTE 5. STOCK BASED INCENTIVE PLANS:
On January 1, 1999, the Company adopted an Incentive Plan ("the Phantom
Plan") for its key employees, whereby share appreciation and dividend income
rights were granted to such employees by reference to the Company's common
shares. Upon exercise of such rights, the employees are required to provide to
the Company an amount equal to $1.50 per share. The rights granted under the
Phantom Plan vest ratably over four years.
Additionally, the Phantom Plan contains terms and conditions that provide
for its modification. In the event of a sale of the Company, each participant in
the Phantom Plan shall receive a pro rata portion of the sale price, less the
initial share value, as defined. Participants may also elect, after the end of
the first year after the date of the award of such shares, to cash out of the
Phantom Plan and receive from the Company an amount equal to two times the pro
rata portion of the change in the Company's pre-tax earnings multiplied by the
vesting percentage. In the event of an initial public offering, the Company
shall issue to each participant a number of shares of the Company's common stock
in settlement of the rights then outstanding.
Compensation expense of $5,291,000 related to the Phantom Plan has been
recognized to reflect the cumulative rights vested as of June 30, 1999. This
charge increases common stock, as the Company expects the issuance of shares
related to a proposed initial public offering to represent the most probable
F-11
<PAGE> 67
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
outcome. For purposes of calculating compensation expense under the Phantom
Plan, the fair value of the Company's common stock was based on an independent
third party valuation.
On August 4, 1999, the Company terminated the Phantom Plan, subject to the
effectiveness of the Company's proposed initial public offering. All outstanding
awards under the Phantom Plan have been terminated and replaced by option grants
under the Stock Option Plan (defined below), in each case subject to the
effectiveness of the Company's proposed initial public offering.
On August 4, 1999, the Board of Directors adopted its 1999 Stock Plan ("the
Stock Option Plan") pursuant to which a total of 1,750,000 shares of Class A
common stock have been reserved for issuance to provide additional incentive to
its employees, officers, directors and consultants. Pursuant to the Stock Option
Plan, the Company may grant stock options and stock purchase rights to
employees, officers, directors and consultants. The Board of Directors granted
options to purchase an aggregate of 1,175,405 shares of Class A common stock at
a weighted average exercise price of $1.50 per share, subject to the
effectiveness of the Company's proposed initial public offering. These grants
will vest fully upon the effectiveness of the Company's initial public offering.
Upon the completion of the anticipated initial public offering, the Company
will recognize compensation expense in an amount equal to the excess of the fair
value of common stock over the exercise price of such options to the extent that
such expense exceeds the amounts previously recognized under the Phantom Plan at
June 30, 1999.
The maximum term of an incentive stock option granted under the Stock
Option Plan is generally limited to ten years. If an optionee terminates his or
her service, the optionee generally may exercise only those options vested as of
the date of termination of service. Unless otherwise specified in the option
agreement, the optionee must effect such exercise within three months of
termination of service for any reason other than death or disability, and within
one year after termination due to death or disability. The exercise price of
incentive stock options granted under the Stock Option Plan must be at least
equal to the fair market value of the Company's Class A common stock on the date
of grant. Terms of any stock purchase rights granted under the Stock Option Plan
shall be determined by the Plan Administrator at the time such rights are
issued. Upon the termination of a purchaser's service with the Company, the
Company shall have an option to repurchase his or her shares at the original
price paid by the purchaser.
In the event the Company is acquired or merged with another entity or
transfers all or substantially all of the Company's assets, then each
outstanding option and stock purchase right shall automatically vest and become
fully exercisable unless the successor entity assumes such option or stock
purchase right or replaces it with a comparable option or right.
Additionally, on December 1, 1997 the Subsidiary entered into a contractual
agreement with an individual who is both a director and officer of the
Subsidiary for the contingent award of Class A common shares in the event of an
initial public offering. The shares are to be granted at the time of the
proposed initial public offering and will consist of one percent of all publicly
offered shares. There will be no consideration received by the Company in
exchange for such award. Upon the effective date of the proposed initial public
offering, the Company will recognize a nominal issuance and record compensation
expense equal to the share price at the time of the initial public offering
multiplied by one percent of the total number of Class A common shares offered
publicly.
NOTE 6. EMPLOYEE STOCK PURCHASE PLAN
Concurrently with the offering, the Company intends to establish an
Employee Stock Purchase Plan ("the Purchase Plan") under which a total of
500,000 shares of Class A common stock will be made available for sale. The
Purchase Plan, which is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended, will be
F-12
<PAGE> 68
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
administered by the Company's Board of Directors or by a committee appointed by
the Board. Employees are eligible to participate if they are employed by the
Company or one of its subsidiaries designated by the Board for at least 20 hours
per week and for more than five months in any calendar year. The Purchase Plan
permits eligible employees to purchase Class A common stock through payroll
deductions, which may not exceed 15% of an employee's compensation, subject to
certain limitations. The Purchase Plan will be implemented in a series of
consecutive, overlapping offering periods, each approximately six months in
duration. Offering periods will begin on the first trading day on or after April
30 and October 31 of every other year and terminate on the last trading day in
the period six months later. However, the first offering period shall be the
period of approximately 24 months commencing on the date upon which the
Company's registration statement is declared effective by the Securities and
Exchange Commission and terminating on the last trading day in the period ending
October 31, 2001. Each participant will be granted an option to purchase stock
on the first day of the six-month purchase period and such option will be
automatically exercised on the last date of each offering period. The purchase
price of each share of Class A common stock under the Purchase Plan will be
equal to 85% of the lesser of the fair market value per share of Class A common
stock on the start date of that offering period or on the date of purchase.
Employees may modify or end their participation in the offering at any time
during the offering period. Participation ends automatically on termination of
employment with the Company. The Purchase Plan will terminate in 2009 unless
sooner terminated by the Company's Board of Directors.
NOTE 7. NET LOSS PER SHARE
Basic and diluted net loss per common share is calculated by dividing net
loss by the weighted average number of common shares outstanding. During the
three years ended December 31, 1998, and during the six months ended June 30,
1999, there were no common share equivalents.
The weighted average number of shares used for basic and diluted per share
amounts has been adjusted, for all periods presented, to reflect the February
11, 1999 issuance of 10,000,000 shares of the Subsidiary's common stock, and the
collateral cancellation of the 1,000 shares previously issued and outstanding.
The Subsidiary common stock was exchanged on August 4, 1999 for 10,000,000
shares of Class B common stock of the Holding Company.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net loss........................ $ (123,000) $ (740,000) $(5,657,000) $(1,933,000) $(7,511,000)
Basic and diluted net loss per
common share.................. $ (0.01) $ (0.07) $ (0.57) $ (0.19) $ (0.75)
Weighted average number of
common shares used for basic
and diluted per share
amounts....................... 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
</TABLE>
NOTE 8. COMMITMENTS AND CONTINGENCIES:
The Company is not currently involved in any material legal proceedings.
The Company is not aware of any legal proceedings pending against it.
NOTE 9. RELATED PARTY TRANSACTIONS:
On January 1, 1997 the Company received certain assets, liabilities, third
party service contracts and certain employees from an affiliated company owned
by the Company's controlling stockholder. These assets and liabilities were
transferred at historical cost.
F-13
<PAGE> 69
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company provides accounting, investor administration and information
technology services to certain affiliates, wholly owned by the Company's
stockholder. The Company received $913,000 for the 6 months ended June 30 1999,
and $2,182,000 and $3,085,000 for the years ended December 31, 1998 and 1997,
respectively, for the provision of these services. These services were charged
at the fully allocated cost to provide such services.
On April 1, 1997 the Company also received from the same affiliated company
certain employees who performed corporate functions including legal, human
relations, facilities, word processing and communications. These employees were
transferred back to the affiliate as of January 1, 1998. For the 9 months ended
December 31, 1997 the Company charged the affiliates for these services, and
these charges are included in the service fees referred to above and in the
consolidated statements of operations. For the six months ended June 30, 1999,
and the year ended December 31, 1998 the Company paid the affiliate $557,000 and
$494,000, respectively, for these services, which is included in the
consolidated statements of operations. Effective August 1, 1999, these functions
will be transferred back to the Company.
The Company has amounts due from affiliates for services of $89,000,
$182,000 and $345,000 as of June 30, 1999, December 31, 1998 and December 31,
1997, respectively.
The Company leases its office space under a noncancellable operating lease
with an affiliate. The term of the lease is two years beginning August 1, 1999,
with five successive options to renew for one year terms. The rental payment
terms are subject to negotiation at each option period. Future minimum rental
payments under noncancellable leases are as follows:
<TABLE>
<S> <C>
2000............................................ $ 644,000
2001............................................ 376,000
----------
$1,020,000
</TABLE>
During the three years ended December 31, 1998 and the six months ended
June 30, 1999, the Company was charged rent expense by the affiliate which has
been offset against affiliate revenue.
NOTE 10. PROFIT SHARING:
The Company has a profit sharing plan covering substantially all employees
who meet certain age and service requirements. Contributions to the plan by the
Company are made at the discretion of the Board of Directors. The profit sharing
expense was $92,000, $133,000, $213,000 and $116,000 for the six months ended
June 30, 1999 and the years ended December 31, 1998, 1997 and 1996,
respectively.
F-14
<PAGE> 70
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1999
The following consolidated financial statements present the ReSource
Phoenix.com, Inc. and Subsidiary ("the Company") Pro Forma Unaudited
Consolidated Balance Sheet at June 30, 1999 and the Pro Forma Unaudited
Consolidated Statements of Operations for the year ended December 31, 1998 and
the six month period ended June 30, 1999.
The following Pro Forma Consolidated Balance Sheet as of June 30, 1999
gives effect to the proposed initial public offering as if it had occurred on
June 30, 1998. The Pro Forma Unaudited Consolidated Statements of Operations for
the year ended December 31, 1998 and the six months ended June 30, 1999 give
effect to the proposed initial public offering as if it occurred on January 1,
1998. Both the Pro Forma Consolidated Balance Sheet and Pro Forma Consolidated
Statements of Operations include adjustments directly attributable to the
initial public offering and expected to have a continuing impact on the Company.
The pro forma information is derived from historical consolidated financial
statements of the Company. The information has been prepared in accordance with
the rules and regulations of the SEC and is provided for comparative purposes
only. The pro forma information does not purport to be indicative of the results
that actually would have occurred had the combination been effected at the
beginning of the periods presented.
F-15
<PAGE> 71
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
6/30/99 (UNAUDITED) 6/30/99
(UNAUDITED) ----------- (UNAUDITED)
----------- PRO FORMA -----------
ACTUAL ADJUSTMENTS AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents............................. $ 128
Accounts receivable................................... 1,034
Receivable from affiliates............................ 89
Prepaid expenses and other current assets............. 159
--------
Total current assets.......................... 1,410
Property and equipment, net........................... 1,994
Note from employee.................................... 21
--------
Total assets.................................. $ 3,425
========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable and accrued liabilities.............. $ 962
Deferred revenue...................................... 1,001
--------
Total current liabilities..................... 1,963
========
Commitments and contingencies
Stockholder's Equity:
Class B common stock.................................. 15,370
--------
Accumulated deficit................................... (13,908)
--------
Total stockholder's equity.................... 1,462
--------
Total liabilities and stockholder's equity.... $ 3,425
========
</TABLE>
F-16
<PAGE> 72
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR YEAR
ENDED PRO FORMA ENDED
12/31/98 ADJUSTMENTS 12/31/98
-------- ----------- -----------
ACTUAL (UNAUDITED) AS ADJUSTED
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Contract Service Revenue............................... $ 2,460
Software Revenue....................................... 44
Affiliate Revenue...................................... 2,182
-------
Total Revenue............................................ 4,686
Operating Expenses:
Cost of providing services............................. 4,555
General and administrative............................. 2,072
Research development................................... 2,286
Client acquisition..................................... 1,134
Depreciation........................................... 307
Stock-related compensation............................. --
-------
Total operating.......................................... 10,354
Loss from operations..................................... (5,668)
Other income............................................. 11
-------
Net loss................................................. $(5,657)
=======
Pro forma basic net loss per share.......................
Pro forma diluted net loss per share.....................
Share used in computing pro forma basic net loss per
share..................................................
Shares used in computing pro forma diluted net loss per
share..................................................
</TABLE>
F-17
<PAGE> 73
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
6/30/99 PRO FORMA 6/30/99
ACTUAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenue:
Contract service revenue.............................. $ 1,836
Software revenue...................................... 1,489
Affiliate revenue..................................... 913
-------
Total revenue........................................... 4,238
Operating Expenses:
Cost of providing services............................ 2,559
General and administrative............................ 1,142
Research and development.............................. 1,550
Client acquisition.................................... 996
Depreciation.......................................... 228
Stock-related compensation............................ 5,291
-------
Total operating expenses................................ 11,766
Loss from operations.................................... (7,528)
-------
Other income............................................ 17
-------
Net loss................................................ $(7,511)
=======
Pro forma basic net loss per share......................
Pro forma diluted net loss per share....................
Shares used in computing pro forma basic
net loss per share....................................
Shares used in computing pro forma diluted
net loss per share....................................
</TABLE>
F-18
<PAGE> 74
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
NOTES TO PRO FORMA UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma information presented is not necessarily indicative
of future consolidated results of operations of the Company or the consolidated
results of operations that would have resulted had the initial public offering
taken place on January 1, 1998. The unaudited pro forma consolidated statements
of operations for the six months ended June 30, 1999 and the year ended December
31, 1998 have been determined based on the consolidated statements of operations
assuming the initial public offering occurred as of January 1, 1998 for the
purposes of the unaudited pro forma consolidated statements of operations. The
unaudited pro forma consolidated balance sheet at June 30, 1999 reflects the
Company's consolidated financial position as if the initial public offering
occurred on June 30, 1998.
2. UNAUDITED PRO FORMA FINANCIAL ADJUSTMENTS
Pro forma adjustments to the June 30, 1999 pro forma unaudited consolidated
balance sheet have been prepared to reflect issuance of shares of
Class A common stock upon the Company's proposed initial public offering and the
accrual of $ of offering costs consisting primarily of financial
advisory fees, attorneys, accountants, financial printing, and other related
charges.
As described in Note 5 of the Notes to Consolidated Financial Statements,
compensation expense related to the Company's Stock Option Plan has been
recognized in an amount equal to the excess of the fair market value of common
stock over the exercise price of such options to the extent that such expense
exceeds the amounts previously recognized under the Phantom Plan as of June 30,
1999. The incremental compensation expense recognized in the pro forma unaudited
consolidated financial statements upon the establishment of the Stock Option
Plan is $ . For purposes of calculating compensation expense under the
Stock Option Plan, the fair value of the Company's Class A common stock was
based on an assumed initial public offering price of $ .
On December 1, 1997 the Company entered into a contractual agreement with
an individual who is both a director and officer of the Company for the
contingent award of Class A common shares in the event of an initial public
offering. The shares are to be granted at the time of the proposed initial
public offering and will consist of one percent of all publicly offered shares.
There will be no consideration received by the Company in exchange for such
award. Upon the effective date of the proposed initial public offering, the
Company will recognize a nominal issuance and record compensation expense equal
to the share price at the time of the initial public offering multiplied by one
percent of the total number of shares offered publicly. Assuming an initial
public offering price of $ per share and an issuance of Class A
common shares, the total compensation expense recognized in the pro forma
unaudited consolidated financial statements is $ .
3. UNAUDITED PRO FORMA INCOME TAX ADJUSTMENTS
The reincorporation of the Company under the proposed initial public
offering will result in the creation of deferred tax assets. However, an income
tax benefit will not be recognized on a pro forma basis for any period presented
because the Company has experienced operating losses since inception. Since the
Company's utilization of these deferred tax assets is dependent on future
profits, which are not assured, a valuation allowance equal to the net deferred
tax assets has been provided in the pro forma unaudited consolidated financial
statements.
F-19
<PAGE> 75
RESOURCEPHOENIX.COM, INC. AND SUBSIDIARY
NOTES TO PRO FORMA UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
4. UNAUDITED PRO FORMA NET LOSS PER SHARE
The net loss per share and shares used in computing the basic net loss per
share are based upon the historical weighted average common shares outstanding
adjusted to reflect the issuance of approximately shares of Class A
common stock upon the Company's proposed initial public offering.
The net loss per share and shares used in computing the diluted net loss
per share are further adjusted to include the issuance of stock options to
purchase shares of Class A common stock, contingent upon the Company's
initial public offering, pursuant to the Stock Option Plan, as described in Note
5 of the Notes to Consolidated Financial Statements.
F-20
<PAGE> 76
Description of Artwork
Back Inside Cover
Depicted here are three rectangles containing the words "Confusion,"
"Evolution," and "Solution" arranged from the top to the bottom of the page. To
the right of the Confusion rectangle is text describing the high-cost,
complexity and difficulty of staying current with technological advancements in
financial and management reporting functions and the difficulty in attracting
and retaining qualified business personnel. To the right of the Evaluation
rectangle is text describing the increasing use of the Internet as an efficient
and reliable method of delivering business information. To the right of the
Solution rectangle is text describing our service offerings.
<PAGE> 77
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of common stock being registered. All amounts are estimates except
the SEC registration fee, the NASD filing fee and the Nasdaq National Market
listing fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
SEC registration fee........................................ $15,985
NASD filing fee............................................. 6,250
Nasdaq National Market listing fee.......................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky qualification fees and expenses.................... *
Transfer agent and registrar fees........................... *
Miscellaneous fees.......................................... *
-------
Total....................................................... $ *
=======
</TABLE>
- ---------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 12 of the Registrant's Certificate of Incorporation (Exhibit 3.1
hereto) and Article VI of the Registrant's Bylaws (Exhibit 3.2 hereto) provide
for mandatory indemnification of its directors and officers, and permissible
indemnification of employees and other agents, to the maximum extent permitted
by the Delaware General Corporation Law. In addition, the Registrant will enter
into Indemnification Agreements (Exhibit 10.1 hereto) with its officers and
directors. Reference is also made to Section 8 of the Underwriting Agreement
contained in Exhibit 1.1 hereto, which provides for the indemnification of
officers and directors of the Registrant against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since the Registrant's inception, the Registrant issued and sold the
following securities:
On August 4, 1999, we issued 10,000,000 shares of Class B Common Stock to
Gus Constantin in exchange for the outstanding capital stock of ReSourcePhoenix,
Inc., a California corporation. The foregoing issuance was made in reliance on
Section 4(2) of the Securities Act as a transaction not involving any public
offering. All of the securities were acquired by the recipient for investment
and not with a view toward the resale or distribution thereof. The recipient was
a director and officer of ours and a sophisticated investor, the offer and sales
were made without any public solicitation and the stock certificates bear
restrictive legends. No underwriter was involved in the transactions and no
commissions were paid. The recipient had adequate access, through his
relationships with the Registrant, to information about the Registrant.
On August 4, 1999 we granted options to purchase an aggregate of 1,175,405
shares of Class A common stock at an exercise price of $1.50 per share, subject
to the effectiveness of our initial public offering. The foregoing grants were
made in reliance on Rule 701 under the Securities Act.
II-1
<PAGE> 78
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Contribution Agreement, dated August 4, 1999, between Gus
Constantin, as trustee for the Gus and Mary Constantin 1978
Living Trust, and Registrant.
3.1 Certificate of Incorporation of Registrant.
3.2 Bylaws of Registrant.
4.1 Form of Registrant's Class A Common Stock certificate.
4.2 Form of Registrant's Class B Common Stock Certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Form of Indemnification Agreement.
10.2 Letter of Understanding and Summary of Discussion, dated
June 1, 1998, between Bryant Tong and Registrant.
10.3 Amendment to Letter of Understanding, dated August 4, 1999,
between Bryant Tong and Registrant.
10.4 1999 Stock Option Plan.
10.5 1999 Employee Stock Purchase Plan.
10.6 Administrative Services Agreement, dated August 1, 1999,
between Phoenix Cable Incorporated and Registrant.
10.7 Administrative Services Agreement, dated August 1, 1999,
between Phoenix Precision Graphics, Inc. and Registrant.
10.8 Administrative Services Agreement, dated August 1, 1999,
between Phoenix Leasing Incorporated and Registrant.
10.9* Business Alliance Program Agreement, dated May 15, 1997,
between Oracle Corporation and Registrant.
10.10* Amendment One to Business Alliance Agreement, dated May 15,
1997, between Oracle Corporation and Registrant.
10.11* Software License and Services Agreement, dated November 14,
1997, between Oracle Corporation and Registrant.
10.12* Amendment One to Software License and Services Agreement,
dated November 14, 1997, between Oracle Corporation and
Registrant.
10.13* Agreement between Necho Systems Corporation and Registrant.
10.14 Lease, dated August 1, 1999, between Phoenix American
Incorporated and Registrant.
11.1* Statement re computation of per share earnings.
21.1 List of subsidiaries.
23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP, Independent Public
Accountants.
24.1 Power of Attorney (included on page II-4).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by Amendment.
(b) Financial Statement Schedules
None.
II-2
<PAGE> 79
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
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has had been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted 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 shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 80
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has had duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in San Rafael, California
on this 5th day of August, 1999.
RESOURCEPHOENIX.COM
By: /s/ GUS CONSTANTIN
------------------------------------
Gus Constantin
Chairman and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Gus
Constantin, Bryant Tong and David Brunton, and each of them, as
attorneys-in-fact, each with the power of substitution, for him or her in any
and all capacities, to sign any amendment to this Registration Statement
(including post-effective amendments and registration statements filed pursuant
to Rule 462 and otherwise), and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting to said attorneys-in-fact, 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 he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has had been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ GUS CONSTANTIN Chairman of the Board and August 5, 1999
- ----------------------------------------------------- Chief Executive Officer
Gus Constantin (Principal Executive Officer)
/s/ BRYANT TONG President, Chief Operating August 5, 1999
- ----------------------------------------------------- Officer and Director
Bryant Tong
/s/ DAVID BRUNTON Chief Financial Officer August 5, 1999
- ----------------------------------------------------- (Principal Financial and
David Brunton Accounting Officer)
Director August 5, 1999
- -----------------------------------------------------
Glenn McLaughlin
/s/ ROGER SMITH Director August 5, 1999
- -----------------------------------------------------
Roger Smith
</TABLE>
II-4
<PAGE> 81
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Contribution Agreement, dated August , 1999, between Gus
Constantin, as trustee for the Gus and Mary Constantin 1978
Living Trust, and Registrant.
3.1 Certificate of Incorporation of Registrant.
3.2 Bylaws of Registrant.
4.1 Form of Registrant's Class A Common Stock certificate.
4.2 Form of Registrant's Class B Common Stock Certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Form of Indemnification Agreement.
10.2 Letter of Understanding and Summary of Discussion, dated
June 1, 1998, between Bryant Tong and Registrant.
10.3 Amendment to Letter of Understanding, dated July , 1999,
between Bryant Tong and Registrant.
10.4 1999 Stock Option Plan.
10.5 1999 Employee Stock Purchase Plan.
10.6 Administrative Services Agreement, dated August 1, 1999,
between Phoenix Cable Incorporated and Registrant.
10.7 Administrative Services Agreement, dated August 1, 1999,
between Phoenix Precision Graphics, Inc. and Registrant.
10.8 Administrative Services Agreement, dated August 1, 1999,
between Phoenix Leasing Incorporated and Registrant.
10.9* Business Alliance Program Agreement, dated May 15, 1997,
between Oracle Corporation and Registrant.
10.10* Amendment One to Business Alliance Agreement, dated May 15,
1997, between Oracle Corporation and Registrant.
10.11* Software License and Services Agreement, dated November 14,
1997, between Oracle Corporation and Registrant.
10.12* Amendment One to Software License and Services Agreement,
dated November 14, 1997, between Oracle Corporation and
Registrant.
10.13* Agreement between Necho Systems Corporation and Registrant.
10.14 Lease, dated August 1, 1999, between Phoenix American
Incorporated and Registrant.
11.1* Statement re computation of per share earnings.
21.1 List of subsidiaries.
23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP, Independent Public
Accountants.
24.1 Power of Attorney (included on page II-4).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 2.1
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") is made as of August 4,
1999 between ReSourcePhoenix.com, Inc., a Delaware corporation (the "Company")
and Gus Constantin as the trustee of the Gus and Mary Constantin 1978 Living
Trust (the "Investor").
SECTION 1.
AUTHORIZATION AND SALE OF CLASS B COMMON STOCK
1.1 SALE OF THE CLASS B COMMON STOCK
(a) Subject to the terms and conditions set forth herein,
the Company will issue and sell to the Investor and the Investor will buy from
the Company ten million (10,000,000) shares of the Company's Class B Common
Stock (the "Shares").
(b) On the Closing Date (as defined below), the Investor
will convey, assign, transfer and deliver good, valid and marketable title to
10,000,000 shares of common stock of ReSource/Phoenix, Inc., a California
corporation (the "Transferred Securities"), free and clear of all liens,
mortgages, pledges, encumbrances, adverse claims and defects, and the Company
will deliver the Shares.
(c) The parties hereto intend that the purchase and sale of
the Shares contemplated hereby qualify as a contribution to the capital of the
Company pursuant to Section 351 of the Internal Revenue Code of 1986, as
amended, and that the issuance of the Shares be considered the "receipt of
property" pursuant to Code Section 351(b).
SECTION 2.
CLOSING DATES; DELIVERY
2.1 CLOSING DATES. The closing of the purchase and sale of the
Shares hereunder (the "Closing") shall be held at a time and location selected
by the parties hereto (such date shall hereinafter be referred to as the
"Closing Date").
2.2 DELIVERY. At the Closing, the Company will deliver to the
Investor a certificate or certificates, representing the Shares, against
delivery of the Transferred Securities, duly endorsed in blank or accompanied by
stock powers or other instruments of transfer duly executed in blank, and
bearing or accompanied by all requisite stock transfer stamps.
<PAGE> 2
SECTION 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor as follows:
3.1 ORGANIZATION AND STANDING; CERTIFICATE AND BY-LAWS. The Company
is a corporation duly organized and existing under, and by virtue of, the laws
of the State of Delaware and is in good standing under such laws. The Company
has requisite corporate power and authority to own and operate its properties
and assets, and to carry on its business as presently conducted and as proposed
to be conducted.
3.2 CORPORATE POWER. The Company has all requisite legal and
corporate power and authority to execute and deliver this Agreement, to sell and
issue the Shares hereunder and to carry out and perform its obligations under
the terms of this Agreement.
3.3 CAPITALIZATION. The authorized capital stock of the Company
consists of 20,000,000 shares of Class A Common Stock, $0.001 par value, none of
which are issued and outstanding prior to the Closing, 10,000,000 shares of
Class B Common Stock, $0.001 par value, none of which are issued and outstanding
prior to the Closing, and 5,000,000 shares of Class B Common Stock, $0.001 par
value, none of which are issued and outstanding prior to the Closing. There are
no options, warrants or other rights to purchase any of the Company's authorized
and unissued capital stock.
3.4 AUTHORIZATION. All corporate action on the part of the Company
and its directors necessary for the authorization, execution, delivery and
performance of this Agreement by the Company, the authorization, sale, issuance
and delivery of the Common and the performance of all of the Company's
obligations hereunder has been taken or will be taken prior to the Closing. This
Agreement, when executed and delivered by the Company, shall constitute a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable and such shares will be free of any liens or encumbrances,
provided, however, that such Shares will be subject to restrictions on transfer
under state and/or federal securities laws.
3.5 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation of any term of its Certificate of Incorporation or By-Laws.
3.6 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Shares, other
than the qualification (or taking such action as may be necessary to secure an
exemption from qualification, if available) of the offer and sale of the Shares
under applicable Blue Sky laws, which, if required, will be accomplished in a
timely manner prior to or promptly upon completion of the Closing.
-2-
<PAGE> 3
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents and warrants to the Company as follows:
4.1 EXPERIENCE. The Investor has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that the Investor is capable of evaluating
the merits and risks of his investment in the Company and has the capacity to
protect his own interests.
4.2 ACCREDITED INVESTOR. The Investor is an "accredited investor" as
such term is defined in Rule 501(a) promulgated under the Securities Act.
4.3 INVESTMENT. The Investor is acquiring the Shares for investment
for his own account, not as a nominee or agent, and not with the view to, or for
resale in connection with, any distribution thereof. The Investor understands
that the Shares have not been, and will not be when issued, registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of his investment intent and the accuracy of
his representations as expressed herein.
4.4 NO PUBLIC MARKET. The Investor understands that no public market
now exists for any of the securities issued by the Company.
4.5 ACCESS TO DATA. The Investor has had an opportunity to discuss
the Company's management, proposed business plan and financial condition with
the Company's management. The Investor understands that a purchase of the Shares
involves a high degree of risk, and there can be no assurance the Company's
business objectives will be obtained.
4.6 TITLE TO ASSETS; NO CONFLICTS. The Investor has good and
marketable title to the Transferred Securities, free and clear of any liens,
charges, pledges, security interests, or other adverse claims. The execution,
delivery and performance of this Agreement by the Investor will not breach,
cause a default under or otherwise conflict with any contract or agreement to
which the Investor is a
-3-
<PAGE> 4
party. No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Investor of
the transactions contemplated hereby.
4.7 BROKER'S AND FINDERS' FEES. The Investor has not incurred, nor
will incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
4.8 NO TRANSFER TAXES OR OTHER FEES. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the sale of the Transferred
Securities.
SECTION 5.
CONDITIONS TO CLOSING OF THE INVESTOR
The Investor's obligations to purchase the Shares at the Closing are
subject to the satisfaction or waiver of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date.
5.2 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares.
SECTION 6.
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Shares at the Closing
Date is subject to the satisfaction or waiver as of the Closing Date of the
following conditions:
6.1 REPRESENTATIONS. The representations made by the Investor in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date.
6.2 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares.
-4-
<PAGE> 5
6.3 DELIVERY OF SECURITIES. The Investor shall have delivered to the
Company a certificate or certificates representing the Transferred Securities,
any other documents of transfer required by Section 2.2 and all other documents,
certificates and agreements necessary to convey good and valid title to such
securities free and clear of all liens and encumbrances.
SECTION 7.
LEGENDS
7.1 LEGENDS. The Investor understands and agrees that the Company
shall cause the legends set forth below, or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by state or federal
securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED."
SECTION 8.
MISCELLANEOUS
8.1 FURTHER ASSURANCES. The Investor and the Company shall take all
such actions, and shall execute and deliver all such documents and instruments,
as may be reasonably requested by the other party to carry out the purposes and
intent of this Agreement.
8.2 GOVERNING LAW; ARBITRATION. Except as set forth below, this
Agreement shall be governed by the laws of the State of California, without
regard to conflicts of laws principles thereof. Any controversy or claim arising
out of or relating to this Agreement shall be settled by arbitration to be held
in Marin County, California. Such arbitration shall be in accordance with the
rules of the American Arbitration Association, and judgment upon the award may
be entered in any court of competent jurisdiction. The prevailing party or
parties in such arbitration and any ensuing legal action shall be reimbursed by
the party or parties who do not prevail for their reasonable attorneys',
accountants' and experts' fees and the costs of such actions.
8.3 AMENDMENT. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the Investor and the Company.
-5-
<PAGE> 6
8.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger.
8.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to either party upon any breach or default of such
other party under this Agreement, shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of either party or any waiver on the part of either party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, or by law or otherwise afforded to either
party, shall be cumulative and not alternative.
8.6 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
8.7 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be enforceable against the party actually
executing such counterpart, and all of which together shall constitute one
instrument.
8.8 TITLES AND SUBTITLES. The title and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
[Remainder of page intentionally left blank]
-6-
<PAGE> 7
The foregoing Contribution Agreement is hereby executed as of the date
set forth above.
ReSourcePhoenix.com, Inc.
By: /s/ BRYANT TONG
-------------------------------------
Title: President
----------------------------------
Investor
/s/ GUS CONSTANTIN
----------------------------------------
Gus Constantin as trustee of the
Gus and Mary Constantin
1978 Living Trust
-7-
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RESOURCEPHOENIX.COM, INC.
A DELAWARE CORPORATION
ReSourcePhoenix.com, Inc., a corporation organized and existing under
and by virtue of the Delaware General Corporation Law (the "Corporation"), does
hereby certify as follows:
FIRST: That the Corporation was originally incorporated on July 27, 1999
pursuant to the Delaware General Corporation Law.
SECOND: That the Corporation's Certificate of Incorporation is hereby
amended and restated to read in its entirety as follows:
"FIRST: The name of this corporation is ReSourcePhoenix.com, Inc. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware
19801. The name of its registered agent at such address is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: This Corporation is authorized to issue two classes of stock to
be designated, respectively, "common stock" and "preferred stock." The total
number of shares which this Corporation is authorized to issue is thirty million
(30,000,000) shares. Twenty-five million (25,000,000) shares shall be designated
common stock (the "Common Stock"), of which fifteen million (15,000,000) shares
shall be designated Class A common stock (the "Class A Common Stock") and ten
million (10,000,000) shares shall be designated Class B common stock (the "Class
B Common Stock"). Five million (5,000,000) shares shall be undesignated
preferred stock (the "Preferred Stock"). Each share of Preferred Stock shall
have a par value of $0.001, and each share of Common Stock shall have a par
value of $0.001.
Any Preferred Stock not previously designated as to series may
be issued from time to time in one or more series pursuant to a resolution or
resolutions providing for such issue duly adopted by the Board of Directors
(authority to do so being hereby expressly vested in the Board), and such
resolution or resolutions shall also set forth the voting powers, full or
limited or none, of
-1-
<PAGE> 2
each such series of Preferred Stock and shall fix the designations, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions of each such series of Preferred
Stock. The Board of Directors is authorized to alter the designation, rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock and, within the limits and restrictions
stated in any resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series of Preferred Stock, to
increase or decrease (but not below the number of shares of any such series then
outstanding) the number of shares of any such series subsequent to the issue of
shares of that series.
Each share of Preferred Stock issued by the Corporation, if
reacquired by the Corporation (whether by redemption, repurchase, conversion to
Common Stock or other means), shall upon such reacquisition resume the status of
authorized and unissued shares of Preferred Stock, undesignated as to series and
available for designation and issuance by the Corporation in accordance with the
immediately preceding paragraph.
Each share of Class B Common Stock issued by the Corporation, if
reacquired by the Corporation (whether by repurchase, conversion into Class A
Common Stock or other means) shall upon such reacquisition be retired and may
not be reissued thereafter.
FIFTH: The shares of Class A Common Stock and Class B Common Stock shall
be identical in all respects and shall have equal rights and privileges, except
as expressly set forth in this Article FIFTH.
1. Dividends. Subject to any preferential dividend rights
of any series of Preferred Stock as may then be outstanding, dividends or
distributions upon the Class A Common Stock and Class B Common Stock may be
declared by the Board of Directors and paid by the Board of Directors of the
Corporation from time to time in such amounts as the Board shall determine, out
of any source at the time lawfully available therefor, provided that identical
dividends or distributions per share are declared and paid concurrently upon the
shares of each such class. In the case of dividends or other distributions
payable in Class A Common Stock or Class B Common Stock, only shares of Class A
Common Stock shall be distributed with respect to Class A Common Stock and only
shares of Class B Common Stock shall be distributed with respect to Class B
Common Stock. In the case of dividends or other distributions consisting of
other voting securities of the Corporation, the Corporation shall declare and
pay such dividends in two separate classes of such voting securities, identical
in all respects, except that the voting rights of each such security paid to the
holders of Class A shall be one-fifth of the voting rights of each such security
paid to the holders of Class B Common Stock. In the case of dividends or other
distributions consisting of non-voting securities convertible into, or
exchangeable for, voting securities of the Corporation, the Corporation shall
provide that such convertible or exchangeable securities and the underlying
securities be identical in all respects (including, without limitation, the
conversion or exchange rate), except that the voting rights of each security
underlying the convertible or exchangeable securities paid to the holders of
Class A Common Stock shall be one-fifth of the voting rights of each security
underlying the convertible or exchangeable securities paid to the holders of
Class B Common Stock,
-2-
<PAGE> 3
and such underlying securities paid to the holders of Class B Common Stock shall
convert into the underlying securities paid to the holders of Class A Common
Stock upon the same terms and conditions applicable to the conversion of Class B
Common Stock into Class A Common Stock.
2. Stock Splits, Combinations and the Like. Neither the
Class A Common Stock nor the Class B Common Stock shall be split, combined or
subdivided unless at the same time there shall be a proportionate split,
combination or subdivision of such other class of Common Stock.
3. Rights Upon Liquidation or Dissolution. Subject to any
preferential liquidation rights of any series of Preferred Stock as may then be
outstanding, the holders of the Class A Common Stock and the holders of the
Class B Common Stock shall be entitled to share ratably in the assets of the
Corporation available for distribution to the holders of Common Stock upon any
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, after payment or provision for the payment of
the debts and other liabilities of the Corporation.
4. Voting. Except as otherwise required by law, on all
matters on which the holders of Common Stock shall be entitled to vote, each
holder of Class A Common Stock shall be entitled to one (1) vote for each share
of Class A Common Stock held by such holder, and each holder of Class B Common
Stock shall be entitled to five (5) votes for each share of Class B Common Stock
held by such holder. Except as otherwise required by applicable law, the holders
of shares of Class A Common Stock and Class B Common Stock shall vote together
as one class on all matters submitted to a vote of stockholders of the
Corporation.
5. Conversion.
(a) Optional Conversion. Subject to the provisions
of this subparagraph 5, each holder of record of Class B Common Stock may, at
the sole discretion and option of such holder, convert any whole number or all
of such holder's shares of Class B Common Stock into fully paid and
nonassessable shares of Class A Common Stock at the rate of one share of Class A
Common Stock for each share of Class B Common Stock surrendered for conversion;
provided, however, that such conversion shall not be effective unless and until
any consents or approvals required under applicable securities laws shall have
been obtained.
(b) Automatic Conversion. The outstanding shares of
Class B Common Stock shall automatically be converted into Class A Common Stock
at the conversion rate specified in paragraph (a) above, without further action
by the respective holder or holders of such shares immediately upon any sale,
pledge, conveyance, hypothecation, assignment or other transfer of such share,
whether or not for value, or attempt thereof, by the initial registered holder
thereof, other than any such transfer by such holder that does not result in any
change of Beneficial Ownership of such share. The term "Beneficial Ownership"
shall have the meaning ascribed to such term in Rule 13d-3 adopted under the
Securities Exchange Act of 1934, as amended, as in effect on July 31, 1999.
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(c) Mechanics of Conversion. To exercise the
optional conversion right set forth herein, the holder of shares of Class B
Common Stock shall surrender the shares to be converted, accompanied by
instruments of transfer satisfactory to the Corporation and the payment in cash
of any amount required pursuant to subparagraph 5(e) below and sufficient to
transfer the Class B Common Stock being converted to the Corporation free of any
adverse interest, at the principal offices of the Corporation or any of the
offices or agencies maintained for such purpose by the Corporation ("Conversion
Agent") and shall give written notice (by registered or certified mail,
overnight courier or hand delivery) to the Corporation through such Conversion
Agent that the holder elects to convert such shares. Such notice shall also
state the name or names, together with the address or addresses, in which the
certificate or certificate for Class A Common Stock which shall be issuable upon
such conversion shall be issued. As promptly as practicable after the surrender
of such shares of Class B Common Stock as aforesaid, the Corporation shall issue
and deliver through such Conversion Agent to such holder, or on the holder's
written order, a certificate or certificates for the number of full shares of
Class A Common Stock issuable upon the conversion of such shares in accordance
with the provisions hereof. Certificates will be issued for the balance of the
shares of Class B Common Stock in any case in which fewer than all of the shares
of Class B Common Stock represented by a certificate are converted.
Each conversion pursuant to paragraph 5 shall be deemed to have
been effected immediately prior to the close of business on the date the
optional conversion or transfer of Beneficial Ownership, as the case may be,
occurs. In each such case the person or persons in whose name or names any
certificate or certificates for Class A Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of the
Class A Common Stock represented thereby at the effective date of such
conversion, unless the stock transfer books of the Corporation shall be closed
on such date, in which event such conversion shall be deemed to have been
effected immediately following the opening of business on the next day on which
the stock transfer books of the Corporation shall be open. Following any such
automatic conversion, the share or shares of Class B Common Stock so converted
shall cease to be outstanding, notwithstanding the fact that the holder or
holders may not have surrendered the certificate or certificates representing
such Class B Common Stock for conversion, and such certificate or certificates
shall thereafter represent solely the right to receive a certificate or
certificates for Class A Common Stock issuable upon conversion of the Class B
Common Stock so converted, upon surrender of such certificate or certificates to
the Corporation or its Conversion Agent, of the certificate or certificates for
Class B Common Stock so converted.
(d) Reservation of Shares. The Corporation shall at
all times reserve and keep available out of the authorized and unissued shares
of Class A Common Stock, solely for the purposes of effecting the conversion of
the outstanding Class B Common Stock, such number of shares of Class A Common
Stock as shall from time to time be sufficient to effect conversion of all
outstanding Class B Common Stock.
(e) Payment of Transfer Taxes. The Corporation will
pay any and all documentary stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of
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shares of Class A Common Stock on conversion of the Class B Common Stock
pursuant hereto; provided however, that the Corporation shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issue or delivery of shares of Class A Common Stock in a name other that of the
original holder of the Class B Common Stock to be converted and that no such
issue or delivery shall be made unless and until the person requesting such
issue or delivery has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(f) Additional Rights of Class B Common Stock. In
the event that the Corporation shall enter into any consolidation, merger,
combination or other transaction in which shares of any class of Common Stock
are exchanged for or changed into other stock or securities, then, and in such
event, the shares of each class of Common Stock shall be exchanged for or
changed into an amount per share equal to the amount of stock, securities, cash
and/or any other property, as the case may be, into which or for which each
share of the other class of Common Stock is exchanged or changed.
Notwithstanding the foregoing, if shares of Class A Common Stock and Class B
Common Stock are exchanged for or changed into shares of capital stock, such
shares so exchanged for or changed into may (but are not required to) differ to
the extent and only to the extent that the Class A Common Stock and Class B
Common Stock differ as provided herein.
In the event of a reclassification, change of outstanding shares
(other than a change in par value or as a result of any subdivision or
combination) or other similar transaction as a result of which the shares of
Class A Common Stock are converted into another security, then a holder of Class
B Common Stock shall be entitled to receive upon conversion the amount of such
security that such holder would have received upon the reclassification or other
similar transaction if such conversion had occurred immediately prior to the
record date of such reclassification or other similar transaction.
If a share of Class B Common Stock shall be converted subsequent
to the record date for the payment of a dividend or other distribution on shares
of Class B Common Stock but prior to such payment, then the registered holder of
such share at the close of business on such record date shall be entitled to
receive the dividend or other distribution payable on such share on such date
notwithstanding the conversion thereof.
SIXTH: For so long as any shares of Class B Common Stock are
outstanding, any action required or permitted to be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, by written consent setting forth the action to be taken signed by the
holders of outstanding capital stock entitled to vote thereon having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a stockholders' meeting at which all shares entitled to vote
thereon were present and voted. Commencing at such time as there are no shares
of Class B Common Stock outstanding, any action required or permitted to be
taken at any annual or special meeting of stockholders may be taken only upon
the vote of stockholders at an annual or special meeting duly noticed and called
in accordance with the Delaware
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<PAGE> 6
General Corporation Law and may not be taken by written consent of stockholders
without a meeting.
SEVENTH: The management of the business and the conduct of the affairs
of the Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed in
the Bylaws of the Corporation.
EIGHTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation.
NINTH: The directors of the Corporation need not be elected by written
ballot unless a stockholder or stockholders holding a majority of the voting
power of the outstanding capital stock entitled to vote demands election by
written ballot at the meeting and before voting.
TENTH:. Advance notice of stockholder nomination for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
ELEVENTH: Special meetings of the stockholders of the Corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer or (iii) the Board of Directors.
TWELFTH: 1. To the fullest extent permitted by the Delaware
General Corporation Law as the same exists or as may hereafter be amended, a
director of the Corporation shall not be personally liable to the Corporation or
its stockholders for monetary damages for a breach of fiduciary duty as a
director.
2. The Corporation may indemnify to the fullest
extent permitted by law any person made or threatened to be made a party to an
action or proceeding, whether criminal, civil, administrative or investigative,
by reason of the fact that he, his testator or intestate is or was a director,
officer or employee of the Corporation or any predecessor of the Corporation or
serves or served at any other enterprise as a director, officer or employee at
the request of the Corporation or any predecessor to the Corporation.
3. Neither any amendment nor repeal of this Article
TWELFTH, nor the adoption of any provision of the Corporation's Certificate of
Incorporation inconsistent with this Article TWELFTH, shall eliminate or reduce
the effect of this Article TWELFTH, in respect of any matter occurring, or any
action or proceeding accruing or arising or that, but for this Article TWELFTH,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
THIRTEENTH: 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
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provision contained under the Delaware General Corporation Law) outside of 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.
FOURTEENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed herein and under the Delaware General
Corporation Law, except as otherwise provided in article TWELFTH, and all rights
conferred upon stockholders herein are granted subject to this reservation."
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THIRD: The foregoing amendment and restatement of the Certificate of
Incorporation has been duly adopted by the sole incorporator of the Corporation.
FOURTH: The Corporation has not received any payment for any of its
stock.
FIFTH: The foregoing amendment and restatement of the Certificate of
Incorporation has been duly adopted in accordance with Section 241 of the
Delaware General Corporation Law.
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EXHIBIT 3.2
BYLAWS
OF
RESOURCEPHOENIX.COM, INC.
(A DELAWARE CORPORATION)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the
Certificate of Incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside
the State of Delaware designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 ANNUAL MEETING
(a) The annual meeting of stockholders shall be held each
year on a date and at a time designated by the board of directors. In the
absence of such designation, the annual meeting of stockholders shall be held on
the third Thursday in May of each year at 10:00 a.m. However, if such day falls
on a legal holiday, then the meeting shall be held at the same time and place on
the next succeeding full business day. At the meeting, directors shall be
elected, and any other proper business may be transacted.
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(b) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the board of directors, (B) otherwise properly brought before
the meeting by or at the direction of the board of directors, or (C) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the secretary of the corporation.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not less than 120 calendar
days in advance of the date specified in the corporation's proxy statement
released to stockholders in connection with the previous year's annual meeting
of stockholders; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than 30 days from the date contemplated at the time of the previous year's
proxy statement, notice by the stockholder to be timely must be so received a
reasonable time before the solicitation is made. A stockholder's notice to the
secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business and
(v) any other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), in his or her capacity as a proponent of a stockholder
proposal. Notwithstanding the foregoing, in order to include information with
respect to a stockholder proposal in the proxy statement and form of proxy for a
stockholder's meeting, a stockholder must provide notice as required by the
regulations promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b). The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this paragraph (b), and, if he or she
should so determine, he or she shall so declare at the meeting that any such
business not properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the board of directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the board of directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the board of directors, shall be made pursuant to
timely notice in writing to the secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 2.2. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a director: (A) the name, age, business
address and residence address of such person,
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(B) the principal occupation or employment of such person, (C) the class and
number of shares of the corporation which are beneficially owned by such person,
(D) a description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nominations are being made by the stockholder, and (E) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for elections of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the 1934 Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided pursuant
to paragraph (b) of this Section 2.2. At the request of the board of directors,
any person nominated by a stockholder for election as a director shall furnish
to the secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrants, determine and declare at the
meeting that a nomination was not made in accordance with the procedures
prescribed by these Bylaws, and if he or she should so determine, he or she
shall so declare at the meeting, and the defective nomination shall be
disregarded.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, the chairman of the board or the chief executive officer,
but such special meetings may not be called by any other person or persons.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, chief executive
officer, president, or the secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
officer receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 2.5
and 2.6, that a meeting will be held at the time requested by the person or
persons who called the meeting, not less than 10 nor more than 60 days after the
receipt of the request. If the notice is not given within 20 days after the
receipt of the request, the person or persons requesting the meeting may give
the notice. Nothing contained in this paragraph of this Section 2.3 shall be
construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the board of directors may be held.
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2.4 ORGANIZATION
Meetings of stockholders shall be presided over by the chairman of the
board, if any, or in his or her absence by the vice chairman of the board, if
any, or in his or her absence by the chief executive officer, if any, or in his
or her absence by the president, if any, or in his or her absence a vice
president, or in the absence of the foregoing persons by a chairman designated
by the board of directors, or in the absence of such designation by a chairman
chosen at the meeting. The secretary shall act as secretary of the meeting, but
in his or her absence the chairman of the meeting may appoint any person to act
as secretary of the meeting.
2.5 NOTICE OF STOCKHOLDERS' MEETINGS
Except as set forth in Section 2.3, all notices of meetings of
stockholders shall be sent or otherwise given in accordance with Section 2.6 of
these Bylaws not less than 10 nor more than 60 days before the date of the
meeting. The notice shall specify the place, date, and hour of the meeting and
(i) in the case of a special meeting, the general nature of the business to be
transacted (no business other than that specified in the notice may be
transacted) or (ii) in the case of the annual meeting, those matters which the
board of directors, at the time of giving the notice, intends to present for
action by the stockholders (but any proper matter may be presented at the
meeting for such action). The notice of any meeting at which directors are to be
elected shall include the name of any nominee or nominees who, at the time of
the notice, the board intends to present for election.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that stockholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
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2.7 QUORUM
The presence in person or by proxy of the holders of a majority of the
voting power of the shares entitled to vote thereat constitutes a quorum for the
transaction of business at all meetings of stockholders; provided, however, that
in the case of any vote to be taken by classes, the holders of a majority of the
votes entitled to be cast by the stockholders of a particular class shall
constitute a quorum for the transaction of business by such class. The
stockholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the voting
power of the shares required to constitute a quorum.
2.8 ADJOURNED MEETING; NOTICE
Any stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
voting power of the shares represented at that meeting, either in person or by
proxy. In the absence of a quorum, no other business may be transacted at that
meeting except as provided in Section 2.7 of these Bylaws.
When any meeting of stockholders, either annual or special, is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and place are announced at the meeting at which the adjournment is
taken. However, if a new record date for the adjourned meeting is fixed or if
the adjournment is for more than 30 days from the date set for the original
meeting, then notice of the adjourned meeting shall be given. Notice of any such
adjourned meeting shall be given to each stockholder of record entitled to vote
at the adjourned meeting in accordance with the provisions of Sections 2.5 and
2.6 of these Bylaws. At any adjourned meeting the corporation may transact any
business which might have been transacted at the original meeting.
2.9 VOTING
Voting at any meeting of stockholders need not be by ballot; provided,
however, that elections for directors shall be by written ballot, unless
otherwise provided in the Certificate of Incorporation.
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.12 of these Bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Each stockholder shall be entitled to that number of votes for each
share held as is set forth in the Certificate of Incorporation of the
corporation, as amended or restated, or in the resolution or
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resolutions adopted by the board of directors providing for the issuance of such
stock, except as may otherwise be required by law.
Any stockholder entitled to vote on any matter may vote part of the
shares in favor of the proposal and refrain from voting the remaining shares or,
except when the matter is the election of directors, may vote them against the
proposal; but if the stockholder fails to specify the number of shares which the
stockholder is voting affirmatively, it will be conclusively presumed that the
stockholder's approving vote is with respect to all shares which the
stockholder is entitled to vote.
If a quorum is present, the affirmative vote of at least a majority of
the voting power of the shares represented, in person or by proxy, and voting at
a duly held meeting (which shares voting affirmatively also constitute at least
a majority of the voting power of the required quorum) shall be the act of the
stockholders, unless the vote of a greater number or a vote by classes is
required by law or by the Certificate of Incorporation.
2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of stockholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either before or
after the meeting, each person entitled to vote, who was not present in person
or by proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of stockholders. All such waivers, consents,
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the Certificate of Incorporation, for so
long as any shares of Class B Common Stock are outstanding, any action which may
be taken at any annual or special meeting of stockholders may be taken without a
meeting and without prior notice, if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
that action at a meeting at which all shares entitled to vote on that action
were present and voted.
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Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than 60 days nor less than 10 days before the date of
any such meeting nor more than 60 days before any such action without a meeting,
and in such event only stockholders of record on the date so fixed are entitled
to notice and to vote or to give consents, as the case may be, notwithstanding
any transfer of any shares on the books of the corporation after the record
date.
If the board of directors does not so fix a record date:
(a) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the business day preceding the day on which notice is given, or, if
notice is waived, at the close of business on the business day preceding the day
on which the meeting is held; and
(b) the record date for determining stockholders entitled to
give consent to corporate action in writing without a meeting (i) when no prior
action by the board of directors has been taken, shall be the day on which the
first written consent is given, or (ii) when prior action by the board of
directors has been taken, shall be at the close of business on the day on which
the board of directors adopts the resolution relating to that action.
The record date for any other purpose shall be as provided in Article
VIII of these Bylaws.
2.13 PROXIES
Every person entitled to vote for Directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the Secretary
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. A
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duly executed proxy shall be irrevocable if it states that it is irrevocable and
if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the secretary of the corporation.
2.14 INSPECTORS OF ELECTION
Before any meeting of stockholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any stockholder or a stockholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The number
of inspectors shall be either one or three. If inspectors are appointed at a
meeting pursuant to the request of one or more stockholders or proxies, then the
holders of a majority of the voting power of shares or their proxies present at
the meeting shall determine whether one or three inspectors are to be appointed.
If any person appointed as inspector fails to appear or fails or refuses to act,
then the chairman of the meeting may, and upon the request of any stockholder or
a stockholder's proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the
voting power of each, the number of shares represented at the meeting, the
existence of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any
way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the
election or vote with fairness to all stockholders.
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ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
to any limitations in the Certificate of Incorporation or these Bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the board of
directors.
3.2 NUMBER AND TERM OF OFFICE
The authorized number of directors shall be five. An indefinite number
of directors may be fixed, or the definite number of directors may be changed,
by a duly adopted amendment to the Certificate of Incorporation or by an
amendment to this bylaw adopted by the vote or written consent of holders of a
majority of the voting power of the outstanding shares entitled to vote or by
resolution of a majority of the board of directors.
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires. If for
any cause, the directors shall not have been elected at an annual meeting, they
may be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws.
3.3 BOARD REPRESENTATION
The board of directors shall be elected by the stockholders of the
corporation, or to the extent necessary to fill a vacancy on the board of
directors, by the balance of the board of directors.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the chief executive officer, the secretary or the board
of directors, unless the notice specifies a later time for that resignation to
become effective. If the resignation of a director is effective at a future
time, the board of directors may elect a successor to take office when the
resignation becomes effective.
Unless otherwise provided in the Certificate of Incorporation or
these Bylaws, vacancies in the board of directors may be filled by a majority of
the remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the stockholders or by court order may be filled only by the
affirmative vote of a majority of the voting power of shares represented and
voting at a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute a majority of
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the required quorum), or by the written consent of a majority of the voting
power of shares entitled to vote thereon. Each director so elected shall hold
office until the next annual meeting of the stockholders and until a successor
has been elected and qualified.
Unless otherwise provided in the Certificate of Incorporation or these
Bylaws:
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors to be elected by all of the
stockholders entitled to vote, voting as a single class, may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the Certificate of Incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in the manner
prescribed by the provisions of the Certificate of Incorporation or these
Bylaws, or may apply to the Court of Chancery for a decree summarily ordering an
election as provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least 10% of the total number of the then outstanding shares 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 as aforesaid, which election
shall be governed by the provisions of Section 211 of the General Corporation
Law of Delaware so far as applicable.
3.5 REMOVAL
Subject to any limitations imposed by law, and unless otherwise provided
in the Certificate of Incorporation, the board of directors, or any individual
director, may be removed from office at any time by the affirmative vote of the
holders of at least a majority of the voting power of the then outstanding
shares of the capital stock of the corporation entitled to vote at an election
of directors.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
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Regular meetings of the board of directors may be held at any place
within or outside the State of Delaware that has been designated from time to
time by resolution of the board of directors. In the absence of such a
designation, regular meetings shall be held at the principal executive office of
the corporation. Special meetings of the board of directors may be held at any
place within or outside the State of Delaware that has been designated in the
notice of the meeting or, if not stated in the notice or if there is no notice,
at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.7 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held
at such time and place as shall be fixed by the vote of the stockholders at the
annual meeting, and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting so long as a quorum
is present at the first meeting of such newly elected board of directors. In the
event of the failure of the stockholders to fix the time or place of such first
meeting of the newly elected board of directors, or in the event such meeting is
not held at the time and place so fixed by the stockholders, the meeting may be
held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the board of directors, or as shall
be specified in a written waiver signed by all of the directors.
3.8 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice if
the dates of such meetings are fixed by the board of directors.
3.9 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, or in the absence of the
chairman of the board by the chief executive officer or by a majority of the
directors then in office.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least seven days before the time
of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least 48 hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving the notice has
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reason to believe will promptly communicate it to the director. The notice need
not specify the purpose of the meeting. In addition, if the meeting is to be
held at the principal executive office of the corporation, the notice need not
specify the place of the meeting.
3.10 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.12 of these Bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
Certificate of Incorporation and applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.11 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.12 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.13 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not be
given if announced at the meeting at which the adjournment is taken, unless the
meeting is adjourned for more than 24 hours. If the meeting is adjourned for
more than 24 hours, then notice of the time and place of the adjourned meeting
shall be given before the adjourned meeting takes place, in the manner specified
in Section 3.9 of these Bylaws, to the directors who were not present at the
time of the adjournment.
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3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board of
directors individually or collectively consent in writing to that action. Such
action by written consent shall have the same force and effect as a unanimous
vote of the board of directors. Such written consent and any counterparts
thereof shall be filed with the minutes of the proceedings of the board.
3.15 ORGANIZATION
Meetings of the board of directors shall be presided over by the
chairman of the board, if any, or in his or her absence by the vice chairman of
the board, if any, or in his or her absence by the chief executive officer, or
in their absence by a chairman chosen at the meeting. The secretary shall act as
secretary of the meeting, but in his or her absence the chairman of the meeting
may appoint any person to act as secretary of the meeting.
3.16 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.16 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.17 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
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The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees, each
consisting of two or more directors, to serve at the pleasure of the board of
directors. The board of directors may designate one or more directors as
alternate members of any committee, who may replace any absent member at any
meeting of the committee. The appointment of members or alternate members of a
committee requires the vote of a majority of the authorized number of directors.
Any committee, to the extent provided in the resolution of the board, shall have
all the authority of the board, but no such committee shall have the power or
authority to (i) amend the Certificate of Incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation), (ii) adopt an agreement of merger or consolidation under Sections
251, 252, 255, 256, 257, 258, 263 or 264 of the General Corporation Law of
Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the Bylaws of the corporation; and, unless the board
resolution establishing the committee, the Bylaws or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these Bylaws, Section
3.6 (place of meetings), Section 3.8 (regular meetings), Section 3.9 (special
meetings and notice), Section 3.10 (quorum), Section 3.11 (waiver of notice),
Section 3.12 (adjournment), Section 3.13 (notice of adjournment), and Section
3.14 (action without meeting), with such changes in the context of those Bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these Bylaws.
ARTICLE V
OFFICERS
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5.1 OFFICERS
The corporation shall have such officers as determined by the board of
directors, which officers may include a chairman of the board, a chief executive
officer, a president, a secretary, a chief financial officer and a treasurer.
The corporation may also have, at the discretion of the board of directors, one
or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 5.3 of these Bylaws. Any number of offices may be
held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these Bylaws, shall be chosen by the board of directors, subject to the rights,
if any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the chief executive
officer to appoint, such other officers as the business of the corporation may
require, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these Bylaws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these Bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
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The chairman of the board, if such an officer be elected, shall serve as
the corporation's general manager, and shall have general supervision, direction
and control of the corporation's business and its officers, and, if present,
preside at meetings of the stockholders and the board of directors and exercise
and perform such other powers and duties as may from time to time be assigned to
him or her by the board of directors or as may be prescribed by these Bylaws. If
there is no chief executive officer, then the chairman of the board shall also
be the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 5.7 of these Bylaws. The chairman of the board
shall report to the board of directors.
5.7 CHIEF EXECUTIVE OFFICER
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
chief executive officer of the corporation shall, subject to the control of the
board of directors, have general supervision, direction, and control of the
business and the officers of the corporation. He or she shall preside at all
meetings of the stockholders and, in the absence or nonexistence of a chairman
of the board, at all meetings of the board of directors. He shall have the
general powers and duties of management usually vested in the chief executive
officer of a corporation, and shall have such other powers and duties as may be
prescribed by the board of directors or these Bylaws.
5.8 PRESIDENT
The president may assume and perform the duties of the chief executive
officer in the absence or disability of the chief executive officer or whenever
the office of the chief executive officer is vacant. The president of the
corporation shall exercise and perform such powers and duties as may from time
to time be assigned to him or her by the board of directors or as may be
prescribed by these Bylaws. In the absence or nonexistence of the chairman of
the board and chief executive officer, he or she shall preside at all meetings
of the stockholders and at all meetings of the board of directors and shall
perform such other duties as the board of directors may from time to time
determine.
5.9 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
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 have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these Bylaws,
the chairman of the board or the chief executive officer.
5.10 SECRETARY
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The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and stockholders. The minutes shall show the time and place of each
meeting, whether regular or special (and, if special, how authorized and the
notice given), the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at stockholders' meetings,
and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these Bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these Bylaws.
5.11 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable times
be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the board of directors. He or she shall disburse the funds of
the corporation as may be ordered by the board of directors, shall render to the
chief executive officer and directors, whenever they request it, an account of
all of his or her transactions as chief financial officer and of the financial
condition of the corporation, and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or these Bylaws.
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ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with any proceeding arising by reason of the fact that such person is or was an
agent of the corporation; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
executive officers and, provided, further, that the corporation shall not be
required to indemnify any director or officer in connection with any proceeding
(or part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
board of directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the General Corporation Law of Delaware or (iv) such
indemnification is required to be made pursuant to an individual contract. For
purposes of this Section 6.1, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the corporation,
(ii) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware, to indemnify each
of its employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
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6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
6.4 EXPENSES
The corporation shall advance to any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, prior to the final disposition of the proceeding, promptly
following request therefor, all expenses incurred by such person in connection
with such proceeding upon receipt of an undertaking by or on behalf of such
person to repay said amounts if it should be determined ultimately that such
person is not entitled to be indemnified under this Article VI or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
Section 6.5, no advance shall be made by the corporation to an officer of the
corporation (except by reason of the fact that such officer is or was a director
of the corporation in which event this paragraph shall not apply) in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, if
a determination is reasonably and promptly made by the board of directors (i) by
a majority vote of a quorum consisting of directors who were not parties to the
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, if
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, that the facts known to the determining party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe either to be
in or not to be opposed to the best interests of the corporation.
6.5 NON-EXCLUSIVITY OF RIGHTS
The rights conferred on any person by this Bylaw shall not be exclusive
of any other right which such person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote
of stockholders or disinterested directors or otherwise, either as to action in
his or her official capacity or as to action in any other capacity while holding
office. The corporation is specifically authorized to enter into individual
contracts with any or all of its directors, officers, employees and agents
respecting indemnification and advances to the fullest extent not prohibited by
the General Corporation Law of Delaware.
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6.6 SURVIVAL OF RIGHTS
The rights conferred on any person by this Bylaw shall continue as to a
person who has ceased to be a director, officer, employee or other agent and
shall inure to the benefit of the heirs, executors and administrators of such
person.
6.7 AMENDMENTS
Any repeal or modification of this Bylaw shall have prospective effect
only, and shall not affect the rights of any person under this Bylaw as in
effect at the time of an alleged action or omission to act giving rise to a
proceeding against such person, if such alleged action or omission occurred
prior to the repeal or modification of this Bylaw.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep (i) a record
of its stockholders listing their names and addresses and the number and class
of shares held by each, (ii) a copy of these Bylaws as amended to date, and
(iii) accounting books and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders and its other books and
records, and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
other writing that authorizes the attorney or other agent to so act on behalf of
the stockholder. The demand under oath shall be directed to the corporation at
its registered office in Delaware or at its principal place of business.
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 such 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
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the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger and the stock list and to make copies thereof or extracts
therefrom. The Court may, in its discretion, prescribe any limitations or
conditions with regard to the inspection, or award such other and further relief
as the Court may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the chief executive officer, the president,
any vice president, the chief financial officer, the secretary or assistant
secretary of this corporation, or any other person authorized by the board of
directors or the chief executive officer or the president or a vice president,
is authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority herein granted may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.
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ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights, or for
purposes of determining the stockholders entitled to exercise any rights in
respect of any other lawful action (other than action by stockholders by written
consent without a meeting), the board of directors may fix, in advance, a record
date, which shall not be more than 60 days before any such action. In that case,
only stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided by law.
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution, or the
60th day before the date of that action, whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The officers of the corporation enumerated Section 5.1 of these bylaws
shall have the authority to execute in the name of the corporation bonds,
contracts, deeds, leases and other written instruments to be executed by the
corporation. In addition, the board of directors, except as otherwise provided
in these Bylaws, may authorize any other officer or officers, or agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the corporation; such authority may be general or confined to
specific instances. Unless so authorized or ratified by the board of directors
or within the agency power of an officer, no officer, agent or employee shall
have any power or authority to bind the corporation by any contract or
engagement, or to pledge its credit or render it liable for any purpose or for
any amount.
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8.4 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, any holder of uncertificated shares shall, upon request, 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 chief executive
officer, the president or a vice-president, and by the chief financial officer,
the secretary or an assistant secretary of the corporation, representing the
number of shares registered in certificate form. Any or all of the signatures on
the certificate may be a facsimile(s). If any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, such certificate may be issued by the corporation
with the same effect as if such person were such officer, transfer agent or
registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then 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 shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, 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 such certificate 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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8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace previously issued certificates unless the latter are
surrendered to the corporation and canceled at the same time. The board of
directors may, if any share certificate or certificate for any other security is
lost, stolen or destroyed, authorize the issuance of a replacement certificate
on such terms and conditions as the board of directors may require; the board of
directors may require indemnification of the corporation secured by a bond or
other adequate security sufficient to protect the corporation against any claim
that may be made against it, including any expense or liability, on account of
the alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the General Corporation Law of Delaware shall
govern the construction of these Bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
ARTICLE IX
AMENDMENTS
Subject to Section 6.7 hereof the Bylaws of the corporation may be
adopted, amended or repealed and new Bylaws adopted by the affirmative vote of
stockholders holding a majority of the voting power of stock entitled to vote,
or by the board of directors.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of
directors of the corporation that the corporation be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the voting power of the outstanding stock of the
corporation entitled to vote thereon votes for the
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<PAGE> 25
proposed dissolution, then a certificate stating that the dissolution has been
authorized in accordance with the provisions of Section 275 of the General
Corporation Law of Delaware and setting forth the names and residences of the
directors and officers shall be executed, acknowledged, and filed and shall
become effective in accordance with Section 103 of the General Corporation Law
of Delaware. Upon such certificate's becoming effective in accordance with
Section 103 of the General Corporation Law of Delaware, the corporation shall be
dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent
in writing, either in person or by duly authorized attorney, to a dissolution,
no meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall have
attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint
one or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are so divided
respecting the management of the affairs of the corporation that the required
vote for action by the board of directors cannot be obtained and the
stockholders are unable to terminate this division; or
(iii) the corporation has abandoned its business and has
failed within a reasonable time to take steps to dissolve, liquidate or
distribute its assets.
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11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware, but the
authority of the custodian shall be to continue the business of the corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
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<PAGE> 1
EXHIBIT 4.1
NUMBER XX RESOURCEPHOENIX.COM, INC. XX SHARES
a Delaware Corporation CLASS A COMMON STOCK
AUTHORIZED XX,000,000 SHARES OF CLASS A COMMON STOCK, $0.001 PAR VALUE
AUTHORIZED XX,000,000 SHARES OF CLASS B COMMON STOCK, $0.001 PAR VALUE
THIS CERTIFIES THAT XXXXXXXX is the record holder of XXXXX fully paid
and non-assessable shares of CLASS A COMMON STOCK, $0.001 PAR VALUE, of
RESOURCEPHOENIX.COM, INC., transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
This certificate and the shares represented hereby are issued and shall
be subject to all the provisions of the Amended and Restated Certificate of
Incorporation the Corporation and its Bylaws (copies of which are on file at the
office of the Corporation), to all of which the holder of this certificate, by
acceptance hereof, assents. This certificate is not valid until countersigned
by a transfer agent and registered by a Registrar.
WITNESS the Seal of the Corporation and the signatures of its duly
authorized officers this XXX day of XXXXX, XXXX.
- ----------------------------------- ----------------------------------------
President Secretary
<PAGE> 2
FOR VALUE RECEIVED I DO HEREBY SELL, ASSIGN AND TRANSFER UNTO__________________
_____________________________________________ SHARES REPRESENTED BY THE WITHIN
CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT ___________________
______________________________________________ AS ATTORNEY TO TRANSFER THE SAID
SHARES ON THE SHARE REGISTER OF THE WITHIN NAMED CORPORATION WITH FULL POWER OF
SUBSTITUTION IN THE PREMISES.
DATED_____________, 19___ ________________________________________
(Shareholder)
____________________________________ ________________________________________
(Witness) (Shareholder)
NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
THE CLASS A COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAS LIMITED VOTING
RIGHTS. THE CLASS B COMMON STOCK HAS SPECIAL VOTING AND CONVERSION RIGHTS.
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 SLASS OF STOCK OR SERIES THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE
DEEMED TO BE AN AFFILIATE OF THE CORPORATION FOR PURPOSES OF RULE 144
PROMULGATED UNDER THE SECURITIES ACT OF 1933 AND ACCORDINGLY, ANY SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION MUST BE MADE IN COMPLIANCE WITH CERTAIN
REQUIREMENTS OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
<PAGE> 1
EXHIBIT 4.2
NUMBER XX RESOURCEPHOENIX.COM, INC. XX SHARES
a Delaware Corporation CLASS B COMMON STOCK
AUTHORIZED XX,000,000 SHARES OF CLASS A COMMON STOCK, $0.001 PAR VALUE
AUTHORIZED XX,000,000 SHARES OF CLASS B COMMON STOCK, $0.001 PAR VALUE
THIS CERTIFIES THAT XXXXXXXX is the record holder of XXXXX fully paid
and non-assessable shares of CLASS B COMMON STOCK, $0.001 PAR VALUE, of
RESOURCEPHOENIX.COM, INC., transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
This certificate and the shares represented hereby are issued and shall
be subject to all the provisions of the Amended and Restated Certificate of
Incorporation the Corporation and its Bylaws (copies of which are on file at the
office of the Corporation), to all of which the holder of this certificate, by
acceptance hereof, assents. This certificate is not valid until countersigned
by a transfer agent and registered by a Registrar.
WITNESS the Seal of the Corporation and the signatures of its duly
authorized officers this XXX day of XXXXX, XXXX.
- ----------------------------------- ----------------------------------------
President Secretary
<PAGE> 2
FOR VALUE RECEIVED I DO HEREBY SELL, ASSIGN AND TRANSFER UNTO__________________
_____________________________________________ SHARES REPRESENTED BY THE WITHIN
CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT ___________________
______________________________________________ AS ATTORNEY TO TRANSFER THE SAID
SHARES ON THE SHARE REGISTER OF THE WITHIN NAMED CORPORATION WITH FULL POWER OF
SUBSTITUTION IN THE PREMISES.
DATED_____________, 19___ ________________________________________
(Shareholder)
____________________________________ ________________________________________
(Witness) (Shareholder)
NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
THE HOLDER OF EACH SHARE OF CLASS B COMMON STOCK REPRESENTED BY THIS CERTIFICATE
IS ENTITLED TO FIVE VOTES ON ALL MATTERS SUBMITTED TO A VOTE OF THE
CORPORATION'S STOCKHOLDERS. EACH SHARE OF CLASS B COMMON STOCK REPRESENTED BY
THIS CERTIFICATE IS CONVERTIBLE INTO ONE SHARE OF CLASS A COMMON STOCK AT ANY
TIME AT THE OPTION OF THE HOLDER, AND WILL AUTOMATICALLY CONVERT INTO ONE SHARE
OF CLASS A COMMON STOCK UPON THE SALE OR TRANSFER OF SUCH SHARE TO ANY OTHER
PERSON EXCEPT A TRANSFER THAT DOES NOT RESULT IN A CHANGE OF BENEFICIAL
OWNERSHIP (AS DEFINED IN THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION).
THE HOLDER OF THESE SHARES SHALL HAVE, UPON CONVERSION OF SUCH SHARES INTO
SHARES OF CLASS A COMMON STOCK, ONE VOTE PER SHARE OF CLASS A COMMON STOCK HELD.
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 SLASS OF STOCK OR SERIES THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE
DEEMED TO BE AN AFFILIATE OF THE CORPORATION FOR PURPOSES OF RULE 144
PROMULGATED UNDER THE SECURITIES ACT OF 1933 AND ACCORDINGLY, ANY SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION MUST BE MADE IN COMPLIANCE WITH CERTAIN
REQUIREMENTS OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
<PAGE> 1
EXHIBIT 10.1
RESOURCEPHOENIX.COM, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is effective as of June
_____, 1999 by and between ReSourcePhoenix.com, Inc., a Delaware corporation
(the "COMPANY"), and __________________________________, ("INDEMNITEE").
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and its
related entities;
WHEREAS, in order to induce Indemnitee to continue to provide services
to the Company, the Company wishes to provide for the indemnification of, and
the advancement of expenses to, Indemnitee to the maximum extent permitted by
law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty
in obtaining liability insurance for the Company's directors, officers,
employees, agents and fiduciaries, the significant increases in the cost of such
insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in connection with the Company's reincorporation, the Company
and Indemnitee desire to continue to have in place the additional protection
provided by an indemnification agreement to provide indemnification and
advancement of expenses to the Indemnitee to the maximum extent permitted by
Delaware law;
WHEREAS, in view of the considerations set forth above, the Company
desires that Indemnitee shall be indemnified and advanced expenses by the
Company as set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth
below.
1. Certain Definitions.
(a) "Change in Control" shall mean, and shall be deemed to
have occurred if, on or after the date of this Agreement, (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended) (the "EXCHANGE ACT"), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company acting in such
capacity or a corporation owned directly or indirectly by the stockholders of
the Company in
<PAGE> 2
substantially the same proportions as their ownership of stock of the Company,
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing more
than 50% of the total voting power represented by the Company's then outstanding
Voting Securities (as defined below), (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, (iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
related transactions) all or substantially all of the Company's assets.
(b) "Claim" shall mean with respect to a Covered Event (as
defined below): any threatened, pending or completed action, suit, proceeding or
alternative dispute resolution mechanism, or any hearing, inquiry or
investigation that Indemnitee in good faith believes might lead to the
institution of any such action, suit, proceeding or alternative dispute
resolution mechanism, whether civil, criminal, administrative, investigative or
other.
(c) References to the "Company" shall include, in addition
to ReSourcePhoenix.com, Inc., any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger to which
ReSourcePhoenix.com, Inc. (or any of its wholly-owned subsidiaries) is a party
which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees, agents or
fiduciaries, so that if Indemnitee is or was a director, officer, employee,
agent or fiduciary of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee, agent
or fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(d) "Covered Event" shall mean any event or occurrence
related to the fact that Indemnitee is or was a director, officer, employee,
agent or fiduciary of the Company, or any subsidiary of the Company, or is or
was serving at the request of the Company as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action or inaction on the part of
Indemnitee while serving in such capacity.
2
<PAGE> 3
(e) "Expenses" shall mean any and all expenses (including
attorneys' fees and all other costs, expenses and obligations incurred in
connection with investigating, defending, being a witness in or participating in
(including on appeal), or preparing to defend, to be a witness in or to
participate in, any action, suit, proceeding, alternative dispute resolution
mechanism, hearing, inquiry or investigation), judgments, fines, penalties and
amounts paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld), actually and
reasonably incurred, of any Claim and any federal, state, local or foreign taxes
imposed on the Indemnitee as a result of the actual or deemed receipt of any
payments under this Agreement.
(f) "Expense Advance" shall mean a payment to Indemnitee
pursuant to Section 3 of Expenses in advance of the settlement of or final
judgement in any action, suit, proceeding or alternative dispute resolution
mechanism, hearing, inquiry or investigation which constitutes a Claim.
(g) "Independent Legal Counsel" shall mean an attorney or
firm of attorneys, selected in accordance with the provisions of Section 2(d)
hereof, who shall not have otherwise performed services for the Company or
Indemnitee within the last three years (other than with respect to matters
concerning the rights of Indemnitee under this Agreement, or of other
indemnitees under similar indemnity agreements).
(h) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
(i) "Reviewing Party" shall mean, subject to the provisions
of Section 2(d), any person or body appointed by the Board of Directors in
accordance with applicable law to review the Company's obligations hereunder and
under applicable law, which may include a member or members of the Company's
Board of Directors, Independent Legal Counsel or any other person or body not a
party to the particular Claim for which Indemnitee is seeking indemnification.
(j) "Section" refers to a section of this Agreement unless
otherwise indicated.
(k) "Voting Securities" shall mean any securities of the
Company that vote generally in the election of directors.
2. Indemnification.
3
<PAGE> 4
(a) Indemnification of Expenses. Subject to the provisions
of Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to
the fullest extent permitted by law if Indemnitee was or is or becomes a party
to or witness or other participant in, or is threatened to be made a party to or
witness or other participant in, any Claim (whether by reason of or arising in
part out of a Covered Event), including all interest, assessments and other
charges paid or payable in connection with or in respect of such Expenses.
(b) Review of Indemnification Obligations. Notwithstanding
the foregoing, in the event any Reviewing Party shall have determined (in a
written opinion, in any case in which Independent Legal Counsel is the Reviewing
Party) that Indemnitee is not entitled to be indemnified hereunder under
applicable law, (i) the Company shall have no further obligation under Section
2(a) to make any payments to Indemnitee not made prior to such determination by
such Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all Expenses
theretofore paid in indemnifying Indemnitee; provided, however, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee is entitled to
be indemnified hereunder under applicable law, any determination made by any
Reviewing Party that Indemnitee is not entitled to be indemnified hereunder
under applicable law shall not be binding and Indemnitee shall not be required
to reimburse the Company for any Expenses theretofore paid in indemnifying
Indemnitee until a final judicial determination is made with respect thereto (as
to which all rights of appeal therefrom have been exhausted or lapsed).
Indemnitee's obligation to reimburse the Company for any Expenses shall be
unsecured and no interest shall be charged thereon.
(c) Indemnitee Rights on Unfavorable Determination; Binding
Effect. If any Reviewing Party determines that Indemnitee substantively is not
entitled to be indemnified hereunder in whole or in part under applicable law,
Indemnitee shall have the right to commence litigation seeking an initial
determination by the court or challenging any such determination by such
Reviewing Party or any aspect thereof, including the legal or factual bases
therefor, and, subject to the provisions of Section 14, the Company hereby
consents to service of process and to appear in any such proceeding. Absent such
litigation, any determination by any Reviewing Party shall be conclusive and
binding on the Company and Indemnitee.
(d) Selection of Reviewing Party; Change in Control. If
there has not been a Change in Control, any Reviewing Party shall be selected by
the Board of Directors, and if there has been such a Change in Control (other
than a Change in Control which has been approved by a majority of the Company's
Board of Directors who were directors immediately prior to such Change in
Control), any Reviewing Party with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnification of Expenses under this
Agreement or any other agreement or under the Company's certificate of
incorporation or bylaws as now or hereafter in effect, or under any other
applicable law, if desired by Indemnitee, shall be Independent Legal Counsel
selected by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would be entitled to be indemnified hereunder under applicable law
4
<PAGE> 5
and the Company agrees to abide by such opinion. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above and to
indemnify fully such counsel against any and all expenses (including attorneys'
fees), claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto. Notwithstanding any other provision
of this Agreement, the Company shall not be required to pay Expenses of more
than one Independent Legal Counsel in connection with all matters concerning a
single Indemnitee, and such Independent Legal Counsel shall be the Independent
Legal Counsel for any or all other Indemnitees unless (i) the employment of
separate counsel by one or more Indemnitees has been previously authorized by
the Company in writing, or (ii) an Indemnitee shall have provided to the Company
a written statement that such Indemnitee has reasonably concluded that there may
be a conflict of interest between such Indemnitee and the other Indemnitees with
respect to the matters arising under this Agreement.
(e) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
3. Expense Advances.
(a) Obligation to Make Expense Advances. The Company shall
make Expense Advances to Indemnitee upon receipt of a written undertaking by or
on behalf of the Indemnitee to repay such amounts if it shall ultimately be
determined that the Indemnitee is not entitled to be indemnified therefore by
the Company.
(b) Form of Undertaking. Any obligation to repay any Expense
Advances hereunder pursuant to a written undertaking by the Indemnitee shall be
unsecured and no interest shall be charged thereon.
(c) Determination of Reasonable Expense Advances. The
parties agree that for the purposes of any Expense Advance for which Indemnitee
has made written demand to the Company in accordance with this Agreement, all
Expenses included in such Expense Advance that are certified by affidavit of
Indemnitee's counsel as being reasonable shall be presumed conclusively to be
reasonable.
4. Procedures for Indemnification and Expense Advances.
(a) Timing of Payments. All payments of Expenses (including
without limitation Expense Advances) by the Company to the Indemnitee pursuant
to this Agreement shall be made to the fullest extent permitted by law as soon
as practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than forty-five (45) business days after such
written demand by Indemnitee is presented to the Company, except in the case of
Expense
5
<PAGE> 6
Advances, which shall be made no later than forty-five (45) business days after
such written demand by Indemnitee is presented to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified or Indemnitee's
right to receive Expense Advances under this Agreement, give the Company notice
in writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.
(c) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by this
Agreement or applicable law. In addition, neither the failure of any Reviewing
Party to have made a determination as to whether Indemnitee has met any
particular standard of conduct or had any particular belief, nor an actual
determination by any Reviewing Party that Indemnitee has not met such standard
of conduct or did not have such belief, prior to the commencement of legal
proceedings by Indemnitee to secure a judicial determination that Indemnitee
should be indemnified under this Agreement or applicable law, shall be a defense
to Indemnitee's claim or create a presumption that Indemnitee has not met any
particular standard of conduct or did not have any particular belief. In
connection with any determination by any Reviewing Party or otherwise as to
whether the Indemnitee is entitled to be indemnified hereunder the burden of
proof shall be on the Company to establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by
the Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company
has liability insurance in effect which may cover such Claim, the Company shall
give prompt notice of the commencement of such Claim to the insurers in
accordance with the procedures set forth in the respective policies. The Company
shall thereafter take all necessary or desirable action to cause such insurers
to pay, on behalf of the Indemnitee, all amounts payable as a result of such
Claim in accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated hereunder to provide indemnification for or make any Expense Advances
with respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of
6
<PAGE> 7
separate counsel subsequently retained by or on behalf of Indemnitee with
respect to the same Claim; provided, however, that, (i) Indemnitee shall have
the right to employ Indemnitee's separate counsel in any such Claim at
Indemnitee's expense and (ii) if (A) the employment of separate counsel by
Indemnitee has been previously authorized by the Company, (B) Indemnitee shall
have reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense, or (C) the Company
shall not continue to retain such counsel to defend such Claim, then the fees
and expenses of Indemnitee's separate counsel shall be Expenses for which
Indemnitee may receive indemnification or Expense Advances hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify the
Indemnitee to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of this
Agreement, the Company's certificate of incorporation, the Company's bylaws or
by statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware
corporation to indemnify a member of its board of directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change in any applicable law, statute or rule which
narrows the right of a Delaware corporation to indemnify a member of its board
of directors or an officer, employee, agent or fiduciary, such change, to the
extent not otherwise required by such law, statute or rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties' rights and
obligations hereunder except as set forth in Section 10(a) hereof.
(b) Nonexclusivity. The indemnification and the payment of
Expense Advances provided by this Agreement shall be in addition to any rights
to which Indemnitee may be entitled under the Company's certificate of
incorporation, its bylaws, any other agreement, any vote of stockholders or
disinterested directors, the General Corporation Law of the State of Delaware,
or otherwise. The indemnification and the payment of Expense Advances provided
under this Agreement shall continue as to Indemnitee for any action taken or not
taken while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not be liable
under this Agreement to make any payment in connection with any Claim made
against Indemnitee to the extent Indemnitee has otherwise actually received
payment (under any insurance policy, provision of the Company's certificate of
incorporation, bylaws or otherwise) of the amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
7
<PAGE> 8
8. Mutual Acknowledgment. Both the Company and Indemnitee
acknowledge that in certain instances, federal law or applicable public policy
may prohibit the Company from indemnifying its directors, officers, employees,
agents or fiduciaries under this Agreement or otherwise. Indemnitee understands
and acknowledges that the Company has undertaken or may be required in the
future to undertake with the Securities and Exchange Commission to submit the
question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.
9. Liability Insurance. To the extent the Company maintains
liability insurance applicable to directors, officers, employees, agents or
fiduciaries, Indemnitee shall be covered by such policies in such a manner as to
provide Indemnitee the same rights and benefits as are provided to the most
favorably insured of the Company's directors, if Indemnitee is a director; or of
the Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
10. Exceptions. Notwithstanding any other provision of this
Agreement, the Company shall not be obligated pursuant to the terms of this
Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee
for Expenses resulting from acts, omissions or transactions for which Indemnitee
is prohibited from receiving indemnification under this Agreement or applicable
law, provided, however, that notwithstanding any limitation set forth in this
Section 10(a) regarding the Company's obligation to provide indemnification,
Indemnitee shall be entitled under Section 3 to receive Expense Advances
hereunder with respect to any such Claim unless and until a court having
jurisdiction over the Claim shall have made a final judicial determination (as
to which all rights of appeal therefrom have been exhausted or lapsed) that
Indemnitee has engaged in acts, omissions or transactions for which Indemnitee
is prohibited from receiving indemnification under this Agreement or applicable
law.
(b) Claims Initiated by Indemnitee. To indemnify or make
Expense Advances to Indemnitee with respect to Claims initiated or brought
voluntarily by Indemnitee and not by way of defense, counterclaim or crossclaim,
except (i) with respect to actions or proceedings brought to establish or
enforce a right to indemnification under this Agreement or any other agreement
or insurance policy or under the Company's certificate of incorporation or
bylaws now or hereafter in effect relating to Claims for Covered Events, (ii) in
specific cases if the Board of Directors has approved the initiation or bringing
of such Claim, or (iii) as otherwise required under Section 145 of the Delaware
General Corporation Law, regardless of whether Indemnitee ultimately is
determined to be entitled to such indemnification, or insurance recovery, as the
case may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any
Expenses incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by the Indemnitee as a basis for such action was
not made in
8
<PAGE> 9
good faith or was frivolous, or (ii) by or in the name of the Company to enforce
or interpret this Agreement, if a court having jurisdiction over such action
determines as provided in Section 13 that each of the material defenses asserted
by Indemnitee in such action was made in bad faith or was frivolous.
(d) Claims Under Section 16(b). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute; provided,
however, that notwithstanding any limitation set forth in this Section 10(d)
regarding the Company's obligation to provide indemnification, Indemnitee shall
be entitled under Section 3 to receive Expense Advances hereunder with respect
to any such Claim unless and until a court having jurisdiction over the Claim
shall have made a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that Indemnitee has violated said
statute.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
13. Expenses Incurred in Action Relating to Enforcement or
Interpretation. In the event that any action is instituted by Indemnitee under
this Agreement or under any liability insurance policies maintained by the
Company to enforce or interpret any of the terms hereof or thereof, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee with
respect to such action (including without limitation attorneys' fees),
regardless of whether Indemnitee is ultimately successful in such action, unless
as a part of such action a court having jurisdiction over such action makes a
final judicial determination (as to which all rights of appeal therefrom have
been exhausted or lapsed) that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous; provided, however, that until such final judicial determination is
made, Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce or
interpret any of the terms of this Agreement, Indemnitee shall be entitled to be
indemnified for all Expenses incurred by Indemnitee
9
<PAGE> 10
in defense of such action (including without limitation costs and expenses
incurred with respect to Indemnitee's counterclaims and cross-claims made in
such action), unless as a part of such action a court having jurisdiction over
such action makes a final judicial determination (as to which all rights of
appeal therefrom have been exhausted or lapsed) that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous; provided, however, that until such final judicial determination is
made, Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action.
14. Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be
severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, and the
remaining provisions shall remain enforceable to the fullest extent permitted by
law. Furthermore, to the fullest extent possible, the provisions of this
Agreement (including without limitation each portion of this Agreement
containing any provision held to be invalid, void or otherwise unenforceable,
that is not itself invalid, void or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement, and all rights, remedies,
liabilities, powers and duties of the parties to this Agreement, shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to principles of conflicts of laws.
18. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless it is in
writing signed by both the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed to be or shall
10
<PAGE> 11
constitute a waiver of any other provisions hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in
this Agreement shall be construed as giving Indemnitee any right to be retained
in the employ of the Company or any of its subsidiaries or affiliated entities.
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
RESOURCEPHOENIX.COM, INC.
By:
-------------------------------------
Print Name:
-----------------------------
Title:
----------------------------------
Address: 2401 Kerner Boulevard
San Rafael, CA 94901
AGREED TO AND ACCEPTED
INDEMNITEE:
- ----------------------------------------
Name:
Title:
Address:
--------------------------------
- ----------------------------------------
- ----------------------------------------
11
<PAGE> 1
EXHIBIT 10.2
To: Gus Constantin
From: Bryant Tong
Date: June 1, 1998
Re: Letter of Understanding and Summary of Discussion
This contract is entered into and effective January 1, 1999, through
December 31, 2001 and will renew for 1 year periods thereafter.
1. The December 23, 1996 agreement will stay in effect through December 31,
1998. My base compensation salary will be $180,000 per year plus current
benefits. I will not be included in the corporate bonus pool used for the
general Phoenix staff.
2. My annual bonus will be the sum of A) through D):
A) When the "adjusted net income" is above $80,000 the
incremental amount over $80,000 up to $100,000, or up to
$20,000, will be paid to me as my bonus. If for instance,
"adjusted net income" equalled $95,000 my bonus would be
$15,000.
B) For the next $400,000 in "adjusted net income", 15% of this
amount will be paid to me as my bonus.
C) For the next $500,000 in "adjusted net income", 10% of this
amount will be paid to me as my bonus.
D) 5% of "adjusted net income" over $1,000,000 will be paid to
me as my bonus.
"Adjusted net income" will be net income before taxes after certain
adjustments. These adjustments will consist of adding back to net income, 25%
of the amount charged to Phoenix Entities.
3. If termination occurs prior to January 1, 2001, the termination payment
will be equal to the greater of:
i) the cumulative remaining balance of my Base Compensation
Package through January 1, 2001, plus $250,000, or
ii) 10 times the most recent year's "adjusted net income", less
book value, times the percentage as listed below for
termination occurring in:
1998 1%
1999 2%
2000 3%
4. If termination or non-renewal of my contract occurs after January 1,
2001, the termination payment will be equal to the greater of:
i) the remaining amount that I am entitled to receive during the
calendar year in which I am terminated plus $250,000,or
<PAGE> 2
To: Gus Constantin
From: Bryant Tong
Page 2
ii) 10 times the most recent year's "adjusted net income", less
book value, times the percentage listed below for termination
occurring in:
2001 4%
2002 5%
after 2002 5%
5. If I elect to leave the company for any reason, I will receive 10 times
the most recent years' "adjusted net income", less book value, times the
percentage as listed below according to my year of departure:
1998 1%
1999 2%
2000 3%
2001 4%
2002 5%
after 2002 5%
If any of the payments referenced above and made under Sections 3, 4 or 5
exceed $250,000, then the amount in excess of $250,000 shall be paid at the
beginning of each of the next three years.
6. A sale of ReSource/Phoenix to an outside party will entitle me to
receive 5% of the proceeds available over and above book value and
selling expenses.
7. It is understood that any sale of ReSource/Phoenix to an outside party
with its transfer of ownership would nullify my 3-year contract entered
into as of January 1, 1999 and any subsequent renewals thereof. This
would become effective upon my receipt of the payment referred to in
Section 6.
In the event a sale were to occur during my initial 3-year contract
term, I would be entitled to receive a minimum amount of $358,000 in
compensation in total. This would be calculated by adding the payments
already received under my initial 3-year contract to my payment referred
to in Section 6. If the sum of these two amounts aggregated to less than
$358,000, I would be entitled to that additional amount bringing my
total benefit to $358,000.
8. If in any year the "adjusted net income" exceeds $3,000,000 my salary
will be increased by 50% beginning with the following year. Thereafter
my annual bonus will be limited to 5% of "adjusted net income" and
Section 2 will no longer be in force.
/s/ BRYANT J. TONG /s/ GUS CONSTANTIN
- -------------------------------- ---------------------------------
Bryant J. Tong Date Gus Constantin Date
<PAGE> 1
EXHIBIT 10.3
AMENDMENT TO LETTER OF UNDERSTANDING
This Amendment to Letter of Understanding is entered into effective ________,
1999 between Gus Constantin for ReSource Phoenix, Inc. and Bryant J. Tong.
WHEREAS, the parties entered into that certain Letter of Understanding and
Summary of Discussions dated June 1, 1998 ("Agreement").
WHEREAS, the parties now wish to amend the Agreement.
NOW, THEREFORE, the parties agree as follows:
A new Section 9 is added to the end of the Agreement to read as follows:
9. In the event of an initial public offering ("IPO") of the stock of
ReSource/Phoenix, Inc. ("Company") and the issuance of stock options to
me, the following changes to this Letter of Understanding and Summary of
Discussions will take effect:
a. Section 1 is replaced in its entirety with the following:
1. BASE COMPENSATION. My base compensation will be $275,000 per
year plus current benefits. I will also receive a car allowance
of $650 per month. I will not be included in the corporate bonus
pool used for the general Phoenix staff. The base compensation,
benefits and car allowance may be changed as the Company agrees
from time to time.
b. Section 2 is replaced in its entirety with the following:
2. BONUS COMPENSATION. Until the Company first achieves positive
net income before taxes ("Net Income") for a fiscal year of at
least $3,000,000, my annual bonus will be calculated using the
methods described in Section (A) below. After the Company first
achieves Net Income for a fiscal year of at least $3,000,000, my
bonus thereafter will be calculated solely using the methods
described in Section (B) below. The Bonus will be calculated and
will be payable in a lump sum as soon after the end of each
fiscal year that the Company's financial figures are available.
All accounting terms herein shall have the meanings ascribed to
them by generally accepted accounting principles.
(A) BONUS BEFORE COMPANY FIRST ACHIEVES $3 MILLION NET
INCOME. Only until the Company first achieves Net Income
for a fiscal year of at least $3,000,000, my bonus will be
the sum of X and Z below:
(i) X equals 60% of my then current base
compensation multiplied by the percentage shown in
the table below opposite the Company's actual
revenue for the fiscal year, expressed as a
percentage of projected revenue set forth in the
Company's then current published business plan
("Plan").
1
<PAGE> 2
<TABLE>
<CAPTION>
Actual Revenue Percentage
-------------- ----------
<S> <C>
Below Plan 0
100% to 109+% of Plan 16.77
110% to 119+% of Plan 33.33
120% to 129+% of Plan 50
130% to 139+% of Plan 66.66
140% to 149+% of Plan 83.33
150% or greater of Plan 100
</TABLE>
(ii) Z equals 40% of my then current base
compensation multiplied by the percentage shown in
the table below opposite the Company's actual
expenses for the year, expressed as a percentage of
projected expenses set forth in the Company's Plan.
<TABLE>
<CAPTION>
Actual Expenses Percentage
--------------- ----------
<S> <C>
Above Plan 0
91% to 100% of Plan 25
81% to 90+% of Plan 50
71% to 80+% of Plan 75
70% or less of Plan 100
</TABLE>
(iii) Notwithstanding anything to the contrary
contained in this Section 2(A), I will not receive
a bonus based on either revenue or expenses if
actual revenues are below Plan OR if actual
expenses are above Plan. In such event, the
Company's Board of Directors, in its sole and
absolute discretion, may award me a bonus based on
other factors and circumstances.
(iv) For example, if my base compensation is
$275,000 and the Company's Plan provides for
revenues of $2,000,000, expenses of $1,000,000
leaving Net Income of $1,000,000, and in actuality:
(a) revenues were $2,500,000 (125% of Plan)
and expenses were $800,000 (80% of Plan),
then my bonus will be $165,000.
(b) revenues were $1,000,000 (50% of Plan)
and expenses were $500,000 (50% of Plan),
then I will not receive a bonus.
(c) revenues were $3,200,000 (160% of Plan)
and expenses were $500,00 (50% of Plan),
then my bonus will be $275,000.
(d) revenues were $2,750,000 (138% of Plan)
and expenses were $1,250,000 (125% of Plan),
then I will not receive a bonus.
2
<PAGE> 3
(B) BONUS AFTER COMPANY FIRST ACHIEVES $3 MILLION NET
INCOME. Commencing with the first fiscal year that the
Company has Net Income of at least $3,000,000 and
continuing for each fiscal year thereafter, regardless of
the Company's Net Income, my bonus will be the sum of the
amounts resulting from multiplying each increment of Net
Income by the percentage shown opposite such Net Income
increment in the table below.
<TABLE>
<CAPTION>
Company Net Income before Taxes Percentage
------------------------------- ----------
<S> <C>
$0 to $2,000,000 5%
$2,000,001 to $4,000,000 4%
$4,000,001 to $6,000,000 3%
$6,000,001 to $8,000,000 2%
$8,000,001 and above 1%
</TABLE>
For example, if the Company's Net Income was $6,000,000
then my bonus will be 5% of the first $2,000,000 plus 4%
of the next $2,000,000 plus 3% of the next $2,000,000, or
$240,000.
c. Section 3 is replaced in its entirety with the following:
3. TERMINATION. If my employment with the Company terminates for
any reason, I will receive a prorata portion of my bonus through
the termination date plus a one time termination payment equal to
my then current base compensation.
d. Sections 4, 5, 6, 7 and 8 are deleted.
e. The 3 year term of the Letter of Understanding with annual
renewals will continue except as changed herein.
ReSource/Phoenix, Inc.
/s/ BRYANT J. TONG /s/ GUS CONSTANTIN
- ---------------------------- ------------------------------------
Bryant J. Tong Gus Constantin
3
<PAGE> 1
EXHIBIT 10.4
RESOURCEPHOENIX.COM, INC.
1999 STOCK PLAN
1. Purposes of the Plan. The purposes of this 1999 Stock Plan are:
o to attract and retain the best available personnel for
positions of substantial responsibility,
o to provide additional incentive to Employees, Directors
and Consultants, and
o to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights
may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
as shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a committee of Directors appointed by
the Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means Class A common stock of the
Company.
(g) "Company" means ResourcePhoenix.com, Inc., a Delaware
corporation.
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.
(i) "Director" means a member of the Board.
<PAGE> 2
(j) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
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(q) "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the
Plan.
(s) "Option Agreement" means an agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(t) "Option Exchange Program" means a program whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price.
(u) "Optioned Stock" means the Common Stock subject to an
Option or Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or
Stock Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this ResourcePhoenix.com, Inc. 1999 Stock
Plan.
(y) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b)" means Section 16(b) of the Exchange
Act.
(cc) "Service Provider" means an Employee, Director or
Consultant.
(dd) "Share" means a share of the Common Stock, as adjusted
in accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase
Common Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of
Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether
now or hereafter existing, as defined in Section 424(f) of the Code.
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(gg) Stock Subject to the Plan. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares that may be
issued under the Plan is 1,750,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock.
(hh) If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for
future grant under the Plan.
3. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions
of the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options
and Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common
Stock to be covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
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(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options or Stock Purchase Rights may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the shares of Common
Stock relating thereto, based in each case on such factors as the Administrator,
in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or
Stock Purchase Right to the then current Fair Market Value if the Fair Market
Value of the Common Stock covered by such Option or Stock Purchase Right shall
have declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option or Stock Purchase
Right (subject to Section 15(c) of the Plan), including the discretionary
authority to extend the post-termination exercisability period of Options longer
than is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
4. Eligibility. Nonstatutory Stock Options and Stock Purchase
Rights may be granted to Service Providers. Incentive Stock Options may be
granted only to Employees.
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5. Limitations.
(a) Each Option shall be designated in the Option Agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right
shall confer upon an Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall they
interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of
Options:
(i) No Service Provider shall be granted, in any
fiscal year of the Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional 500,000
Shares which shall not count against the limit set forth in subsection (i)
above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is cancelled in the same fiscal
year of the Company in which it was granted (other than in connection with a
transaction described in Section 13), the cancelled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.
6. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 15 of the Plan.
7. Term of Option. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.
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<PAGE> 7
8. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the Administrator. In the case
of a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an Option
is granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions that must be satisfied before
the Option may be exercised.
(c) Form of Consideration. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
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<PAGE> 8
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to the
Optionee's participation in any Company-sponsored deferred compensation program
or arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If,
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<PAGE> 9
after termination, the Optionee does not exercise his or her Option within the
time specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares an Option previously granted
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase, the price to be
paid, and the time within which the offeree must accept such offer. The offer
shall be accepted by execution of a Restricted Stock Purchase Agreement in the
form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason
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<PAGE> 10
(including death or Disability). The purchase price for Shares repurchased
pursuant to the Restricted Stock Purchase Agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at a rate determined
by the Administrator.
(c) Other Provisions. The Restricted Stock Purchase
Agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its sole
discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right
is exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
11. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
12. Adjustments Upon Changes in Capitalization, Dissolution, Merger
or Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option and Stock Purchase Right, and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but as to which no Options or Stock Purchase Rights have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of 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; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may
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<PAGE> 11
provide for an Optionee to have the right to exercise his or her Option until
ten (10) days prior to such transaction as to all of the Optioned Stock covered
thereby, including Shares as to which the Option would not otherwise be
exercisable. In addition, the Administrator may provide that any Company
repurchase option applicable to any Shares purchased upon exercise of an Option
or Stock Purchase Right shall lapse as to all such Shares, provided the proposed
dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised, an Option or
Stock Purchase Right will terminate immediately prior to the consummation of
such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
13. Date of Grant. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.
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(b) Shareholder Approval. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary and desirable
to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to
the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with Applicable Laws and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the
exercise of an Option or Stock Purchase Right, the Company may require the
person exercising such Option or Stock Purchase Right to represent and warrant
at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.
16. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
17. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. The Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the manner and
to the degree required under Applicable Laws.
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EXHIBIT 10.5
RESOURCEPHOENIX.COM, INC.
EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Employee Stock Purchase
Plan of ResourcePhoenix.com, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean Class A common stock of the
Company.
(d) "Company" shall mean ResourcePhoenix.com, Inc. and any
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross
earnings, commissions, payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that
has been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee
of the Company for tax purposes whose customary employment with the Company is
at least twenty (20) hours per week and more than five (5) months in any
calendar year. For purposes of the Plan, the employment relationship shall be
treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of
each Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each
Purchase Period.
<PAGE> 2
(j) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock prior to the date of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board; or
(iv) For purposes of the Enrollment Date of the first
Offering Period under the Plan, the Fair Market Value shall be the initial price
to the public as set forth in the final prospectus included within the
registration statement in Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock (the
"Registration Statement").
(k) "Offering Periods" shall mean the periods of
approximately twenty-four (24) months during which an option granted pursuant to
the Plan may be exercised, commencing on the first Trading Day on or after April
30 and October 31 of each year and terminating on the last Trading Day in the
periods ending twenty-four months later; provided, however, that the first
Offering Period under the Plan shall commence with the first Trading Day on or
after the date on which the Securities and Exchange Commission declares the
Company's Registration Statement effective and ending on the last Trading Day on
or before October 31, 2001. The duration and timing of Offering Periods may be
changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Period" shall mean the approximately six month
period commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value
of a share of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower; provided however, that the Purchase Price may be adjusted by
the Board pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
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<PAGE> 3
(p) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a
given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after April 30 and October 31 of each year, or on such other
date as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
October 31, 2001. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's payroll
office prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on
the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.
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<PAGE> 4
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation
in the Plan as provided in Section 10 hereof, or may increase or decrease the
rate of his or her payroll deductions during the Offering Period by completing
or filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during a Purchase Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock. At
any time, the Company may, but shall not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than 4,000
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
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<PAGE> 5
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of the Company's Common Stock an Employee may purchase during
each Purchase Period of such Offering Period. Exercise of the option shall occur
as provided in Section 8 hereof, unless the participant has withdrawn pursuant
to Section 10 hereof. The option shall expire on the last day of the Offering
Period.
8. Exercise of Option.
(a) Unless a participant withdraws from the Plan as provided
in Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date,
the number of shares with respect to which options are to be exercised may
exceed (i) the number of shares of Common Stock that were available for sale
under the Plan on the Enrollment Date of the applicable Offering Period, or (ii)
the number of shares available for sale under the Plan on such Exercise Date,
the Board may in its sole discretion (x) provide that the Company shall make a
pro rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any
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<PAGE> 6
time by giving written notice to the Company in the form of Exhibit B to this
Plan. All of the participant's payroll deductions credited to his or her account
shall be paid to such participant promptly after receipt of notice of withdrawal
and such participant's option for the Offering Period shall be automatically
terminated, and no further payroll deductions for the purchase of shares shall
be made for such Offering Period. If a participant withdraws from an Offering
Period, payroll deductions shall not resume at the beginning of the succeeding
Offering Period unless the participant delivers to the Company a new
subscription agreement.
(b) A participant's withdrawal from an Offering Period shall
not have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any reason,
he or she shall be deemed to have elected to withdraw from the Plan and the
payroll deductions credited to such participant's account during the Offering
Period but not yet used to exercise the option shall be returned to such
participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 15 hereof, and such participant's option shall be
automatically terminated. The preceding sentence notwithstanding, a participant
who receives payment in lieu of notice of termination of employment shall be
treated as continuing to be an Employee for the participant's customary number
of hours per week of employment during the period in which the participant is
subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of
a participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of
the Company as provided in Section 19 hereof, the maximum number of shares of
the Company's Common Stock which shall be made available for sale under the Plan
shall be two hundred fifty thousand (250,000) shares.
(b) The participant shall have no interest or voting right
in shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
shall be registered in the name of the participant or in the name of the
participant and his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
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<PAGE> 7
15. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the Reserves, the maximum number of
shares each participant may purchase each Purchase Period (pursuant to Section
7), as well as the price per share and the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock
-7-
<PAGE> 8
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, any
Purchase Periods then in progress shall be shortened by setting a new Exercise
Date (the "New Exercise Date") and any Offering Periods then in progress shall
end on the New Exercise Date. The New Exercise Date shall be before the date of
the Company's proposed sale or merger. The Board shall notify each participant
in writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the participant's option has been changed to the New
Exercise Date and that the participant's option shall be exercised automatically
on the New Exercise Date, unless prior to such date the participant has
withdrawn from the Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section 19
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Offering Period or the
Plan is in the best interests of the Company and its shareholders. Except as
provided in Section 19 and this Section 20 hereof, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any other applicable law, regulation or
stock exchange rule), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.
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<PAGE> 9
(b) Without shareholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the Offering
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
(c) In the event the Board determines that the ongoing
operation of the Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the extent necessary or
desirable, modify or amend the Plan to reduce or eliminate such accounting
consequence including, but not limited to:
(i) altering the Purchase Price for any Offering
Period including an Offering Period underway at the time of the change in
Purchase Price;
(ii) shortening any Offering Period so that Offering
Period ends on a new Exercise Date, including an Offering Period underway at the
time of the Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
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<PAGE> 10
23. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
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<PAGE> 11
EXHIBIT A
RESOURCEPHOENIX.COM, INC.
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the
RESOURCEPHOENIX.COM, INC. Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the Company's
Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 1 to 15%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at the
time such shares were purchased by me
<PAGE> 12
over the price which I paid for the shares. I hereby agree to notify the
Company in writing within 30 days after the date of any disposition of
my shares and I will make adequate provision for Federal, state or other
tax withholding obligations, if any, which arise upon the disposition of
the Common Stock. The Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any
applicable withholding obligation including any withholding necessary to
make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for
federal income tax purposes as having received income only at the time
of such disposition, and that such income will be taxed as ordinary
income only to the extent of an amount equal to the lesser of (1) the
excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or (2)
15% of the fair market value of the shares on the first day of the
Offering Period. The remainder of the gain, if any, recognized on such
disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)____________________________________________________
(First) (Middle) (Last)
_________________________ ________________________________________
Relationship
________________________________________
(Address)
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<PAGE> 13
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
-------------------- ----------------------------------------
Signature of Employee
----------------------------------------
Spouse's Signature
(If beneficiary other than spouse)
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<PAGE> 14
EXHIBIT B
RESOURCEPHOENIX.COM, INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the
RESOURCEPHOENIX.COM, INC. Employee Stock Purchase Plan which began on
____________, ______ (the "Enrollment Date") hereby notifies the Company that he
or she hereby withdraws from the Offering Period. He or she hereby directs the
Company to pay to the undersigned as promptly as practicable all the payroll
deductions credited to his or her account with respect to such Offering Period.
The undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
----------------------------------------
----------------------------------------
----------------------------------------
Signature:
----------------------------------------
Date:
-----------------------------------
<PAGE> 1
EXHIBIT 10.6
ADMINISTRATION SERVICES AGREEMENT
This ADMINISTRATION SERVICES AGREEMENT (the "Agreement") is between
ReSourcePhoenix.com, a Delaware corporation with its principal place of business
located at 2401 Kerner Boulevard, San Rafael, California 94901 ("RPC"), and
Phoenix Cable Incorporated, a Delaware corporation with its principal place of
business located at 2401 Kerner Boulevard, San Rafael, California 94901
("Customer"). This Agreement is effective as of August 1, 1999 (the "Effective
Date").
WHEREAS, this Agreement sets forth the terms and conditions pursuant to
which RPC shall provide certain accounting, tax, legal, administrative,
financial and data processing services, and other consulting services (defined
herein as the "Administration Services") to Customer as described herein;
NOW, THEREFORE, the parties agree as follows:
1. ADMINISTRATION SERVICES.
1.1 Services. RPC shall perform the Administration Services described in
Exhibit A for Customer during the term of this Agreement. The parties
acknowledge that in performing such Services, RPC may rely on certifications and
instructions of Customer in connection with the performance of any Services, and
upon any signature which RPC believes in good faith to be genuine.
1.2 Phoenix Leasing Incorporated. RPC shall have the right to use of the
"Phoenix Leasing" name, trademarks, and logos only so long as this Agreement is
in effect. Upon termination of this Agreement, RPC and all its subsidiaries and
affiliates shall cease using the "Phoenix Leasing" name, trademarks and logos
for any further business dealings apart from the fulfillment of any remaining
obligation hereunder. Customer shall have the right to control the scope of the
use of the "Phoenix Leasing" name, trademark and logo and has the right of
review and approval of documentation bearing such name prior to its use.
2. ADDITIONAL CONSULTING SERVICES. Customer may request that RPC perform
additional Services as described in Exhibit B hereto, at any time during the
term of this Agreement by providing RPC with a written work request ("Work
Request"). Each Work Request shall describe the requested services to be
completed and, if applicable, the requested date of completion. All Work
Requests are subject to written acceptance by RPC. Unless otherwise agreed to by
the parties, services performed under Work Requests shall be charged at RPC's
standard consulting service fee rate as set forth in Exhibit C, as modified from
time to time pursuant to the Agreement.
3. CUSTOMER OBLIGATIONS. As a condition precedent to RPC's obligations
hereunder, Customer shall (a) provide RPC with full, good faith cooperation and
such information as may be required by RPC in order to render the services as
required hereunder, (b) provide such assistance, including support services,
information and other assistance, as may be reasonably requested by RPC from
time to time and (c) timely and fully carry out all other Customer
responsibilities set forth herein.
4. FEES AND EXPENSES.
4.1. Fees and Expenses.
4.1.1 Monthly Program Fee. For all Services provided by RPC to
Customer under this Agreement, Customer shall pay RPC a monthly fee as set forth
in Exhibit C. Any partial months
1
<PAGE> 2
shall be prorated as applicable. For any of the optional services described in
Section 4, Customer shall pay RPC at RPC's standard consulting fee rate set
forth in Exhibit B for all time incurred by RPC in the performance of such
Services.
4.1.2 Other Expenses. All services performed by RPC for Customer
pursuant to this Agreement, including any optional services, shall be
collectively known as the "Services." In addition, Customer shall be responsible
for all actual, reasonable out-of-pocket expenses incurred by RPC in performing
the Services, including but not limited to any special printing requests,
Customer letterhead, envelopes and labels, insertions to mailings and postage
costs, overnight delivery charges, and out-of-pocket travel and related expenses
associated with the Services. If RPC is required to pay any federal, state or
local taxes based on the Services or other deliverables (other than taxes based
on RPC's net income), such taxes shall be billed to and paid by Customer, in
addition to the fees and expenses stated above.
4.2. Invoices and Payment. RPC shall invoice Customer monthly as of the
first of each month for Services performed by RPC during the preceding month.
Each invoice is due and payable thirty (30) days after the invoice date. If RPC
has not received payment within five (5) days after the due date, interest shall
accrue on past due amounts at the rate of 10% per annum commencing with the due
date and continuing until fully paid.
5. WARRANTIES.
5.1. Warranty for Services. RPC warrants during the term of the Agreement
that the Services shall be performed in a timely manner and of a quality
conforming to generally accepted industry standards and practices. At any time
following completion of any Services, RPC shall, at RPC's expense, upon receipt
of written notice from Customer describing a breach of the foregoing warranty in
such reasonable detail as is requested by RPC, reperform the Services described
in such written notice so as to conform to generally accepted industry standards
and practices.
5.2. Compliance with Rules and Regulations. RPC has taken reasonable care
to review the applicable laws and regulations which govern the Services provided
in connection with this Agreement. Such laws and regulations are subject to
different interpretations, which may change due to court decisions,
administrative rulings and modifications and additions to existing regulations.
5.3. Disclaimers. CUSTOMER AGREES THAT RPC MAKES NO WARRANTIES, EXPRESS,
IMPLIED OR STATUTORY, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OR ANY OTHER MATTER, OTHER THAN THE EXPRESS WARRANTIES
CONTAINED IN THIS AGREEMENT. NO REPRESENTATION OR STATEMENT NOT EXPRESSLY
CONTAINED IN THIS AGREEMENT SHALL BE BINDING UPON RPC AS A WARRANTY OR
OTHERWISE.
6. TERM AND TERMINATION. The term of this Agreement shall commence on the
Effective Date and continue for one (1) year thereafter, unless earlier
terminated in accordance with its terms. Thereafter, the Agreement shall renew
automatically for successive one (1) year terms unless written notice of
termination is received by either party at least ninety (90) days prior to the
end of such initial term or any renewal term. If either party shall materially
fail to fulfill any obligation under this Agreement, and such failure has not
been cured within sixty (60) days after receipt of the other party's written
notice thereof, the party giving notice may, at any time thereafter, terminate
this Agreement. The obligations of RPC and Customer in Sections 5, 6, 7, 8, 9,
10 and 11 shall survive termination or
2
<PAGE> 3
expiration of this Agreement. Upon termination, each party shall return and make
no further use of equipment, property, materials and other items (and all copies
thereof) belonging to the other party. RPC may destroy or otherwise dispose of
any of Customer's data in its possession unless Customer furnishes RPC with
reasonable written instruction for return to Customer or other disposition not
earlier than sixty (60) days prior to the date of expiration or cancellation and
not later than ten (10) days thereafter. RPC shall have no obligation to convert
Customer's data to be returned to Customer into any format other than a RPC
standard format, or such other format as the parties may mutually agree in
writing. Any expense incurred by RPC in returning or disposing of Customer's
data shall be borne by Customer.
7. CUSTOMER INDEMNIFICATION. RPC shall have no duties or obligations other than
those specified in this Agreement. It is expressly understood that Customer and
RPC are independent contractors of one another, and that neither has the
authority to bind the other to any third person. RPC is acting solely as a third
party service provider under this Agreement and shall not participate in
management decisions regarding Customer's business. RPC shall not be responsible
for loss, destruction, alteration or disclosure to any person of Customer's data
submitted by Customer or resultant output thereof (or loss, destruction,
alteration or disclosure to any person of any physical media on which such
Customer data or resultant output are stored), unless caused by gross negligence
or willful misconduct on the part of RPC. Furthermore, RPC shall have no
liability for any errors or omissions in any information or instructions
provided to RPC by Customer or any Customer investors, broker-dealers, lessees,
borrowers, trustees, or any other third party in connection with the performance
of the Services for processing or in connection with the Services provided
hereunder. Customer shall indemnify RPC, and the directors, officers, employees,
affiliates and agents of each of them, and shall hold them and hold it harmless
against any claims, losses or damages asserted by any person, including, but not
limited to, any Customer investor, including court costs and reasonable
attorney's fees, arising out of or in connection with the performance of
Services hereunder, except for any such claims, losses or damages arising out of
the indemnified party's willful misconduct.
8. LIMITATION OF LIABILITY. EXCEPT FOR THE INDEMNITY PROVIDED BY CUSTOMER TO RPC
IN SECTION 7 HEREIN, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY
FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOST
PROFITS OR REVENUE, LOST SAVINGS,[LOSS OF USE OF THE PHOENIX S.T.A.R. SYSTEM OR
ANY COMPONENT OF SUBPART THEREOF,] BUSINESS INTERRUPTION, OR COST OF SUBSTITUTED
FACILITIES, EQUIPMENT OR SERVICES, OR OTHER ECONOMIC LOSS ARISING OUT OF BREACH
BY THE OTHER PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR AGREEMENTS
CONTAINED IN THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, AND WHETHER ANY CLAIM FOR RECOVERY IS BASED ON
THEORIES OF CONTRACT, NEGLIGENCE OR TORT (INCLUDING STRICT LIABILITY).
NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT, CUSTOMER AGREES THAT IN
NO EVENT SHALL RPC'S AGGREGATE LIABILITY TO CUSTOMER, CUSTOMER'S INVESTORS,
BROKER-DEALERS, LESSEES, BORROWERS, TRUSTEES, OR ANY OTHER THIRD PARTY IN
CONNECTION WITH THE PERFORMANCE OF ANY OR ALL OF THE SERVICES ARISING IN
CONNECTION WITH THIS AGREEMENT, REGARDLESS OF THE FORM OF CLAIM OR ACTION,
EXCEED AN AMOUNT EQUAL TO THE TOTAL AMOUNT OF MONTHLY FEES PAID BY CUSTOMER FOR
THE FIRST THREE MONTHS OF THIS AGREEMENT AS SET FORTH IN EXHIBIT "C."
9. FORCE MAJEURE. Neither party shall be liable hereunder by reason of any
failure or delay in the performance of its obligations hereunder (except for the
payment of money) on account of strikes,
3
<PAGE> 4
shortages, riots, insurrection, fires, flood, storm, explosions, acts of God,
war, governmental action, labor conditions, earthquakes, material shortages, or
any other cause beyond the reasonable control of such party.
10. OTHER PROJECTS. This Agreement shall not prevent RPC from entering into
similar agreements with third parties, or from independently developing, using,
selling or licensing materials, products or services which are similar to those
provided hereunder.
11. MISCELLANEOUS. This Agreement shall be governed by the laws of the State of
California without regard to its choice of law provisions. It is agreed that
exclusive jurisdiction and venue for any legal action between the parties
arising out of or relating to the performance of this Agreement and the
Confidentiality Agreement shall be in the state and federal courts, as
applicable, sitting in the Northern District of California; provided, that RPC
shall be entitled to seek injunctive or other interim or equitable relief in
other jurisdictions as may be required to protect its rights. All notices
required to be sent hereunder shall be in writing and shall be deemed to have
been given when mailed to the address shown at the beginning of this Agreement.
If any provision of this Agreement is held to be invalid or unenforceable, the
invalid or unenforceable provision shall be deemed modified to the limited
extent required to permit its enforcement in a manner most closely approximating
the intention of the parties as expressed herein; the remaining provisions shall
remain in full force and effect. The waiver by either party of any default or
breach of this Agreement shall not constitute a waiver of any other or
subsequent default or breach. This Agreement, and the Exhibits hereto, and the
Confidentiality Agreement, constitute the entire agreement between the parties
and supersede all previous agreements or representations, written or oral, with
respect to the Services. This Agreement may not be modified or amended except in
writing signed by a duly authorized representative of each party. In the event
of any dispute arising out of or with respect to this Agreement, the prevailing
party shall be entitled to recover its reasonable attorney's fees, whether or
not the dispute is prosecuted to judgment.
12. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be considered an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized representatives.
RESOURCEPHOENIX.COM. PHOENIX CABLE INCORPORATED
By: By:
----------------------------- --------------------------------
Name: Name:
----------------------------- --------------------------------
Title: Title:
----------------------------- --------------------------------
4
<PAGE> 5
EXHIBIT A
DESCRIPTION OF SERVICES
Services Summary
RPC shall provide the following services to Customer:
All accounting operations
Maintenance of the Computer accounting software
General ledger
Cash management services
Financial reporting
EDGAR filing services
Corporate State and Federal Income, Property, Sales and Use Tax compliance
and payment processing
Partnership State and Federal Income, Property, Sales and Use Tax compliance
and payment processing
Partnership investor K-1 tax processing
Investor relations
Investor accounting to include all profit and loss allocation
Investor performance calls
Investor transfer services
Employee payroll processing
All Human Resources
Employee benefits management
Employee recruiting support
Facilities management
Phone system management
Mailing services
Corporate Communications coordination services
Receptionists
Corporate legal services
Computer data center management
Maintenance of the computer lease system
Information Technology Services
Certain programming support services
Word Processing services
<PAGE> 6
EXHIBIT B
OPTIONAL SERVICES
At Customer's option, and at a fee to be mutually agreed upon, RPC may
provide the following Optional Services as mutually agreed upon:
<PAGE> 7
EXHIBIT C
FEES, CHARGES AND EXPENSES
Customer shall pay to RPC a monthly fee of $42,339.
<PAGE> 1
EXHIBIT 10.7
ADMINISTRATION SERVICES AGREEMENT
This ADMINISTRATION SERVICES AGREEMENT (the "Agreement") is between
ReSourcePhoenix.com, a Delaware corporation with its principal place of business
located at 2401 Kerner Boulevard, San Rafael, California 94901 ("RPC"), and
Phoenix Precision Graphics, Inc., a Nevada corporation with its principal place
of business located at 2401 Kerner Boulevard, San Rafael, California 94901
("Customer"). This Agreement is effective as of August 1, 1999 (the "Effective
Date").
WHEREAS, this Agreement sets forth the terms and conditions pursuant to
which RPC shall provide certain accounting, tax, legal, administrative,
financial and data processing services, and other consulting services (defined
herein as the "Administration Services") to Customer as described herein;
NOW, THEREFORE, the parties agree as follows:
1. ADMINISTRATION SERVICES.
1.1 Services. RPC shall perform the Administration Services described in
Exhibit A for Customer during the term of this Agreement. The parties
acknowledge that in performing such Services, RPC may rely on certifications and
instructions of Customer in connection with the performance of any Services, and
upon any signature which RPC believes in good faith to be genuine.
1.2 Phoenix Leasing Incorporated. RPC shall have the right to use of the
"Phoenix Leasing" name, trademarks, and logos only so long as this Agreement is
in effect. Upon termination of this Agreement, RPC and all its subsidiaries and
affiliates shall cease using the "Phoenix Leasing" name, trademarks and logos
for any further business dealings apart from the fulfillment of any remaining
obligation hereunder. Customer shall have the right to control the scope of the
use of the "Phoenix Leasing" name, trademark and logo and has the right of
review and approval of documentation bearing such name prior to its use.
2. ADDITIONAL CONSULTING SERVICES. Customer may request that RPC perform
additional Services as described in Exhibit B hereto, at any time during the
term of this Agreement by providing RPC with a written work request ("Work
Request"). Each Work Request shall describe the requested services to be
completed and, if applicable, the requested date of completion. All Work
Requests are subject to written acceptance by RPC. Unless otherwise agreed to by
the parties, services performed under Work Requests shall be charged at RPC's
standard consulting service fee rate as set forth in Exhibit C, as modified from
time to time pursuant to the Agreement.
3. CUSTOMER OBLIGATIONS. As a condition precedent to RPC's obligations
hereunder, Customer shall (a) provide RPC with full, good faith cooperation and
such information as may be required by RPC in order to render the services as
required hereunder, (b) provide such assistance, including support services,
information and other assistance, as may be reasonably requested by RPC from
time to time and (c) timely and fully carry out all other Customer
responsibilities set forth herein.
4. FEES AND EXPENSES.
4.1. Fees and Expenses.
4.1.1 Monthly Program Fee. For all Services provided by RPC to
Customer under this Agreement, Customer shall pay RPC a monthly fee as set forth
in Exhibit C. Any partial months
1
<PAGE> 2
shall be prorated as applicable. For any of the optional services described in
Section 4, Customer shall pay RPC at RPC's standard consulting fee rate set
forth in Exhibit B for all time incurred by RPC in the performance of such
Services.
4.1.2 Other Expenses. All services performed by RPC for Customer
pursuant to this Agreement, including any optional services, shall be
collectively known as the "Services." In addition, Customer shall be responsible
for all actual, reasonable out-of-pocket expenses incurred by RPC in performing
the Services, including but not limited to any special printing requests,
Customer letterhead, envelopes and labels, insertions to mailings and postage
costs, overnight delivery charges, and out-of-pocket travel and related expenses
associated with the Services. If RPC is required to pay any federal, state or
local taxes based on the Services or other deliverables (other than taxes based
on RPC's net income), such taxes shall be billed to and paid by Customer, in
addition to the fees and expenses stated above.
4.2. Invoices and Payment. RPC shall invoice Customer monthly as of the
first of each month for Services performed by RPC during the preceding month.
Each invoice is due and payable thirty (30) days after the invoice date. If RPC
has not received payment within five (5) days after the due date, interest shall
accrue on past due amounts at the rate of 10% per annum commencing with the due
date and continuing until fully paid.
5. WARRANTIES.
5.1. Warranty for Services. RPC warrants during the term of the Agreement
that the Services shall be performed in a timely manner and of a quality
conforming to generally accepted industry standards and practices. At any time
following completion of any Services, RPC shall, at RPC's expense, upon receipt
of written notice from Customer describing a breach of the foregoing warranty in
such reasonable detail as is requested by RPC, reperform the Services described
in such written notice so as to conform to generally accepted industry standards
and practices.
5.2. Compliance with Rules and Regulations. RPC has taken reasonable care
to review the applicable laws and regulations which govern the Services provided
in connection with this Agreement. Such laws and regulations are subject to
different interpretations, which may change due to court decisions,
administrative rulings and modifications and additions to existing regulations.
5.3. Disclaimers. CUSTOMER AGREES THAT RPC MAKES NO WARRANTIES, EXPRESS,
IMPLIED OR STATUTORY, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OR ANY OTHER MATTER, OTHER THAN THE EXPRESS WARRANTIES
CONTAINED IN THIS AGREEMENT. NO REPRESENTATION OR STATEMENT NOT EXPRESSLY
CONTAINED IN THIS AGREEMENT SHALL BE BINDING UPON RPC AS A WARRANTY OR
OTHERWISE.
6. TERM AND TERMINATION. The term of this Agreement shall commence on the
Effective Date and continue for one (1) year thereafter, unless earlier
terminated in accordance with its terms. Thereafter, the Agreement shall renew
automatically for successive one (1) year terms unless written notice of
termination is received by either party at least ninety (90) days prior to the
end of such initial term or any renewal term. If either party shall materially
fail to fulfill any obligation under this Agreement, and such failure has not
been cured within sixty (60) days after receipt of the other party's written
notice thereof, the party giving notice may, at any time thereafter, terminate
this Agreement. The obligations of RPC and Customer in Sections 5, 6, 7, 8, 9,
10 and 11 shall survive termination or
2
<PAGE> 3
expiration of this Agreement. Upon termination, each party shall return and make
no further use of equipment, property, materials and other items (and all copies
thereof) belonging to the other party. RPC may destroy or otherwise dispose of
any of Customer's data in its possession unless Customer furnishes RPC with
reasonable written instruction for return to Customer or other disposition not
earlier than sixty (60) days prior to the date of expiration or cancellation and
not later than ten (10) days thereafter. RPC shall have no obligation to convert
Customer's data to be returned to Customer into any format other than a RPC
standard format, or such other format as the parties may mutually agree in
writing. Any expense incurred by RPC in returning or disposing of Customer's
data shall be borne by Customer.
7. CUSTOMER INDEMNIFICATION. RPC shall have no duties or obligations other than
those specified in this Agreement. It is expressly understood that Customer and
RPC are independent contractors of one another, and that neither has the
authority to bind the other to any third person. RPC is acting solely as a third
party service provider under this Agreement and shall not participate in
management decisions regarding Customer's business. RPC shall not be responsible
for loss, destruction, alteration or disclosure to any person of Customer's data
submitted by Customer or resultant output thereof (or loss, destruction,
alteration or disclosure to any person of any physical media on which such
Customer data or resultant output are stored), unless caused by gross negligence
or willful misconduct on the part of RPC. Furthermore, RPC shall have no
liability for any errors or omissions in any information or instructions
provided to RPC by Customer or any Customer investors, broker-dealers, lessees,
borrowers, trustees, or any other third party in connection with the performance
of the Services for processing or in connection with the Services provided
hereunder. Customer shall indemnify RPC, and the directors, officers, employees,
affiliates and agents of each of them, and shall hold them and hold it harmless
against any claims, losses or damages asserted by any person, including, but not
limited to, any Customer investor, including court costs and reasonable
attorney's fees, arising out of or in connection with the performance of
Services hereunder, except for any such claims, losses or damages arising out of
the indemnified party's willful misconduct.
8. LIMITATION OF LIABILITY. EXCEPT FOR THE INDEMNITY PROVIDED BY CUSTOMER TO RPC
IN SECTION 7 HEREIN, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY
FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOST
PROFITS OR REVENUE, LOST SAVINGS,[LOSS OF USE OF THE PHOENIX S.T.A.R. SYSTEM OR
ANY COMPONENT OF SUBPART THEREOF,] BUSINESS INTERRUPTION, OR COST OF SUBSTITUTED
FACILITIES, EQUIPMENT OR SERVICES, OR OTHER ECONOMIC LOSS ARISING OUT OF BREACH
BY THE OTHER PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR AGREEMENTS
CONTAINED IN THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, AND WHETHER ANY CLAIM FOR RECOVERY IS BASED ON
THEORIES OF CONTRACT, NEGLIGENCE OR TORT (INCLUDING STRICT LIABILITY).
NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT, CUSTOMER AGREES THAT IN
NO EVENT SHALL RPC'S AGGREGATE LIABILITY TO CUSTOMER, CUSTOMER'S INVESTORS,
BROKER-DEALERS, LESSEES, BORROWERS, TRUSTEES, OR ANY OTHER THIRD PARTY IN
CONNECTION WITH THE PERFORMANCE OF ANY OR ALL OF THE SERVICES ARISING IN
CONNECTION WITH THIS AGREEMENT, REGARDLESS OF THE FORM OF CLAIM OR ACTION,
EXCEED AN AMOUNT EQUAL TO THE TOTAL AMOUNT OF MONTHLY FEES PAID BY CUSTOMER FOR
THE FIRST THREE MONTHS OF THIS AGREEMENT AS SET FORTH IN EXHIBIT "C."
9. FORCE MAJEURE. Neither party shall be liable hereunder by reason of any
failure or delay in the performance of its obligations hereunder (except for the
payment of money) on account of strikes,
3
<PAGE> 4
shortages, riots, insurrection, fires, flood, storm, explosions, acts of God,
war, governmental action, labor conditions, earthquakes, material shortages, or
any other cause beyond the reasonable control of such party.
10. OTHER PROJECTS. This Agreement shall not prevent RPC from entering into
similar agreements with third parties, or from independently developing, using,
selling or licensing materials, products or services which are similar to those
provided hereunder.
11. MISCELLANEOUS. This Agreement shall be governed by the laws of the State of
California without regard to its choice of law provisions. It is agreed that
exclusive jurisdiction and venue for any legal action between the parties
arising out of or relating to the performance of this Agreement and the
Confidentiality Agreement shall be in the state and federal courts, as
applicable, sitting in the Northern District of California; provided, that RPC
shall be entitled to seek injunctive or other interim or equitable relief in
other jurisdictions as may be required to protect its rights. All notices
required to be sent hereunder shall be in writing and shall be deemed to have
been given when mailed to the address shown at the beginning of this Agreement.
If any provision of this Agreement is held to be invalid or unenforceable, the
invalid or unenforceable provision shall be deemed modified to the limited
extent required to permit its enforcement in a manner most closely approximating
the intention of the parties as expressed herein; the remaining provisions shall
remain in full force and effect. The waiver by either party of any default or
breach of this Agreement shall not constitute a waiver of any other or
subsequent default or breach. This Agreement, and the Exhibits hereto, and the
Confidentiality Agreement, constitute the entire agreement between the parties
and supersede all previous agreements or representations, written or oral, with
respect to the Services. This Agreement may not be modified or amended except in
writing signed by a duly authorized representative of each party. In the event
of any dispute arising out of or with respect to this Agreement, the prevailing
party shall be entitled to recover its reasonable attorney's fees, whether or
not the dispute is prosecuted to judgment.
12. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be considered an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized representatives.
RESOURCEPHOENIX.COM. PHOENIX PRECISION GRAPHICS, INC.
By: By:
----------------------------- --------------------------------
Name: Name:
----------------------------- --------------------------------
Title: Title:
----------------------------- --------------------------------
4
<PAGE> 5
EXHIBIT A
DESCRIPTION OF SERVICES
Services Summary
RPC shall provide the following services to Customer:
All accounting operations
Maintenance of the Computer accounting software
General ledger
Cash management services
Financial reporting
EDGAR filing services
Corporate State and Federal Income, Property, Sales and Use Tax compliance
and payment processing
Partnership State and Federal Income, Property, Sales and Use Tax compliance
and payment processing
Partnership investor K-1 tax processing
Investor relations
Investor accounting to include all profit and loss allocation
Investor performance calls
Investor transfer services
Employee payroll processing
All Human Resources
Employee benefits management
Employee recruiting support
Facilities management
Phone system management
Mailing services
Corporate Communications coordination services
Receptionists
Corporate legal services
Computer data center management
Maintenance of the computer lease system
Information Technology Services
Certain programming support services
Word Processing services
<PAGE> 6
EXHIBIT B
OPTIONAL SERVICES
At Customer's option, and at a fee to be mutually agreed upon, RPC may
provide the following Optional Services as mutually agreed upon:
<PAGE> 7
EXHIBIT C
FEES, CHARGES AND EXPENSES
Customer shall pay to RPC a monthly fee of $31,718.
<PAGE> 1
EXHIBIT 10.8
ADMINISTRATION SERVICES AGREEMENT
This ADMINISTRATION SERVICES AGREEMENT (the "Agreement") is between
ReSourcePhoenix.com, a Delaware corporation with its principal place of business
located at 2401 Kerner Boulevard, San Rafael, California 94901 ("RPC"), and
Phoenix Leasing Incorporated, a California corporation with its principal place
of business located at 2401 Kerner Boulevard, San Rafael, California 94901
("Customer"). This Agreement is effective as of August 1, 1999 (the "Effective
Date").
WHEREAS, this Agreement sets forth the terms and conditions pursuant to
which RPC shall provide certain accounting, tax, legal, administrative,
financial and data processing services, and other consulting services (defined
herein as the "Administration Services") to Customer as described herein;
NOW, THEREFORE, the parties agree as follows:
1. ADMINISTRATION SERVICES.
1.1 Services. RPC shall perform the Administration Services described in
Exhibit A for Customer during the term of this Agreement. The parties
acknowledge that in performing such Services, RPC may rely on certifications and
instructions of Customer in connection with the performance of any Services, and
upon any signature which RPC believes in good faith to be genuine.
1.2 Phoenix Leasing Incorporated. RPC shall have the right to use of the
"Phoenix Leasing" name, trademarks, and logos only so long as this Agreement is
in effect. Upon termination of this Agreement, RPC and all its subsidiaries and
affiliates shall cease using the "Phoenix Leasing" name, trademarks and logos
for any further business dealings apart from the fulfillment of any remaining
obligation hereunder. Customer shall have the right to control the scope of the
use of the "Phoenix Leasing" name, trademark and logo and has the right of
review and approval of documentation bearing such name prior to its use.
2. ADDITIONAL CONSULTING SERVICES. Customer may request that RPC perform
additional Services as described in Exhibit B hereto, at any time during the
term of this Agreement by providing RPC with a written work request ("Work
Request"). Each Work Request shall describe the requested services to be
completed and, if applicable, the requested date of completion. All Work
Requests are subject to written acceptance by RPC. Unless otherwise agreed to by
the parties, services performed under Work Requests shall be charged at RPC's
standard consulting service fee rate as set forth in Exhibit C, as modified from
time to time pursuant to the Agreement.
3. CUSTOMER OBLIGATIONS. As a condition precedent to RPC's obligations
hereunder, Customer shall (a) provide RPC with full, good faith cooperation and
such information as may be required by RPC in order to render the services as
required hereunder, (b) provide such assistance, including support services,
information and other assistance, as may be reasonably requested by RPC from
time to time and (c) timely and fully carry out all other Customer
responsibilities set forth herein.
4. FEES AND EXPENSES.
4.1. Fees and Expenses.
4.1.1 Monthly Program Fee. For all Services provided by RPC to
Customer under this Agreement, Customer shall pay RPC a monthly fee as set forth
in Exhibit C. Any partial months
1
<PAGE> 2
shall be prorated as applicable. For any of the optional services described in
Section 4, Customer shall pay RPC at RPC's standard consulting fee rate set
forth in Exhibit B for all time incurred by RPC in the performance of such
Services.
4.1.2 Other Expenses. All services performed by RPC for Customer
pursuant to this Agreement, including any optional services, shall be
collectively known as the "Services." In addition, Customer shall be responsible
for all actual, reasonable out-of-pocket expenses incurred by RPC in performing
the Services, including but not limited to any special printing requests,
Customer letterhead, envelopes and labels, insertions to mailings and postage
costs, overnight delivery charges, and out-of-pocket travel and related expenses
associated with the Services. If RPC is required to pay any federal, state or
local taxes based on the Services or other deliverables (other than taxes based
on RPC's net income), such taxes shall be billed to and paid by Customer, in
addition to the fees and expenses stated above.
4.2. Invoices and Payment. RPC shall invoice Customer monthly as of the
first of each month for Services performed by RPC during the preceding month.
Each invoice is due and payable thirty (30) days after the invoice date. If RPC
has not received payment within five (5) days after the due date, interest shall
accrue on past due amounts at the rate of 10% per annum commencing with the due
date and continuing until fully paid.
5. WARRANTIES.
5.1. Warranty for Services. RPC warrants during the term of the Agreement
that the Services shall be performed in a timely manner and of a quality
conforming to generally accepted industry standards and practices. At any time
following completion of any Services, RPC shall, at RPC's expense, upon receipt
of written notice from Customer describing a breach of the foregoing warranty in
such reasonable detail as is requested by RPC, reperform the Services described
in such written notice so as to conform to generally accepted industry standards
and practices.
5.2. Compliance with Rules and Regulations. RPC has taken reasonable care
to review the applicable laws and regulations which govern the Services provided
in connection with this Agreement. Such laws and regulations are subject to
different interpretations, which may change due to court decisions,
administrative rulings and modifications and additions to existing regulations.
5.3. Disclaimers. CUSTOMER AGREES THAT RPC MAKES NO WARRANTIES, EXPRESS,
IMPLIED OR STATUTORY, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OR ANY OTHER MATTER, OTHER THAN THE EXPRESS WARRANTIES
CONTAINED IN THIS AGREEMENT. NO REPRESENTATION OR STATEMENT NOT EXPRESSLY
CONTAINED IN THIS AGREEMENT SHALL BE BINDING UPON RPC AS A WARRANTY OR
OTHERWISE.
6. TERM AND TERMINATION. The term of this Agreement shall commence on the
Effective Date and continue for one (1) year thereafter, unless earlier
terminated in accordance with its terms. Thereafter, the Agreement shall renew
automatically for successive one (1) year terms unless written notice of
termination is received by either party at least ninety (90) days prior to the
end of such initial term or any renewal term. If either party shall materially
fail to fulfill any obligation under this Agreement, and such failure has not
been cured within sixty (60) days after receipt of the other party's written
notice thereof, the party giving notice may, at any time thereafter, terminate
this Agreement. The obligations of RPC and Customer in Sections 5, 6, 7, 8, 9,
10 and 11 shall survive termination or
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<PAGE> 3
expiration of this Agreement. Upon termination, each party shall return and make
no further use of equipment, property, materials and other items (and all copies
thereof) belonging to the other party. RPC may destroy or otherwise dispose of
any of Customer's data in its possession unless Customer furnishes RPC with
reasonable written instruction for return to Customer or other disposition not
earlier than sixty (60) days prior to the date of expiration or cancellation and
not later than ten (10) days thereafter. RPC shall have no obligation to convert
Customer's data to be returned to Customer into any format other than a RPC
standard format, or such other format as the parties may mutually agree in
writing. Any expense incurred by RPC in returning or disposing of Customer's
data shall be borne by Customer.
7. CUSTOMER INDEMNIFICATION. RPC shall have no duties or obligations other than
those specified in this Agreement. It is expressly understood that Customer and
RPC are independent contractors of one another, and that neither has the
authority to bind the other to any third person. RPC is acting solely as a third
party service provider under this Agreement and shall not participate in
management decisions regarding Customer's business. RPC shall not be responsible
for loss, destruction, alteration or disclosure to any person of Customer's data
submitted by Customer or resultant output thereof (or loss, destruction,
alteration or disclosure to any person of any physical media on which such
Customer data or resultant output are stored), unless caused by gross negligence
or willful misconduct on the part of RPC. Furthermore, RPC shall have no
liability for any errors or omissions in any information or instructions
provided to RPC by Customer or any Customer investors, broker-dealers, lessees,
borrowers, trustees, or any other third party in connection with the performance
of the Services for processing or in connection with the Services provided
hereunder. Customer shall indemnify RPC, and the directors, officers, employees,
affiliates and agents of each of them, and shall hold them and hold it harmless
against any claims, losses or damages asserted by any person, including, but not
limited to, any Customer investor, including court costs and reasonable
attorney's fees, arising out of or in connection with the performance of
Services hereunder, except for any such claims, losses or damages arising out of
the indemnified party's willful misconduct.
8. LIMITATION OF LIABILITY. EXCEPT FOR THE INDEMNITY PROVIDED BY CUSTOMER TO RPC
IN SECTION 7 HEREIN, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY
FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOST
PROFITS OR REVENUE, LOST SAVINGS,[LOSS OF USE OF THE PHOENIX S.T.A.R. SYSTEM OR
ANY COMPONENT OF SUBPART THEREOF,] BUSINESS INTERRUPTION, OR COST OF SUBSTITUTED
FACILITIES, EQUIPMENT OR SERVICES, OR OTHER ECONOMIC LOSS ARISING OUT OF BREACH
BY THE OTHER PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR AGREEMENTS
CONTAINED IN THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, AND WHETHER ANY CLAIM FOR RECOVERY IS BASED ON
THEORIES OF CONTRACT, NEGLIGENCE OR TORT (INCLUDING STRICT LIABILITY).
NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT, CUSTOMER AGREES THAT IN
NO EVENT SHALL RPC'S AGGREGATE LIABILITY TO CUSTOMER, CUSTOMER'S INVESTORS,
BROKER-DEALERS, LESSEES, BORROWERS, TRUSTEES, OR ANY OTHER THIRD PARTY IN
CONNECTION WITH THE PERFORMANCE OF ANY OR ALL OF THE SERVICES ARISING IN
CONNECTION WITH THIS AGREEMENT, REGARDLESS OF THE FORM OF CLAIM OR ACTION,
EXCEED AN AMOUNT EQUAL TO THE TOTAL AMOUNT OF MONTHLY FEES PAID BY CUSTOMER FOR
THE FIRST THREE MONTHS OF THIS AGREEMENT AS SET FORTH IN EXHIBIT "C."
9. FORCE MAJEURE. Neither party shall be liable hereunder by reason of any
failure or delay in the performance of its obligations hereunder (except for the
payment of money) on account of strikes,
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<PAGE> 4
shortages, riots, insurrection, fires, flood, storm, explosions, acts of God,
war, governmental action, labor conditions, earthquakes, material shortages, or
any other cause beyond the reasonable control of such party.
10. OTHER PROJECTS. This Agreement shall not prevent RPC from entering into
similar agreements with third parties, or from independently developing, using,
selling or licensing materials, products or services which are similar to those
provided hereunder.
11. MISCELLANEOUS. This Agreement shall be governed by the laws of the State of
California without regard to its choice of law provisions. It is agreed that
exclusive jurisdiction and venue for any legal action between the parties
arising out of or relating to the performance of this Agreement and the
Confidentiality Agreement shall be in the state and federal courts, as
applicable, sitting in the Northern District of California; provided, that RPC
shall be entitled to seek injunctive or other interim or equitable relief in
other jurisdictions as may be required to protect its rights. All notices
required to be sent hereunder shall be in writing and shall be deemed to have
been given when mailed to the address shown at the beginning of this Agreement.
If any provision of this Agreement is held to be invalid or unenforceable, the
invalid or unenforceable provision shall be deemed modified to the limited
extent required to permit its enforcement in a manner most closely approximating
the intention of the parties as expressed herein; the remaining provisions shall
remain in full force and effect. The waiver by either party of any default or
breach of this Agreement shall not constitute a waiver of any other or
subsequent default or breach. This Agreement, and the Exhibits hereto, and the
Confidentiality Agreement, constitute the entire agreement between the parties
and supersede all previous agreements or representations, written or oral, with
respect to the Services. This Agreement may not be modified or amended except in
writing signed by a duly authorized representative of each party. In the event
of any dispute arising out of or with respect to this Agreement, the prevailing
party shall be entitled to recover its reasonable attorney's fees, whether or
not the dispute is prosecuted to judgment.
12. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be considered an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized representatives.
RESOURCEPHOENIX.COM. PHOENIX LEASING INCORPORATED
By: By:
----------------------------- --------------------------------
Name: Name:
----------------------------- --------------------------------
Title: Title:
----------------------------- --------------------------------
4
<PAGE> 5
EXHIBIT A
DESCRIPTION OF SERVICES
Services Summary
RPC shall provide the services shown in Section 1 below to Customer for the
entities listed in 2 below:
1. All accounting operations
Maintenance of the Computer accounting software
General ledger
Cash management services
Financial reporting
EDGAR filing services
Corporate State and Federal Income, Property, Sales and Use Tax compliance
and payment processing
Partnership State and Federal Income, Property, Sales and Use Tax compliance
and payment processing
Partnership investor K-1 tax processing
Investor relations
Investor accounting to include all profit and loss allocation
Investor performance calls
Investor transfer services
Employee payroll processing
All Human Resources
Employee benefits management
Employee recruiting support
Facilities management
Phone system management
Mailing services
Corporate Communications coordination services
Receptionists
Corporate legal services
Computer data center management
Maintenance of the computer lease system
Information Technology Services
Certain programming support services
Word Processing services
2.
Phoenix Leasing Incorporated
Phoenix Leasing Associates, Inc.
Phoenix Leasing Associates L.P.
Phoenix Leasing Associates II Inc.
Phoenix Leasing Associates II L.P.
Phoenix Leasing Associates III, Inc.
Phoenix Leasing Associates III L.P.
Phoenix Leasing Associates IV, Inc.
Phoenix Leasing Associates IV L.P.
Phoenix Leasing Liquidation Corp.
Phoenix Warehouse, Inc.
Phoenix Warehouse II, Inc.
Phoenix Business Finance Funding, Inc.
<PAGE> 6
Phoenix Warehouse IV, Inc.
Phoenix Franchise Funding, Inc.
Phoenix Receivables, Inc.
Phoenix Receivables II, Inc.
Phoenix Receivables III, Inc.
Phoenix Receivables 5-97 LLC
Phoenix Contracts LLC
Phoenix Receivables 11-97 LLC
Phoenix Receivables 5-98 LLC
Phoenix CP Contracts LLC
Phoenix Cobalt Carina LLC
Phoenix CP Receivables, Inc.
Phoenix Receivables II, Inc. - Lease Pool
Phoenix Receivables III, Inc. - Lease Pool
Phoenix Receivables 5-97 LLC - Lease Pool
Phoenix Receivables 11-97 LLC - Lease Pool
Phoenix Receivables 5-98 LLC - Lease Pool
Phoenix Cobalt Carina LLC - Lease Pool
Finova Growth Capital Pool*
Phoenix Leasing Cash Distribution Fund III
Phoenix High Tech/High Yield Fund
Phoenix Leasing Cash Distribution Fund IV
Phoenix Income Fund, L.P.
Phoenix Leasing Cash Distribution Fund V, L.P.
Phoenix Leasing American Business Fund, L.P.
Phoenix Joint Venture 1994-2
Phoenix Acceptance LTD Liability Co.
<PAGE> 7
EXHIBIT B
OPTIONAL SERVICES
At Customer's option, and at a fee to be mutually agreed upon, RPC may
provide the following Optional Services as mutually agreed upon:
<PAGE> 8
EXHIBIT C
FEES, CHARGES AND EXPENSES
Customer shall pay to RPC a monthly fee of $242,777.
<PAGE> 1
EXHIBIT 10.14
LEASE
THIS LEASE, dated August 1, 1999, is made and entered into by the Lessor and
Lessee named herein who agree as follows:
1. BASIC LEASE PROVISIONS
The basic provisions of this Lease are as follows:
LESSOR: Phoenix American Incorporated
ADDRESS OF LESSOR: 2401 Kerner Boulevard, San Rafael, California 94901
LESSEE: ReSource/Phoenix, Inc.
ADDRESS OF LESSEE: 2401 Kerner Boulevard, San Rafael, California 94901
INITIAL PREMISES: approximately 37,000 square feet of the building at 2401
Kerner Boulevard (the "Building").
RIGHT OF FIRST REFUSAL: Lessee has a right of first refusal to lease additional
space in the Building as and when the same becomes available on terms and
conditions mutually agreeable to the parties.
PERMITTED USE: General office use, including shipping and receiving.
LEASE TERM: 2 years ("Initial Term"), with 5 successive options to renew for 1
year terms ("Extended Terms"). The monthly rental amounts for each successive
Extended Term will be as mutually agreed by the parties.
COMMENCEMENT DATE: August 1, 1999
.
INITIAL TERMINATION DATE: July 31, 2001
INITIAL MONTHLY RENTAL AMOUNT: $53,650 per month based upon a square footage
charge of $17.40. Should Lessee exercise its right to occupy more space, the
square footage rate and monthly rental amounts for the entire rented square
footage shall be as mutually agreed by the parties.
Each reference in this Lease to any of the Basic Lease Provisions shall be
construed to include the provisions set forth in this Section 1, as well as all
of the additional terms and provisions of the applicable sections of this Lease
where said Basic Lease Provisions are more fully set forth. The foregoing Basic
Lease Provisions are hereby approved.
LESSOR: LESSEE:
PHOENIX AMERICAN INCORPORATED, RESOURCE/PHOENIX, INC.,
a Nevada corporation a California corporation
By: By:
--------------------------- --------------------------------------
Its: Its:
-------------------------- --------------------------------------
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2. PREMISES. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, those certain premises (hereinafter called "Premises") which are
described in Basic Lease Provisions in Section 1 of this Lease. The term
"Premises" includes Lessee's right to use the parking lot surrounding the
Building and also includes Lessee's non-exclusive right to use those areas
designated for common use by all Building occupants. In the event that Lessee
desires to exercise its right of first refusal to occupy more space in the
building, Lessee shall notify Lessor of its election in writing promptly after
Lessor notifies Lessee of such space availability.
3. TERM. The Initial Term of this Lease shall be for the period
specified in Basic Lease Provisions in Section 1 hereof, commencing on the
Commencement Date and expiring on the Initial Termination Date specified in said
Basic Lease Provisions unless sooner terminated pursuant to any other provisions
of this Lease. In the event that Lessee desires to exercise its option to renew
for Extended Terms, Lessee shall notify Lessor in writing of its election at
least 30 days prior to the expiration date of the Initial Term and each Extended
Term.
4. POSSESSION. If Lessor cannot deliver possession of the Premises to
Lessee by the Commencement Date, then Lessee shall be entitled to an abatement
of rent covering the period between the Commencement Date and the time when
Lessor can deliver possession. Lessee acknowledges and agrees that,
notwithstanding anything to the contrary contained in this Lease, Lessor shall
not be liable to Lessee for any loss or damage resulting from Lessor's failure
to deliver the Premises to Lessee by the Commencement Date, including but not
limited to any special or consequential damages. Lessee further acknowledges and
agrees that the term of this Lease shall not be extended by any such delay.
5. HOLDING OVER. Immediately upon the Termination Date of this Lease,
Lessee shall vacate and surrender possession of the Premises in accordance with
the provisions of this Lease. Notwithstanding anything to the contrary contained
herein, however, any holding over by Lessee after the expiration of the said
term shall be construed to be a tenancy from month to month, and shall be on the
terms and conditions specified in this Lease, so far as applicable and Lessor
retains all rights and remedies under this Lease. Any such holding over shall
not constitute an extension of the term of this Lease. During any holding over,
Lessee shall perform and fulfill all of its responsibilities and obligations
under this Lease, except that Lessee shall pay monthly rental to Lessor at a
rate of one hundred and twenty-five percent (125%) of the highest Monthly Rental
amount paid by Lessee under this Lease.
6. PURPOSE. Lessee agrees to use and occupy the Premises during the term
hereof only for the permitted use specified in the Basic Lease Provisions in
Section 1 hereof and for no other purpose without the written consent of Lessor
which consent will not be unreasonably withheld.
7. RENT. (a) Monthly Rental Payments. Lessee agrees to pay monthly
rental in advance without further demand by Lessor, in the amounts specified in
the Basic Lease Provisions in Section 1 hereof on the first day of each calendar
month, and without deduction or offset of the amounts specified in this Lease,
throughout the term of this Lease at the address of Lessor set forth in the
Basic Lease Provisions in Section 1 hereof. This rental amount includes full
service for the Premises including water, gas and electrical service, trash
disposal, janitorial and security services. (b). Late Charges. LESSEE AGREES
THAT SHOULD ANY RENTAL OR ANY OTHER AMOUNT DUE LESSOR PURSUANT TO THIS LEASE,
INCLUDING WITHOUT LIMITATION ANY AMOUNT DUE PURSUANT TO ANY PROVISION OF THIS
SECTION, NOT BE PAID WITHIN TEN (10) DAYS OF THE DATE DUE, THAT LESSOR WILL
INCUR ADDITIONAL EXPENSE OF
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MANAGEMENT, AND ACCOUNTING AND LEGAL COSTS IN AN AMOUNT IMPOSSIBLE TO DETERMINE
WITH CERTAINTY AT THIS TIME AND THE PARTIES THEREFORE AGREE PURSUANT TO THE
PROVISIONS OF CALIFORNIA CIVIL CODE, SECTIONS 1951.5 AND 1671, THAT LESSOR SHALL
RECOVER AN ADDITIONAL FOUR PERCENT (4%) OF THE OUTSTANDING RENTAL OR SUCH OTHER
AMOUNT AS LIQUIDATED DAMAGES AND THE SAME SHALL BECOME IMMEDIATELY DUE AND
PAYABLE. LESSOR AND LESSEE AGREE THAT SUCH DAMAGES ARE FAIR AND REASONABLE UNDER
THE CIRCUMSTANCES EXISTING AT THE TIME OF EXECUTION AND DELIVERY OF THIS LEASE,
AND LESSEE FURTHER AGREES THAT LESSOR SHALL HAVE THE RIGHT TO EXERCISE ANY AND
ALL OTHER RIGHTS AND REMEDIES OF LESSOR UNDER THIS LEASE FOR A FAILURE TO PAY
ANY RENTAL OR OTHER AMOUNTS.
8. ASSIGNMENT AND SUBLETTING. Lessee shall not assign this Lease or any
interest therein, nor lease or sublet the said Premises, or any part thereof, or
any right or privilege appurtenant thereto, nor permit the occupancy of any part
thereof by any other person, without the prior written consent of Lessor, which
consent shall not be unreasonably withheld. In such event, Lessor's consent
shall be based upon Lessor's commercially reasonable determination of the
creditworthiness of the proposed assignee, sublessee, subtenant, occupant or
other user, and a consent to one such assignment, subletting, subtenancy,
occupancy or use shall not be construed as a consent to any subsequent
assignment, subletting, subtenancy, occupancy or use. Any such assignment,
subletting, subtenancy, occupancy or use, without the prior written consent of
Lessor, shall at the option of Lessor (in addition to all other rights and
remedies that Lessor may exercise under this Lease) terminate this Lease, and
any such purported assignment, sublease, subtenancy, occupancy or use shall be
null and void. This Lease shall not, nor shall any interest therein, be
assignable as to the interest of Lessee by operation of law, without the prior
written consent of Lessor, which consent will not be unreasonably withheld;
provided, however, that Lessor's consent shall not be required for any
assignment by Lessee to any affiliated corporation which is a successor to
Lessee either by merger, consolidation or other corporate reorganization,
including the transfer to any such corporation of all or substantially all of
the assets of Lessee; and provided further that before any such assignment shall
be effective (a) any such assignee shall have a net worth, determined in
accordance with generally accepted accounting principles, consistently applied,
after giving effect to such assignment, equal to or greater than Lessee's net
worth, as so determined, as of the date of this Lease, (b) said assignee shall
assume, in full, the obligations of Lessee under this Lease, and agree to be
bound by all terms, covenants and conditions of this Lease, and (c) Lessor shall
be given written notice of such assignment and assumption. Lessee immediately
and irrevocably assigns to Lessor all minimum rental, additional rental and
other amounts due by any assignee, sublessee, subtenant, occupant or other user
from any assignment, sublet, subtenancy, occupancy or other use of all or a part
of the Premises as permitted by this Lease, and Lessor, as assignee and as
attorney-in-fact for Lessee, may collect such rental and other amounts.
9. SURRENDER OF PREMISES. The voluntary or other surrender of this Lease
by Lessee, or a mutual cancellation thereof, shall not work a merger, but shall,
at the option of Lessor, terminate any or all existing assignments, subleases,
subtenancies, occupancies or other uses, or may, at the option of Lessor,
operate as an assignment to it of any or all such assignments, subleases,
subtenancies, occupancies or other uses.
10. WASTE/NUISANCE. Lessee shall not commit, or suffer to be committed,
any waste upon
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<PAGE> 4
the Premises, whether of a hazardous nature or otherwise, or any nuisance, or
other act or thing which may disturb the quiet enjoyment of any other Building
occupant, or in any way unreasonably obstruct, interfere with, injure or annoy
any such occupant, or do or permit to be done anything in any way tending to
unreasonably disturb any such occupant.
11. COMPLIANCE WITH LAW. Lessee shall not use the Premises or the
Building, or permit anything to be done in or about the Premises or the
Building, which will in any way conflict with any law, statute or ordinance,
whether federal, state or local, or governmental rule, regulation or requirement
now in force and effect, or which may hereafter be enacted or promulgated.
Lessee shall at its sole cost and expense promptly comply with all laws,
statutes and ordinances, whether federal, state or local, and governmental
rules, regulations and requirements now in force and effect, or which may
hereafter be enacted or promulgated, and with the requirements of any board of
fire underwriters or other similar body now or hereafter constituted, relating
to or affecting the condition, use or occupancy of the Premises, excluding the
remediation of any Hazardous Materials or other illegal conditions, if any,
which existed prior to the commencement of the term of this Lease (or earlier
occupation of the Premises by Lessee), and further excluding any structural
changes or Building modifications not related to or affected by Lessee's
improvements or acts. The judgment of any court of competent jurisdiction or the
admission of Lessee in any action against Lessee, whether Lessor be a party
thereto or not, that Lessee has violated any law, statute, ordinance or
governmental rule, regulation or requirement shall be conclusive of that fact as
between Lessor and Lessee.
12. ALTERATIONS AND LIENS. Lessee shall not make, or allow to be made,
any alterations, additions, improvements, repairs, deletions or other
modifications to the Premises, or any part thereof, without the prior written
consent of Lessor, which consent shall not be unreasonably withheld. Any
alterations, additions, improvements or other modifications to the said Premises
shall, at the option of Lessor, become at once a part of the realty and
belonging to Lessor. Lessee shall retain title to all movable furniture and
trade fixtures placed in the Premises by it. Subject to the foregoing, all
heating, lighting, plumbing, electrical, ventilation and air conditioning
installations made by Lessee shall be and become the property of Lessor upon
installation and shall not be deemed trade fixtures unless mutually agreed to in
writing between the parties. If written consent of Lessor to any proposed
alterations, additions, improvements, repairs, deletions or other modifications
by Lessee shall have been obtained, Lessee agrees to advise Lessor in writing in
advance of the date upon which such alterations, additions, improvements,
repairs, deletions or other modifications will commence in order to permit
Lessor to post notices of non-responsibility. Lessee agrees to post a
performance bond in the amount of one hundred and twenty-five percent (125%) of
the estimated costs of the specified alterations, additions, improvements,
repairs, deletions or other modifications, if the estimated cost exceeds
$10,000, should Lessor request that Lessee obtain the same. Lessee shall keep
the Premises free from any and all liens arising from or out of any work
performed, materials furnished or obligations incurred by or on behalf of
Lessee. In the event Lessor consents to the making of any alterations,
additions, improvements, repairs, deletions or other modifications to the
Premises by Lessee, the same shall be made by Lessee at Lessee's sole cost and
expense by a California licensed contractor selected by Lessee.
13. REPAIRS. Except for ordinary janitorial maintenance which shall be
furnished by Lessor five days per week on a regularly scheduled basis, which
scheduled days may be modified from time to time, and except for maintenance of
Building systems, Lessee shall, at its sole cost and expense, keep and maintain
the Premises and appurtenances and every part thereof, including without
limitation walls, floors, ceilings, doors, solar control tinting on interior
windows, electrical facilities and equipment within the Premises (except
exterior walls, windows and roofs), in good and sanitary order, condition and
repair.
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<PAGE> 5
By entry hereunder, Lessee accepts the Premises as being in good and sanitary
order, condition and repair, except for the list of items to be mutually agreed
upon in writing by Lessor and Lessee, delivery of Lessee's preliminary list of
said items to occur no later than twenty (20) days following Lessee's occupancy
of the Premises, and except for defects not discoverable by inspection, and
agrees on the last day of the term of this Lease or earlier termination of this
Lease pursuant to the provisions hereof, to surrender to Lessor said Premises
with said appurtenances in the same condition as when received, excepting normal
wear and tear or destruction by casualty. Except as set forth to the contrary in
this Lease, in the event that the provisions of any statute, law, ordinance or
governmental rule, regulation or requirement now in force and effect, or
hereafter enacted or promulgated by any federal, state or local authority,
requires by reason of Lessee's use of the Premises any alterations, additions,
improvements, repairs, deletions or other modifications or acts of any kind to
be done to the Premises or any part thereof, the same shall be done at the sole
cost and expense of Lessee, excluding any structural changes not related to or
affected by Lessee's alterations, additions, improvements, repairs, deletions or
other modifications or acts. Except as specifically set forth in this Lease, it
is specifically understood and agreed that Lessor has no obligation and has made
no promises to alter, remodel, improve, repair, decorate, paint or otherwise
modify the Premises, or any part thereof, and that no representations respecting
the condition of the Premises or the Building have been made by Lessor to
Lessee. If Lessee fails to perform Lessee's obligations hereunder, Lessor may,
at Lessor's option, enter the Premises and put the same in good order, condition
and repair, and the cost arising or in connection therefrom shall become due and
payable as additional rental by Lessee to Lessor upon demand, but nothing
contained in this sentence shall be deemed to impose any duty upon Lessor, or
affect in any manner the obligations placed upon Lessee, as a result of Lessor's
action. Except in the event Lessor or its agents is determined to have been
grossly negligent or to have exhibited willful misconduct, there shall be no
abatement or reduction of rental or other amounts due under this Lease, by
reason of injury to or interference with Lessee's use of the Premises arising
from or in connection with the making of alterations, additions, improvements,
repairs, deletions or other modifications in or to any portion of the Building
or the Premises, or in or to fixtures, appurtenances, improvements, equipment or
other property therein, nor liability of Lessor arising therefrom or in
connection therewith.
14. SERVICES AND UTILITIES. Lessor agrees to furnish to the Premises,
subject to any rules, regulations or other requirements affecting the Building
of which the Premises are a part, water and electricity suitable for the
intended use of the Building, heat and air conditioning required in Lessor's
judgment for the comfortable use and occupation of the Premises, and janitorial
services. Lessor shall also maintain and keep lighted the common stairs, entries
and toilet rooms in the Building of which the Premises are a part. Lessor shall
not be liable for, and there shall be no abatement or reduction of rental or
other amounts due by Lessee under this Lease, by reason of Lessor's failure to
furnish any of the foregoing when such failure is caused by accidents, breakage,
repairs, strikes, lockouts or other labor disturbances or labor disputes of any
kind or character, or by any other cause, beyond the reasonable control of
Lessor. Should water or other utility rationing be imposed on the Building and
its occupants, Lessee agrees to be bound by the strict enforcement thereof by
Lessor and any enforcement body. Except in the case of Lessor's gross negligence
or willful misconduct, Lessor shall not be liable for loss of or injury to
person or property, however occurring, through or in connection with or
incidental to failure to furnish any of the foregoing; provided, however, that
in no event shall Lessor be liable for special or consequential damages.
Wherever heat generating machines or equipment are used in the Premises which
affect the temperature otherwise maintained by the air conditioning system or
electrical loads, Lessor reserves the right to install supplementary air
conditioning units in the Premises or additional electrical service, and the
costs thereof, including the costs of installation and of operation and
maintenance thereof, shall be paid by Lessee.
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<PAGE> 6
15. ENTRY BY LESSOR. Lessor may enter the Premises at any time in the
event of an emergency. Lessee shall permit Lessor and its agents to enter the
Premises at reasonable times for, among other purposes, any of the following
purposes: to inspect the same; to show said Premises to prospective purchasers,
lessees or tenants, such showings to be limited, except in the event of a breach
or other default by Lessee under this Lease, to the six (6) months preceding the
end of the term of this Lease; to maintain the Building of which the Premises
are considered a part; to make such repairs to the Premises as Lessor is
obligated or may elect to make; to make alterations, additions, improvements,
repairs, deletions or other modifications, or utility or other installations or
deinstallations, to any part of the Building; and to post notices of
non-responsibility for alterations, additions, improvements, repairs, deletions
or other modifications, or utility or other installations or deinstallations.
16. INDEMNIFICATION OF LESSOR. Except for Lessor's acts of gross
negligence or willful misconduct, Lessor shall not be liable to Lessee, and
Lessee hereby waives all claims against Lessor, for any injury or damage to any
person or property in or about the Premises by or from any cause whatsoever,
and, without limiting the generality of the foregoing, whether caused by water
damage occasioned by the Building's or Premises' sprinkler system or by water
leakage of any kind or character from the roof, walls, floors, basement or other
part or parts of the Premises or the Building, or caused by gas, fire, oil,
electricity or any cause whatsoever in, on or about the Premises or the Building
or any part thereof. Except in the case of Lessor's gross negligence or willful
misconduct, Lessor shall not be liable to Lessee, its agents, employees,
invitees, licensees or other third parties for loss or damage to property,
including without limitation goods, wares or merchandise, or for injury or death
to persons in, on or about the Premises or the Building. Notwithstanding
anything to the contrary contained in the foregoing, Lessee acknowledges and
agrees that in no event shall Lessor be liable for special or consequential
damages. Lessee agrees to indemnify and hold harmless Lessor from any and all
claims, demands, damages, losses, costs and expenses (including without
limitation reasonable attorneys' fees) arising out of or in connection with
Lessee's or its agents, employees, invitees or licensees occupancy or use of the
Premises or the Building, including without limitation the exercise room, the
cafeteria and their facilities and equipment, and any other common use area or
facility.
Except in the case of Lessor's gross negligence or willful misconduct,
Lessor shall not be liable to Lessee for any damage by, or from any act or
failure to act of, any co-tenant or other occupant of the Building, or of any
owner or occupant of adjoining or contiguous property; provided, however, that
in no event shall Lessor be liable for special or consequential damages. Lessee
agrees to pay for all damages to the Building, and to the Building's tenants or
occupants, caused by Lessee, its agents, employees, invitees or licensees misuse
or neglect of the Building and appurtenances thereto.
17. LESSEE INSURANCE. Lessee shall, during the entire term of this
Lease, keep in full force and effect a policy of Comprehensive General Liability
insurance utilizing an insurance industry standard form with Broad Form General
Liability Endorsement, or equivalent, in an amount of not less than $2,000,000
per occurrence of bodily injury and property damage combined, with respect to
use, occupancy or maintenance of the Premises. The policy shall name Lessor and
any affiliates of Lessor as additional insureds and loss payees, and shall
contain a clause that the insurer will not cancel or materially change the
policy of insurance without first giving Lessor thirty (30) days prior written
notice. The insurance coverage shall be provided by a California-licensed
insurance company, and a copy of the policy or a certificate of insurance shall
be delivered to Lessor.
Lessee, at Lessee's own cost and expense, shall also maintain insurance
protecting and
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indemnifying Lessor and Lessee against any claim or liability for damage to or
loss of Lessee's personal property, furnishings, fixtures, equipment, tenant
improvements and other contents occurring upon, in or about the Premises, to the
extent of the full insurable value of such personal property, furnishings,
fixtures, equipment, tenant improvements and other contents, including without
limitation any damage or loss arising out of or in connection with vandalism and
malicious mischief, sprinkler leakage and earthquake sprinkler leakage.
On or before the Commencement Date, Lessee shall furnish Lessor with
certificates, evidencing the insurance coverage described in this Section 18,
and renewal policies or certificates therefor shall be furnished to Lessor at
least thirty (30) days prior to the expiration date of each policy for which a
certificate was theretofore furnished.
18. USES PROHIBITED. Lessee shall not do or permit anything to be done
in or about the Premises or any other area or part of the Building or common
areas of the Building, including the Premises which are a part thereof, nor
bring or keep anything therein, which will in any way increase the existing rate
or premium amount of, or otherwise affect, any policy of insurance, including
but not limited to fire, vandalism, malicious mischief, flood, earthquake,
liability, Hazardous Materials (as such term is defined herein), extended and
other coverage relating to the Building or common areas of the Building,
including the Premises which are a part thereof, and all personal property,
furnishings, fixtures, equipment, improvements and other contents thereof, or
cause a cancellation of any policy of insurance covering the Building or common
areas of the Building, or any part thereof, or any personal property,
furnishings, fixtures, equipment, improvements and other contents thereof.
Lessee agrees that if any such activity causes an increase in any or all of
Lessor's insurance premium rates, it will pay the amount of any such increase(s)
in premium(s) to Lessor within ten (10) days following receipt by Lessee from
Lessor of a bill setting forth the amount of any such increase(s). In the event
any of Lessee's activities shall cause cancellation of any policy of insurance,
Lessee shall immediately cease to conduct such activity. Lessee shall not
conduct or permit to be conducted any sale by auction on or from said Premises.
19. SUBROGATION. Lessor and Lessee hereby mutually waive any claim
against the other during the term of this Lease for any injury to person or loss
or damage to any of their property located on or about the Premises or the
Building that is caused by or results from perils covered by insurance carried
by the respective parties, to the extent of the proceeds of such insurance
actually received with respect to such injury, loss or damage, whether or not
due to the negligence of the other party or its agents, employees, licensees or
invitees. Since the forgoing waivers will preclude the assignment of any claim
by way of subrogation to an insurance company or any other person, each party
hereby agrees to immediately give to its insurer written notice of the terms of
these mutual waivers and to have its insurance policies endorsed to prevent the
invalidation of such insurance coverage because of such waivers. Nothing in this
Section shall relieve a party of liability to the other for failure to carry
insurance required by this Lease.
20. FIRE CLAUSE. In the event of partial destruction of the Premises
during the term of this Lease, from any cause insured under a Standard Form Fire
and Extended Coverage policy of insurance which Lessor agrees to maintain,
Lessor shall forthwith repair the same, provided such repairs can be made within
one hundred eighty (180) days from the date of such partial destruction, under
the then applicable laws, rules and regulations of federal, state and local
authorities and in light of the extent of such damage and the then condition of
the labor market and availability of materials and supplies, but such partial
destruction shall in no way annul or void this Lease, except that Lessee shall
be entitled to a
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proportionate reduction of the minimum monthly rental amount owed by Lessee
pursuant to this Lease, such reduction to be based upon the extent to which the
damages and destruction and the making of such repairs shall interfere with the
business carried on by Lessee in the Premises. If Lessor need not make such
repairs, but nevertheless elects within one hundred eighty (180) days to make
the same, this Lease shall continue in full force and effect, and the minimum
monthly rental amount shall be proportionately reduced in accordance with the
immediately preceding sentence. Lessee may terminate this Lease if commencement
of such repairs has not occurred within one hundred eighty (180) days or been
completed within one year. In the event that Lessor does not elect to make such
repairs, or such repairs cannot be made, this Lease may be terminated at the
option of either party. A total destruction of the Building shall, at the option
either of Lessor or Lessee, terminate this Lease.
Lessor shall not be required to repair any injury or damage by fire or
any other cause, or to make any repairs or replacements of any personal
property, furnishings, fixtures, equipment, improvements, contents or other
property contained or installed in the Premises of Lessee. Notwithstanding
anything to the contrary contained in this Section or this Lease, Lessor shall
not have any obligation to repair, reconstruct or restore the Premises when the
damage resulting from any casualty covered under this Lease occurs during the
last twelve (12) months of the term of this Lease, nor shall Lessor be required
to make expenditures greater than the actual amount of any insurance recovery.
21. PUBLIC APPROPRIATION. In the event proceedings shall be commenced by
any public or quasi-public authority under the powers of eminent domain,
condemnation, or otherwise, affecting the fee simple title of the Building, of
which the Premises are a part, Lessee shall have no right to claim any
compensation or other valuation for its leasehold interest or otherwise by
reason of its use or occupancy of or improvements to the Premises, and any award
adjudicated in favor of Lessor or by way of settlement with Lessor or otherwise
shall belong in its entirety to Lessor. Lessee shall, however, be entitled to
any award made to it by a court of competent jurisdiction for depreciation to
and cost of removal of personal property, furnishings, fixtures, equipment and
other contents placed in the Premises by Lessee, for relocation costs and for
business interruption costs, provided that said award does not otherwise
diminish the amount to be received by Lessor. In the event of a partial taking
of the Premises, in connection with a taking affecting the fee simple title of
the Building, then Lessee's minimum monthly rental amount shall be reduced in
the proportion that the number of square feet actually taken bears to the total
square footage of the leased Premises. If any taking pursuant to this paragraph
causes substantial interference with the conduct of Lessee's business, then and
only then may Lessee, at Lessee's option, terminate this Lease as of the date
the public or quasi-public authority actually took such possession. If Lessee
does not terminate this Lease as hereinabove provided, then the minimum monthly
rental amount payable shall be reduced as set forth hereinabove.
In the event of a condemnation solely of Lessee's leasehold interest in
all or a portion of the leased Premises, without the condemnation of the fee
simple title also, this Lease shall not terminate and such condemnation shall
not excuse Lessee from full performance of any of its obligations hereunder, but
Lessee, in such event, shall be entitled to present or pursue against the
condemning authority its claim for, and to receive from such condemning
authority, all compensation or damages sustained by it by reason of such
condemnation, and Lessor's right to recover compensation or damages shall be
limited to compensation for and damages, if any, to its reversionary interests;
provided, however, that during such time as Lessee shall be out of possession of
the leased Premises by reason of such condemnation, this Lease shall not be
subject to forfeiture for failure to observe and perform any of Lessee's
covenants not calling for the payment of money. In the event the condemning
authority shall fail to keep the Premises in the state of repair required under
the terms of this Lease, or to perform any other covenant
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not calling for the payment of money, Lessee shall have ninety (90) days after
the restoration of possession to it of the Premises within which to carry out
its obligations under the terms of this Lease. During such time as Lessee shall
be out of possession of the leased Premises by reason of such leasehold
condemnation, Lessee shall pay to Lessor, in lieu of the minimum monthly rental
amounts provided for in this Lease, and in addition to any other payments
required of Lessee under this Lease, a minimum monthly rental amount equal to
the average minimum monthly rental amount paid by Lessee during the period
commencing on the Commencement Date and ending on the date the condemning
authority actually took possession of the Premises. At any time after such
condemnation proceedings are commenced, Lessor shall have the right, at its
option, to require Lessee to assign to Lessor all compensation and damages
payable by the condemnor to Lessee, to be held without liability for interest
thereon as security for the full performance of Lessee's covenants hereunder,
such compensation and damages received pursuant to said assignment to be applied
first to the payment of rental amounts and all other amounts from time to time
payable by Lessee pursuant to the terms of this Lease as such rental and other
amounts fall due, and the remainder, if any, to be payable to Lessee at the end
of the term of this Lease or on restoration of possession to Lessee, whichever
shall first occur, it being understood and agreed that such assignment shall not
relieve Lessee of any of its obligations under this Lease with respect to
payment of any such rental or other amounts, except as the same shall be
actually received by Lessor.
22. DEFAULT. The occurrence of any one or more of the following events
("Default") shall constitute a breach of this Lease by Lessee: (a) if Lessee
shall fail to pay any rental amount (including the amount of any additional
rental) within ten (10) days of when the same becomes due and payable; or (b) if
Lessee shall fail to pay any other sum when and as the same becomes due and
payable and such failure shall continue for more than ten (10) days after
written notice thereof from Lessor; or (c) if Lessee shall vacate or abandon the
Premises, vacation of the Premises to include the failure to occupy the Premises
for a continuous period of sixty (60) days or more, whether or not rental and
other amounts have been paid; or (d) if Lessee shall fail to perform or observe
any other material provision of this Lease, that Lessee is required to perform
or observe hereunder, and such failure shall continue for more than thirty (30)
days after notice thereof from Lessor, and Lessee shall not within such period
cure such Default; or (e) if Lessee shall make a general assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
as they become due or shall file a petition in bankruptcy, or shall be
adjudicated as bankrupt or insolvent, if such adjudication is not vacated or
otherwise removed within ninety (90) days, or shall file a petition in any
proceeding seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, or shall file an answer admitting or fail timely to contest
the material allegations of a petition filed against it in any such proceeding,
or shall seek or consent to or acquiesce in the appointment of any trustee,
receiver or liquidator of Lessee or any material part of its properties; or (f)
if within ninety (90) days after the commencement of any proceeding against
Lessee seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such proceeding shall not have been dismissed; or (g) if
within ninety (90) days after the appointment, without the consent or
acquiescence of Lessee, of any trustee, receiver or liquidator of Lessee or of
any material part of its properties, such appointment shall not have been
vacated; or (h) if this Lease or any estate of Lessee hereunder shall be levied
upon under any attachment or writ of execution and such attachment or writ of
execution is not vacated within ten (10) days.
23. REMEDIES. (a) Without limiting Lessor in the exercise of any right
or remedy which Lessor may have under this Lease or at law or in equity, if an
event of Default or other breach by Lessee
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under this Lease shall occur, Lessor may:
(1) Terminate Lessee's right to possession of the Premises by any
lawful means three (3) days following Lessor's delivery to Lessee of a written
termination notice, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to Lessor,
unless on or before such termination date all arrears of rental and all other
amounts payable by Lessee under this Lease and all costs and expenses incurred
by or on behalf of Lessor hereunder, including reasonable costs of enforcing the
provisions of this Lease, shall have been paid by Lessee and all other breaches
of this Lease by Lessee at the time existing shall have been fully remedied to
the satisfaction of Lessor. Upon any such termination, Lessor shall be entitled
to recover from Lessee: (i) the worth of the unpaid rental which had been earned
at the time of termination; (ii) the worth of the unpaid rental which would have
been earned after termination; and (iii) any other amount necessary to
compensate Lessor for all the detriment proximately caused by Lessee's failure
to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, including without limitation all
repossession costs, brokerage commissions, legal expenses, attorneys' fees,
alteration costs and expenses of preparation of the Premises or parts thereof
for re-letting. The "worth" of the amounts referred to in clause (i) above shall
be computed by adding to amounts due by Lessee interest at the rate of twelve
percent (12%) per annum, or at such lesser rate as may be required so as not to
exceed the highest rate permitted by law. The "worth" of the amount referred to
in clause (ii) above shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of
termination. The term "rental," as used in this paragraph, shall be deemed to be
and to mean any rental, utility, operating expense, adjustment or other amount
owed by Lessee under this Lease; or
(2) Maintain Lessee's right to possession of the Premises, in
which case this Lease shall continue in effect whether or not Lessee shall have
vacated or abandoned the Premises. In such event, Lessor shall be entitled to
enforce all of Lessor's rights and remedies under this Lease, including the
right to recover any rental and other amounts as they become due hereunder; and
(3) In addition to the rights and remedies described in
paragraphs (1) and (2) above, pursue any other remedy now or hereafter available
to Lessor under the laws of the State of California. No remedy or election under
this Lease shall be deemed exclusive but shall, wherever possible, be cumulative
with all other remedies at law or in equity. Unpaid installments of rental
amounts and other unpaid monetary obligations of Lessee under the terms of this
Lease shall bear interest from the date due at the maximum rate then allowable
by law.
(b) Unless the parties have mutually agreed in writing to the contrary,
no payment by Lessee or receipt by Lessor of a lesser amount than the rental or
other amounts stipulated in this Lease shall be deemed to be other than on
account of such rental or other amounts owing by Lessee, as Lessor shall elect,
nor shall any endorsement or statement on any check or any letter accompanying
any check or payment as rental or other amounts owed be deemed binding on Lessor
or an accord and satisfaction, and Lessor may accept such check or payment
without prejudice to Lessor's right to recover the balance of rental or other
amounts owing by Lessee, and to pursue every remedy in this Lease or by law
provided.
(c) No act or thing done by Lessor or Lessor's agents under the terms of
this Lease shall be deemed to constitute an eviction by Lessor, nor deemed to
constitute an acceptance of a surrender of the Premises, and no agreement to
accept such surrender shall be valid unless in a writing signed by Lessor. No
employee of Lessor or of Lessor's agents shall have any power to accept the keys
of the Premises
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prior to the termination of this Lease. The delivery of keys to an employee of
Lessor or of Lessor's agents shall not operate as a termination of this Lease or
acceptance of a surrender of the Premises. In the event that Lessee at any time
desires to have Lessor sublet the Premises for Lessee's account, Lessor or
Lessor's agents are authorized to receive said keys for such purposes without
releasing Lessee from any of Lessee's obligations under this Lease, and Lessee
hereby relieves Lessor of any liability for loss or damage to any of Lessee's
effects in connection with any such subletting activities.
(d) Except in the case of Lessor's gross negligence or willful
misconduct, Lessor shall not be responsible for damages caused by Lessor or
Lessor's agents re-entering and taking possession of the Premises or removing
and storing furniture and other property as herein provided, and in no event
shall Lessor be responsible for special or consequential damages. Lessee agrees
to indemnify and hold Lessor harmless from any and all loss, cost or damage
occasioned Lessor thereby, except in the case of Lessor's gross negligence or
willful misconduct, and further agrees that no such re-entry shall be considered
or construed to be a forcible entry under California law.
24. ATTORNEYS' FEES. If Lessor shall be made a party to any action or
proceeding commenced against Lessee, Lessee shall pay any and all reasonable
costs, expenses and attorneys' fees incurred by Lessor in connection with any
such action or proceeding, except in the event that a court of competent
jurisdiction shall determine that Lessor is liable therefor. In the event of any
action at law or in equity between Lessor and Lessee to enforce any of the
provisions or rights of either party hereunder, the unsuccessful party to such
action or proceeding hereby covenants and agrees to pay to the successful party
in such action or proceeding all reasonable costs and expenses, including
reasonable attorneys' fees, incurred in connection therewith by such successful
party, and further agrees that if such successful party shall recover judgment
in any such action or proceeding, such reasonable costs, expenses and attorneys'
fees shall be included in and as part of such judgment.
25. SALE BY LESSOR. In the event of a sale or conveyance by Lessor of
the Building containing the Premises, or any conveyance or assignment by Lessor
of its entire interest in the Premises, the same shall operate to relieve Lessor
of performance of any obligation arising hereunder after such sale, conveyance
or assignment, and any and all liability for same associated therewith. In such
event Lessee acknowledges and agrees that this Lease and Lessee's obligations
hereunder shall not be affected by any such sale, conveyance or assignment, and
further agrees that any such purchaser or assignee shall be solely responsible
for performance of any of Lessor's obligations arising hereunder after such
sale, conveyance or assignment.
26. SUBORDINATION. This Lease is and shall always be subordinate to any
mortgage, deed of trust, master lease, ground lease or any other lien which may
result from any form of financing or otherwise, which is now or shall at any
time be placed upon the Premises or any part thereof or the Building, and Lessee
agrees to execute and deliver any instrument, without cost, and within five (5)
business days of demand, which may be deemed necessary to further effect the
subordination of this Lease to any such mortgage, deed of trust, master lease,
ground lease or any other lien which may result from any form of financing or
otherwise, or to any purchaser or assignee thereof or successor thereto.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default hereunder and so
long as Lessee shall pay the rental and other amounts due under this Lease and
observe and perform all of the provisions of this Lease, unless this Lease is
otherwise terminated pursuant to its terms.
27. DELIVERY OF RECORDABLE STATEMENTS. The parties hereto each agree at
any time
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and from time to time, within five (5) business days of request by the other, to
execute, acknowledge and deliver to the requesting party a statement, which may
take the form of a memorandum of lease, estoppel, subordination, non-disturbance
and attornment agreement, in writing, and in recordable form, certifying to,
among other things, the date of commencement of this Lease, that this Lease is
unmodified and in full force and effect (or if there has been any modification
that the same is in full force and effect as modified and stating the date of
such modification), and also stating the dates to which the rental and other
charges and amounts owing under this Lease have been paid, and further setting
forth such other matters as may reasonably be requested by the requesting party,
including an acknowledgment that there are not, to the responding party's
knowledge any uncured defaults on the part of the requesting party, or
specifying such defaults if any are claimed. Any such statement may be
conclusively relied upon by the intended recipient thereof.
28. WAIVER. The waiver by either party of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein or therein contained. The subsequent
acceptance of any rental or other amount hereunder by Lessor shall not be deemed
to be a waiver of any preceding breach by Lessee of any term, covenant or
condition of this Lease, other than a waiver of the failure of Lessee to pay the
particular rental or other amount so accepted, regardless of knowledge of any
preceding breach at the time of acceptance of such rental or other amount.
29. GOVERNING LAW, JURISDICTION, PARTIAL INVALIDITY. This Lease is
subject to and shall be construed in accordance with the laws of the State of
California, and it is agreed between the parties hereto that if any word,
phrase, clause, sentence, article, provision, paragraph or section of this
Lease, is or shall be held invalid or unlawful under the laws of the State of
California for any reason whatsoever, the same shall be deemed severed from the
remainder hereof, and stricken therefrom, and shall in no way affect or impair
the validity of this Lease or any other portion hereof (including the exhibits
hereto), and this Lease shall otherwise remain in full force and effect. The
parties agree that venue for any action concerning this Lease shall be the
Superior Court of Marin County, California.
30. NOTICES. All notices required by law or by this Lease shall be in
writing, and shall be sufficiently given and served upon the other party when
delivered in person, or sent by United States mail, registered or certified,
with postage prepaid, addressed to Lessor or Lessee as the case may be at the
addresses specified in the Basic Lease Provisions in Section 1 hereof, or to
such other addresses as the parties may from time to time designate by written
notice; provided, that all notices to Lessee shall be duly and sufficiently
given hereunder if delivered to Lessee in person at the Premises or if addressed
to Lessee at the Premises.
31. SUCCESSORS AND ASSIGNS. All the terms, covenants and conditions
hereof shall be binding upon and inure to the benefit of the heirs, executors,
administrators, successors and assigns of the parties hereto, provided that
nothing in this Section shall be deemed to permit any assignment, subletting,
subtenancy, occupancy or other use by Lessee not in accordance with or otherwise
contrary to the provisions of this Lease. No assignee for the benefit of
creditors, trustee, receiver or referee in bankruptcy shall acquire any rights
under this Lease by virtue of this section.
32. SIGNS. Lessee shall not place or permit to be placed any sign,
marquee, awning, placard, picture, advertisement, name, notice or other
decoration, or security bars or other attachment, on or to the roof, front,
back, sides, windows, doors, visible interior walls or exterior walls of the
Premises, without first obtaining the prior written consent of Lessor. Any sign,
marquee, awning, placard, picture,
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advertisement, name, notice or other decoration, or security bars or other
attachment, approved by Lessor, shall be affixed or inscribed at Lessee's
expense by a person approved by Lessor. Lessee further agrees that no awnings or
other projections over or around the windows of the Premises other than
"building standard" mini blinds shall be installed by Lessee, and that only such
window coverings as are permitted by Lessor shall be used in Lessee's Premises.
In addition, Lessee agrees that it shall not exhibit or affix flags, pennants,
banners or similar items on or to the exterior or interior of the windows or
doors, nor shall it place anything on or allow anything to be placed on the
glass of or on any window, door, partition or wall which in the opinion of
Lessor appears unsightly from outside the Premises. Lessor may, without
liability, enter upon the Premises and remove any such sign, marquee, awning,
placard, picture, advertisement, name, notice or other decoration, including any
flag, pennant, banner or similar item, or security bars or other attachment,
affixed in violation of this Section, Lessee hereby agreeing to pay the
reasonable cost of removal thereof. Lessor may establish additional reasonable
rules and regulations as to the size, type and design of all exterior and
interior signs and decorations, and Lessee agrees to abide by same.
33. OBSTRUCTION. The Building and common areas thereof are not for the
use of the general public, and Lessor shall in all cases retain the right to
control and prevent access thereto by all persons whose presence in the sole
judgment of Lessor shall be prejudicial to the safety, character, reputation and
interest of the Building and its occupants.
34. BUILDING SECURITY. Lessee agrees to take all necessary steps to
ensure that its employees, agents, invitees and licensees maintain the
Building's security through proper use of all security systems and by observing
commercially reasonable standards of conduct. All entrance doors in Lessee's
Premises shall be left locked when Lessee's Premises are not in use. Entrance
doors shall not be left open unmonitored by Lessee at any time. Lessee shall not
alter any lock or install any new or additional lock or any bolt on any door of
the Premises without the prior written consent of Lessor. Lessor shall not be
liable to Lessee for any damage or loss arising from or in connection with the
admission, exclusion or ejection of any person to or from the Premises or the
Building under the provisions of this Lease.
35. HAZARDOUS CONDITIONS, WASTE. Lessor hereby represents and warrants
to Lessee that the Premises do not contain any oil, flammable explosives,
asbestos, urea formaldehyde contaminated polluting materials, substances or
wastes or any other substances defined as "hazardous substances," "hazardous
materials," "hazardous wastes," "toxic substances," or "toxic wastes" under
applicable law (collectively "Hazardous Materials") in any concentration, amount
or condition that would constitute a violation of any federal, state or local
statute, ordinance, rule or regulation relating to industrial hygiene or
environmental conditions on, under or about the Premises, including soil or
groundwater conditions thereof. Lessee agrees not to cause or permit any
Hazardous Materials or illegal or unlawful substances or materials of any nature
whatsoever to be brought onto or used on the Premises or Building, and further
agrees not to cause or permit any dangerous, flammable, combustible or explosive
substances or materials of any nature whatsoever to be brought onto or used on
the Premises or Building in any concentration, amount or condition that would
constitute a violation of any federal, state or local statute, ordinance, rule
or regulation. Lessee further agrees that no dangerous, flammable, combustible
or explosive objects, substances or materials shall be brought into the Building
by Lessee or with the permission of Lessee. Lessee agrees to hold Lessor
harmless from and indemnify Lessor against any damage or liability that may
arise from any failure by Lessee to perform its obligations under this Section.
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36. SPACE PLANNING. In connection with the execution and delivery of
this Lease, Lessee shall furnish to Lessor any space planning information
reasonably requested by Lessor. Any proposed changes to such initial space
planning must be approved in writing by Lessor prior to the implementation of
same, which approval shall not be unreasonably withheld.
37. MISCELLANEOUS. (a) Unless otherwise specifically provided in this
Lease, any payment or other obligation of Lessee under any term or provision of
this Lease shall be performed by Lessee at its sole cost and expense and without
any abatement of any rental or other amount.
(b) The section and paragraph titles (and clauses thereof) in this Lease
(and exhibits hereto) are for convenience only and shall not in any way limit or
otherwise restrict the construction or interpretation of the terms or provisions
hereof (or thereof).
(c) The terms "Lessor" and "Lessee," as used herein, shall include the
plural, as well as the singular, and any successor or assignee permitted
hereunder. Terms used in the neuter gender shall include the masculine and
feminine. If there be more than one Lessee, the obligations hereunder imposed
shall be joint and several.
39. ENTIRE AGREEMENT. This Lease may be modified only by a writing duly
executed by authorized officers of Lessor and Lessee. This Lease constitutes the
entire agreement of the parties hereto and supersedes all prior written and oral
agreements between the parties. Lessor and Lessee acknowledge that no oral or
other representations have been made by themselves or any agent of either of
them with respect to the condition of the Premises or any obligation of the
Lessor hereunder or otherwise. The parties agree to execute any documents
necessary to carry this Lease into effect.
40. QUIET ENJOYMENT. Provided no event of Default or other breach
hereunder has occurred and is continuing, Lessor agrees not to disturb Lessee's
quiet enjoyment of the Premises.
41. DUE AUTHORIZATION. Lessee and the individual executing this Lease on
behalf of Lessee each represent and warrant that such individual is duly
authorized to execute and deliver this Lease on behalf of Lessee.
IN WITNESS WHEREOF, this Lease has been executed as of the first day of August,
1999.
LESSOR: LESSEE:
PHOENIX AMERICAN INCORPORATED, RESOURCE/PHOENIX, INC.,
a Nevada corporation a California corporation
By: By:
----------------------------- ------------------------------------
Its: Its:
----------------------------- ------------------------------------
15
<PAGE> 1
EXHIBIT 21.1
Corporate Name State of Incorporation
- -------------- ----------------------
ReSource/Phoenix, Inc. California
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
August 4, 1999
San Francisco, CA
/s/ Arthur Anderson LLP
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