<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 14, 1999
REGISTRATION NO. 333-84589
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
RESOURCEPHOENIX.COM
(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
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
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> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE(2)
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Class A Common Stock, $0.001
par value.................... 4,887,500 shares $14.00 $68,425,000 $19,023
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- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of registration fee
pursuant to Rule 457(c) under the Securities Act of 1933.
(2) $15,985 of the registration fee was previously paid by the registrant in
connection with the filing of the Registration Statement on August 5, 1999.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<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 SEPTEMBER 14, 1999
[RESOURCEPHOENIX.COM LOGO]
4,250,000 SHARES
CLASS A COMMON STOCK
ReSourcePhoenix.com is offering 4,250,000 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 $12.00 and
$14.00 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.
Some of our security holders have granted the underwriters a 30-day option
to purchase up to an additional 637,500 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.
------------------------------
BANCBOSTON ROBERTSON STEPHENS THOMAS WEISEL PARTNERS LLC
The date of this prospectus is , 1999.
<PAGE> 3
Description of Artwork
Front Inside Cover
What if there was a company that...
Offered the cost-effective benefits
of outsourcing--
While providing the flexibility, control
and scalability of an in-house financial
and management reporting system--
And provided access to leading enterprise
resource planning software via the Internet?
There is.
ReSourcePhoenix.com(TM)
Inside Gatefold
Graphical collage of people performing the tasks included
in the ReSourcePhoenix solution.
Under the graphic is the following text:
Software
Enterprise Resource Planning
Sales Force Automation
Functional Software
Web-based Applications
Professional Expertise
Accounting
Information Technology
Finance
Business Processes
Financial and Management Reporting
Transaction Processing
Budgeting and Analysis
Project Management
Sales Contact Management
Investor Services
Accounting Management
Internet
Internet-based Communication
Virtual Private Network
Hosted Applications
ReSourcePhoenix.com Solutions
ReFOCOS(SM)
M.A.R.S.
S.T.A.R.
<PAGE> 4
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
Information Regarding Forward Looking Statements............ 13
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................................. 18
Business.................................................... 28
Management.................................................. 39
Relationship with Phoenix Companies and Certain
Transactions.............................................. 44
Principal Stockholders...................................... 46
Description of Capital Stock................................ 47
Shares Eligible For Future Sale............................. 50
Underwriting................................................ 51
Legal Matters............................................... 53
Experts..................................................... 53
Where You Can Find More Information......................... 53
Index to Financial Statements............................... F-1
</TABLE>
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
ReSourcePhoenix.com provides outsourced financial and management reporting,
accounting management, transaction processing and record keeping services. We
allow our clients to focus on their core businesses 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.
Enterprise resource planning software integrates the back-office aspects of the
business, including planning, inventory management, customer service,
manufacturing, sales and marketing. 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;
1
<PAGE> 6
- recruiting, hiring and training an extensive staff of information
technology, accounting, finance and transaction processing professionals;
- 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. As of
September 1, 1999, all but one of our ReFOCOS clients, who collectively
generated approximately 37.6% of our revenues for the six months ended June 30,
1999, could access our service using the Internet. The remainder of our service
clients, who collectively generated 26.2% of revenues for the six months ended
June 30, 1999, access our service using non-Internet communications. During the
same period, we derived approximately 36.2% of our revenue from software,
including license fees and related services.
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. At the time of our formation,
we provided information technology, accounting, finance and transaction
processing services to entities affiliated with Phoenix Leasing Incorporated, a
sponsor and syndicator of publicly-traded limited partnerships. Phoenix Leasing
is controlled by Gus Constantin, our chairman, chief executive officer and
controlling stockholder. As of September 1, 1999, we had 39 clients, including
36 unaffiliated clients and 3 clients affiliated with Phoenix Leasing. We have
never lost a client because of service or pricing issues.
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 Web site address is www.resourcephoenix.com. The information
on our Web site 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 September 1, 1999 after
giving effect to a 1 to 0.72 reverse stock split. The shares of common stock
outstanding assumes no exercise of the underwriters' over-allotment option and
excludes (1) 1,260,000 shares of Class A common stock that have been reserved
for issuance under our stock option plan and (2) 360,000 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.................. 4,250,000 shares
Common stock to be outstanding after
the offering:
Class A common stock................. 4,250,000 shares
Class B common stock................. 7,200,000 shares
Total............................. 11,450,000 shares
Over-allotment option offered by
selling security
holders.............................. 637,500 shares
Voting rights:
Class A common stock................. 1 vote per share
Class B common stock................. 5 votes per share
Use of proceeds........................ To repay indebtedness, 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 pro forma as
adjusted column reflects the sale of 4,250,000 shares of Class A common stock
offered by this prospectus at an assumed initial public offering price of $13.00
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 $ 4,161
Total operating expenses................. 1,298 6,121 10,354 4,204 11,766
Loss from operations..................... (123) (781) (5,668) (1,892) (7,605)
Net loss................................. (123) (740) (5,657) (1,933) (7,588)
Basic and diluted net loss per share..... $ (0.02) $ (0.10) $ (0.79) $ (0.27) $ (1.05)
Shares used in computing basic and
diluted net loss per share............. 7,200 7,200 7,200 7,200 7,200
Pro forma basic and diluted net loss
per share.............................. $ (0.84) $ (0.66)
Shares used in computing pro forma basic
and diluted net loss per share......... 11,450 11,450
</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 $50,451
Working capital (deficit)................................. (709) 49,614
Total assets.............................................. 3,348 53,671
Total liabilities......................................... 2,042 2,042
Total stockholder's equity................................ 1,306 51,629
</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.
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 three unaffiliated clients to date, one because the client was
acquired and two because the clients 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
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.
4
<PAGE> 9
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. As of September 1, 1999, all but one of our ReFOCOS
clients, who collectively generated approximately 37.6% of our revenues for the
six months ended June 30, 1999, could access our service using the Internet. The
remainder of our service clients, who collectively generated 26.2% of revenues
for the six months ended June 30, 1999, access our service using non-Internet
communications. During the same period, we derived approximately 36.2% of our
revenues from software, including license fees and related services. 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 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 $14.0 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. AS A RESULT, THE LOSS OF A SINGLE CLIENT MAY SERIOUSLY HARM OUR
OPERATING RESULTS.
Our results of operations and our business depend on our relationships with
a limited number of large clients. As a result, the loss of a single client may
seriously harm our operating results. 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. THE LOSS OF ANY OF THIS THIRD PARTY SOFTWARE,
HARDWARE OR SERVICES MAY BE DIFFICULT TO REPLACE AND MAY HARM OUR OPERATING
RESULTS.
A substantial portion of the software that is integrated into our services
is licensed from third parties, including Oracle Corporation and Necho Systems
Corp. If we were to lose the right to use the software that we have licensed
from Oracle, Necho or other third parties, our operations would be seriously
harmed. 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
6
<PAGE> 11
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.
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 approximately 36.2% 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
7
<PAGE> 12
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 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. For example, we recently adapted our ReFOCOS
service, which formerly used a client-server communications architecture, to use
an Internet communications architecture. 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.
We must recruit qualified information technology personnel, for which there
is high demand and short supply. In addition, we must also recruit qualified
accounting, finance and transaction processing personnel, which are also in high
demand. We recently opened our first office outside of northern California and
plan
8
<PAGE> 13
to open additional sales offices and data centers outside of California. We
don't have much experience operating a multi-office business.
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.
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. Gus Constantin, our chairman and chief executive
officer, founded us and our predecessor business more than 27 years ago. Bryant
Tong, our president and chief operating officer, has worked for us and our
predecessor business for more than 16 years. David Brunton, our vice president
and chief financial officer, has worked for us and our predecessor business for
more than 12 years. 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. If we had to replace any of our key executives, we would not be able to
replace the significant amount of knowledge that many of our key executives have
about us.
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 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 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
9
<PAGE> 14
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 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. 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 89.4% 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 in the aggregate will have 10.6% 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;
- 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. 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 8.0 MILLION, OR 65.4%, 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 4,250,000 shares of Class A common stock
outstanding. This includes the 4,250,000 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 65.4%, or 8,046,291
shares, of our total outstanding shares, including shares subject to options
that will become exercisable upon our initial public offering, 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>
8,046,291 65.4% 181 days after the date of this prospectus, subject in some
cases to volume limitations
</TABLE>
11
<PAGE> 16
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 $50.3
million at an assumed initial public offering price of $13.00 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
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This prospectus 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 "expect," "anticipate," "intend" and "plan." Our actual results may differ
materially from those discussed in these statements. Factors that could
contribute to such differences include, but are not limited to, those discussed
in "Risk Factors" and elsewhere in this prospectus.
You should rely only on the information contained in this prospectus when
making a decision about whether to invest in our Class A common stock. 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 when this prospectus or any shares
of our Class A common stock is delivered.
-------------------------
ReSourcePhoenix.com, ReFOCOS, S.T.A.R. and M.A.R.S. are trademarks of
ReSourcePhoenix.com. This prospectus contains trademarks and trade names of
other companies.
USE OF PROCEEDS
Our net proceeds from the sale of the 4,250,000 shares of Class A common
stock offered by this prospectus are estimated to be approximately $50.3 million
based upon an assumed offering price of $13.00 per share 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:
- 5% to 10% for repayment of indebtedness;
- 15% to 25% for capital expenditures; and
- 55% to 65% for general corporate purposes, including working capital.
As of the date of this prospectus, we can only estimate the particular uses
for the net proceeds to be received upon completion of the offering. As a
result, the foregoing estimates and our use of proceeds are subject to change at
our management's discretion. The amounts actually expended for each of the
purposes listed above may vary significantly depending upon a number of factors,
including the progress of our marketing programs and capital spending
requirements.
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
Except for a dividend paid to our sole stockholder on September 12, 1999,
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 pro forma as adjusted to give effect to
the sale of 4,250,000 shares of Class A common stock in this offering at an
assumed initial public offering price of $13.00 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 846,291 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 $2.08 per share.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
---------------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Preferred stock, $0.001 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, $0.001 par value per share; 27,800,000
shares authorized, actual and as adjusted, no shares,
issued and outstanding, actual and 4,250,000 shares,
issued and outstanding, as adjusted....................... -- 50,323
Class B common stock, $0.001 par value per share; 7,200,000
shares authorized, actual and as adjusted, 7,200,000
issued and outstanding, actual and as adjusted............ 15,291 19,239
Accumulated deficit......................................... (13,985) (17,933)
-------- --------
Total stockholders' equity.................................. $ 1,306 $ 51,629
======== ========
</TABLE>
14
<PAGE> 19
DILUTION
Our pro forma net tangible book value as of June 30, 1999 was approximately
$1.3 million, or $0.18 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 4,250,000 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
$51.6 million, or $4.51 per share of common stock. This represents an immediate
increase in pro forma net tangible book value of $4.33 per share to existing
stockholders and an immediate dilution in pro forma net tangible book value of
$8.49 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............. $13.00
Pro forma net tangible book value per share as of June 30,
1999................................................... $0.18
Increase per share attributable to new investors.......... 4.33
-----
Pro forma net tangible book value per share after this
offering.................................................. 4.51
------
Dilution per share to new investors......................... $ 8.49
======
</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 $13.00 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...................... 7,200,000 62.9% $15,291,000 21.7% $ 2.12
New investors.............................. 4,250,000 37.1 55,250,000 78.3 $13.00
---------- ---- ----------- ----
Total............................ 11,450,000 100% 70,541,000 100%
========== ==== =========== ====
</TABLE>
The foregoing table assumes no exercise of outstanding options. As of
September 1, 1999, options to purchase 846,291 shares of Class A common stock
were outstanding at a weighted average exercise price of $2.08 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 $ 1,740
Contract service
revenue-affiliate........... -- -- -- 3,085 2,182 1,034 913
Software revenue............... -- -- -- -- 44 38 1,508
------- ------- ------- ------- ------- ------- -------
Total revenue............... 691 896 1,175 5,340 4,686 2,312 4,161
------- ------- ------- ------- ------- ------- -------
Operating Expenses:
Cost of providing services..... 325 442 570 2,874 4,479 2,297 2,472
Cost of providing software
revenue..................... -- -- -- -- 157 41 319
General and administrative..... 188 222 298 2,035 2,072 750 1,172
Research and development....... -- -- -- 566 2,216 654 1,289
Client acquisition............. 345 347 418 513 1,123 321 995
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) (7,605)
Other revenue (expense).......... -- -- -- 41 11 (41) 17
------- ------- ------- ------- ------- ------- -------
Net loss......................... $ (172) $ (123) $ (123) $ (740) $(5,657) $(1,933) $(7,588)
======= ======= ======= ======= ======= ======= =======
Basic and diluted net loss per
share.......................... $ (0.02) $ (0.02) $ (0.02) $ (0.10) $ (0.79) $ (0.27) $ (1.05)
Shares used in computing basic
and diluted net loss per
share.......................... 7,200 7,200 7,200 7,200 7,200 7,200 7,200
Pro forma basic and diluted net
loss per share................. $ (0.84) $ (0.66)
Shares used in computing pro
forma basic and diluted net
loss
per share...................... 11,450 11,450
</TABLE>
16
<PAGE> 21
<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 1,046
Property and equipment............. 232 250 256 686 694 1,994
Other assets....................... -- -- -- 51 24 159
Total assets....................... 451 550 559 1,732 1,822 3,348
Accounts payable and accrued
liabilities...................... 446 369 361 874 1,195 962
Deferred revenue................... -- -- -- -- 627 1,001
Payable to stockholder............. -- -- -- -- -- 79
Total liabilities.................. 446 369 361 874 1,822 2,042
Stockholder's equity............... 5 181 198 858 -- 1,306
</TABLE>
17
<PAGE> 22
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 provides outsourced financial and management reporting,
accounting management, transaction processing and record keeping services. We
allow our clients to focus on their core businesses 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
Incorporated, 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 entities affiliated
with Phoenix Leasing which had at that time total combined assets of more than
$200 million. We provided services to three clients affiliated with Phoenix
Leasing, which had total combined assets of more than $300 million at September
1, 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. All of our software clients have entered into annual software
maintenance and support contracts. The first of these contracts comes up for
renewal in the second quarter of 2000.
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.
As of September 1, 1999, all but one of our ReFOCOS clients, who
collectively generated approximately 37.6% of our revenues for the six months
ended June 30, 1999, could access our service using the Internet. The remainder
of our service clients, who collectively generated 26.2% of revenues for the six
months ended June 30, 1999, access our service using non-Internet
communications. During the same period, we derived approximately 36.2% of our
revenues from software, including license fees and related services. 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.
18
<PAGE> 23
We expect to record aggregate compensation expense of approximately $3.9
million in the fourth 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. clients and from one-time installation
fees. We recognize monthly fees as these services are performed and installation
fees once installation is complete.
Contract service revenue -- affiliate. We derive contract service
revenue -- affiliate 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."
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 our 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.
Components of costs and expenses. Cost of providing services includes
salaries and benefits for personnel in our S.T.A.R. and ReFOCOS operations
groups, fees paid to outside service providers other than implementation service
providers and other miscellaneous operating costs. Cost of providing software
revenue includes salaries and benefits for personnel in our M.A.R.S. technical
support and installation groups. Prior to the quarter ended June 30, 1998, these
costs were expensed as research and development. 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.
19
<PAGE> 24
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% 41.9%
Contract service revenue -- affiliate.......... -- 57.8 46.6 44.7 21.9
Software revenue............................... -- -- 0.9 1.7 36.2
----- ------ ------ ----- ------
Total revenue.......................... 100.0 100.0 100.0 100.0 100.0
----- ------ ------ ----- ------
Operating expenses:
Cost of providing services..................... 48.5 53.8 95.6 99.4 59.4
Cost of providing software revenue............. -- -- 3.4 1.8 7.7
General and administrative..................... 25.4 38.1 44.2 32.4 28.2
Research and development....................... -- 10.6 47.3 28.3 31.0
Client acquisition............................. 35.6 9.6 24.0 13.9 23.9
Stock-related compensation..................... -- -- -- -- 127.2
Depreciation and amortization.................. 1.0 2.5 6.6 6.1 5.5
----- ------ ------ ----- ------
Total operating expenses............... 110.5 114.6 221.1 181.9 282.9
----- ------ ------ ----- ------
Loss from operations............................. (10.5) (14.6) (121.1) (81.9) (182.9)
Other income (expense)........................... -- 0.8 0.3 (1.8) 0.4
----- ------ ------ ----- ------
Net loss......................................... (10.5)% (13.8)% (120.8)% (83.7)% (182.5)%
===== ====== ====== ===== ======
</TABLE>
Six Months Ended June 30, 1999 and 1998
Revenue. Total revenue increased 80.0% 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. Contract service revenue increased 40.3% to $1.7
million for the six months ended June 30, 1999 as compared to $1.2 million in
the corresponding period of 1998. The increase was due primarily to a higher
number of S.T.A.R. and ReFOCOS clients in 1999 versus 1998. S.T.A.R. revenue was
$0.9 million, or 52.9% of total contract service revenue, and $0.8 million, or
66.7% of total contract service revenue, for the six months ended June 30, 1999
and 1998, respectively. ReFOCOS revenue was $0.8 million, or 47.1% of total
contract service revenue, and $0.4 million or 33.4% of total contract service
revenue for the six months ended June 30, 1999 and 1998, respectively. 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.
Contract service revenue -- affiliate. Contract service revenue from
affiliates 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 three affiliated limited partnerships as these
partnerships reached the end of their stated terms.
Software revenue. 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. Prior to 1999, the M.A.R.S.
product was in Beta testing at client sites. Customer acceptance was contingent
upon installation of a final working copy of the software, which occurred during
the quarter ended June 30, 1999. As a result, software license revenue was
deferred until customer acceptance was received as required under SOP 97-2.
20
<PAGE> 25
Cost of providing service. Cost of providing service increased 7.6% to $2.5
million for the six months ended June 30, 1999 from $2.3 million for the six
months ended June 30, 1998. The increase is primarily due to additional salary
and benefit costs of $0.3 million associated with hiring additional operations
personnel required to provide services to new clients.
Cost of providing software revenue Cost of providing software revenue
increased 678.0% to $0.3 million for the six months ended June 30, 1999 from
$41,000 for the six months ended June 30, 1998. The increase is due to the
increase in M.A.R.S. contracts.
General and administrative expenses. General and administrative expenses
increased 56.3% to $1.2 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 of $0.4 million associated with hiring
additional management and administrative personnel to support our operations.
Research and development expenses. Research and development expenses
increased 97.1% to $1.3 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 of $0.5 million associated with hiring additional employees
and direct costs of $0.1 million to support M.A.R.S. development.
Client acquisition expense. Client acquisition expenses increased 210.0% 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 of $0.5 million related to adding sales, marketing and implementation
personnel and consulting fees of $0.2 million associated with the implementation
of our ReFOCOS product.
Stock-related compensation expense. Stock-related 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. Total revenue decreased 12.2% to $4.7 million in 1998 from $5.3
million in 1997, primarily due to a decrease in contract service revenue from
affiliates from $3.1 million in 1997 to $2.2 million in 1998.
Contract service revenue. 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. S.T.A.R. revenue was $1.7 million and $1.6 million for
the years ended 1998 and 1997, respectively, a 6.3% increase. ReFOCOS revenue
was $0.8 million and $0.7 million for the years ended 1998 and 1997,
respectively, a 14.3% increase. 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 five 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.
Contract service revenue -- affiliate. Contract service revenue from
affiliates decreased 29.3% from $3.1 million in 1997 to $2.2 million in 1998.
This decrease in contract service revenue from affiliates was due to the
disposal by an affiliate of certain of its business units for which we provided
contract services.
Software revenue. Software revenue increased from zero in 1997 to $44,000
in 1998. This increase consists of non-refundable installation fees for our
M.A.R.S. product.
Cost of providing services. Cost of providing services increased 55.8% to
$4.5 million in 1998 from $2.9 million in 1997. The increase was primarily due
to the increase in the number of clients serviced, which required us to add
personnel in our operations group and resulted in additional salaries and
benefits of $1.2 million for these personnel, as well as increased hiring and
consulting costs of $0.3 million.
Cost of providing software revenue. Cost of providing software revenue
increased $0.2 million in 1998 from zero in 1997. The increase was due to the
increase in M.A.R.S. contracts.
21
<PAGE> 26
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.
Research and development expenses. Research and development expenses
increased 291.5% to $2.2 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 118.9%
to $1.1 million in 1998 from $0.5 million in 1997. The increase was primarily
due to salaries, benefits and travel expenses of $0.5 million associated with
hiring additional sales and implementation personnel for the M.A.R.S and ReFOCOS
services as well as $65,000 of costs associated with hiring additional
implementation consultants to transition our existing ReFOCOS clients to our
Web-enabled ReFOCOS service.
Years Ended December 31, 1997 and 1996
Revenue. Total revenue increased 354.5% to $5.3 million in 1997 from $1.2
million in 1996.
Contract service revenue. 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. S.T.A.R. revenue was $1.6 million and $0.7 million for the years
ended 1997 and 1996, respectively, a 128.6% increase. ReFOCOS revenue was $0.7
million and $0.5 million for the years ended 1997 and 1996, respectively, a
40.0% increase. 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.
Contract service revenue -- affiliate. We recognized contract service
revenue from affiliates of $3.1 million in 1997, but did not recognize any
contract service revenue from affiliates 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.
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. 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.
22
<PAGE> 27
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
Contract service revenue -- affiliate......... 912 908 553 481 589 559
Software revenue.............................. -- -- -- 39 3 2
------ ------ ------- ------- ------- -------
Total revenue........................... 1,510 1,516 1,217 1,095 1,170 1,204
Operating expense:
Cost of providing services.................... 884 793 1,177 1,120 1,155 1,027
Cost of providing software revenue............ -- -- -- 41 57 59
General and administrative.................... 670 705 338 412 503 819
Research and development...................... 177 354 289 365 628 934
Client acquisition............................ 125 114 164 157 247 555
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...................... $ 808 $ 932
Contract service revenue -- affiliate......... 478 435
Software revenue.............................. 95 1,413
------- -------
Total revenue........................... 1,381 2,780
Operating expense:
Cost of providing services.................... 1,108 1,364
Cost of providing software revenue............ 129 190
General and administrative.................... 600 572
Research and development...................... 610 679
Client acquisition............................ 401 594
Depreciation and amortization................. 91 137
Stock-related compensation.................... 2,358 2,933
------- -------
Total operating expenses................ 5,297 6,469
------- -------
Loss from operations........................... (3,916) (3,689)
Other income (expense)......................... 9 8
------- -------
Net loss....................................... $(3,907) $(3,681)
======= =======
</TABLE>
<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%
Contract service revenue -- affiliate......... 60.4 59.9 45.4 43.9 50.3
Software revenue.............................. -- -- -- 3.6 0.3
------ ------ ------- ------- -------
Total revenue........................... 100.0 100.0 100.0 100.0 100.0
Operating expense:
Cost of providing services.................... 58.5 52.3 96.7 102.3 98.7
Cost of providing software revenue............ 3.7 4.9
General and administrative.................... 44.4 46.5 27.8 37.6 43.0
Research and development...................... 11.7 23.4 23.7 33.3 53.7
Client acquisition............................ 8.3 7.5 13.5 14.3 21.1
Depreciation and amortization................. 2.3 2.8 5.6 6.7 6.8
Stock-related compensation.................... -- -- -- -- --
------ ------ ------- ------- -------
Total operating expenses................ 125.2 132.5 167.3 197.9 228.2
------ ------ ------- ------- -------
Loss from operations........................... (25.2) (32.5) (67.3) (97.9) (128.2)
------ ------ ------- ------- -------
Other income (expense)......................... 1.1 0.8 (1.6) (2.0) 4.2
Net loss....................................... (24.1)% (31.7)% (68.9)% (99.9)% (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% 58.5% 33.5%
Contract service revenue -- affiliate......... 46.4 34.6 15.7
Software revenue.............................. 0.2 6.9 50.8
------- ------- -------
Total revenue........................... 100.0 100.0 100.0
Operating expense:
Cost of providing services.................... 85.3 80.2 49.1
Cost of providing software revenue............ 4.9 9.3 6.8
General and administrative.................... 68.0 43.4 20.6
Research and development...................... 77.6 44.2 24.4
Client acquisition............................ 46.1 29.0 21.5
Depreciation and amortization................. 7.1 6.6 4.9
Stock-related compensation.................... -- 170.7 105.5
------- ------- -------
Total operating expenses................ 289.0 383.6 232.7
------- ------- -------
Loss from operations........................... (189.0) (283.6) (132.7)
------- ------- -------
Other income (expense)......................... 0.2 0.7 0.3
Net loss....................................... (188.8)% (282.9)% (132.4)%
======= ======= =======
</TABLE>
Revenue. Our total revenues have fluctuated over the last eight quarters
primarily as a result of decreases in contract service revenue from affiliates,
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
23
<PAGE> 28
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 revenue. Contract service revenue 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.
Contract service revenue -- affiliate. Contract service revenue from
affiliates has fluctuated as a result of the disposition of affiliated entities.
Software revenue. 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.
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 increase in software revenue recognized related to M.A.R.S. that had
previously been deferred. Prior to 1999, the M.A.R.S. product was in Beta
testing at client sites. Customer acceptance was contingent upon installation of
a final working copy of the software, which occurred during the quarter ended
June 30, 1999. As a result, all software revenue was deferred until customer
acceptance was received as required under SOP 97-2 except an insignificant
amount of non-refundable installation fees. Costs incurred related to the
development of our M.A.R.S. software product were expensed as research and
development when incurred because the product had not reached technological
feasibility until the quarter ended June 30, 1999.
Cost of providing software revenue. Cost of providing software revenue has
increased over the five quarters ended June 30, 1999. This increase has been due
to the increase in the number of M.A.R.S. contracts.
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 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
24
<PAGE> 29
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 and loans from our sole stockholder, the Gus and Mary Jane
Constantin 1978 Living Trust.
At June 30, 1999, we had approximately $0.1 million of cash and cash
equivalents. Net cash used in operating activities in 1998, 1997 and 1996 was
$4.1 million, $0.7 million, and $0.1 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 distinguish 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.
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
25
<PAGE> 30
- 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, which was completed in the summer of
1998;
- inventory of all aspects of our operations and relationships subject to
the year 2000 problem, which was completed in the summer of 1998 for
existing systems and is ongoing for new components as these new
components are added to our system;
- communication as necessary with significant suppliers to determine the
readiness of their products and systems, which was completed in August
1999 for critical suppliers and is ongoing for non-critical suppliers;
- comprehensive analysis, including impact analysis and cost analysis, of
our year 2000 readiness, which was completed in April 1999 for critical
components of our system and is ongoing for non-critical components of
our system; and
- testing and remediation, which was completed for our S.T.A.R. service in
June 1999, completed for our M.A.R.S. software product and service in
August 1999 and is expected to be completed for our ReFOCOS service in
September 1999.
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.
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 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
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<PAGE> 31
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 have contingency plans for handling year 2000 problems that are not detected
and are correcting any identified problems prior to their occurrence. If
previously undetected year 2000 issues occur, we plan to consult with Oracle and
our other vendors to determine if the problem relates to products supplied by
these vendors and is wide-spread among users of these products. If the problems
are widespread, we will apply resolutions provided by these vendors. If the
problem is not widespread, we will investigate whether all of the latest year
2000 patches and configuration recommendations from the vendors have been
applied, and apply as necessary. If the problem persists we will investigate the
particular problem. If the problem seems to be hardware, operating system or
network related, we will apply the appropriate vendor fix or transfer operations
to our business resumption site at SunGard, whichever is a lower risk.
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.
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<PAGE> 32
BUSINESS
OVERVIEW
ReSourcePhoenix.com provides outsourced financial and management reporting,
accounting management, transaction processing and record keeping services. We
allow our clients to focus on their core businesses 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> 33
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 businesses;
- 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 businesses.
- 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; and
-- 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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<PAGE> 34
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 of attracting new
clients. We plan to increase brand awareness by launching a comprehensive
advertising campaign, which includes Internet, radio and print
advertisements. This campaign began 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> 35
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. All but one of our ReFOCOS
clients access the ReFOCOS service 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
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the S.T.A.R. application. This typically requires minimal customization but
substantial data conversion. 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 its 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 and 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.
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- 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 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 Web
sites 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.
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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 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 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 each 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 recently launched a
comprehensive advertising campaign, which began in September 1999.
ReFOCOS
Our primary focus is to target early stage and middle market companies,
which we believe 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.
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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 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 September 1, 1999, we had 39 clients, including 36 unaffiliated
clients and 3 clients that are affiliated with Phoenix Leasing. Of these
clients, 16 were ReFOCOS clients, 10 were M.A.R.S. clients and 17 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 Advisors CIGNA Financial Partners
- -----------------------------------------------------------------------------------------------
Blackstone Cable Deutsche Fund Management W.P. Carey
- -----------------------------------------------------------------------------------------------
</TABLE>
We believe that our high quality service is the reason why we have never
lost a client because of service or pricing 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
Technology Group, 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 its applications and use the software for the benefit of our customers.
The contract requires that we pay a one-time software
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license fee and annual maintenance fees, and pay additional amounts
incrementally as we add users. The contract continues for a perpetual term.
Necho Systems Corp. We have an agreement with Necho that permits us to
license its Web-based travel and expense reporting application, NavigatER, and
use the software for the benefit of our customers. This agreement requires that
we pay an initial software license fee, and pay additional amounts incrementally
as we add users. This agreement is for a perpetual 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; and
- 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 Technology Group, Inc. Core Technology Group provides to us various
Oracle technology consulting services. We have entered into a relationship
whereby we have agreed to use Core Technology Group 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 it refers 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 its lenders and
business developers to educate them about our service offerings. We have agreed
to pay Imperial fees for clients it refers 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, experience, price, software functionality,
ability to attract professional staff and overall network design. With respect
to service, we believe that we have a competitive advantage because we combine
both information technology outsourcing and finance, accounting and transaction
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<PAGE> 41
processing outsourcing. With respect to experience, we believe that we have a
competitive advantage because we have provided outsourced financial and
management reporting solutions since 1972. With respect to price, we believe
that we have a competitive advantage because we have negotiated relatively
favorable terms with Oracle, Necho and other vendors that supply components to
our system. With respect to our ability to attract professional staff, we
believe that we have a competitive advantage because of the career paths that we
are able to offer to our professional staff. See "-- Our People." 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. Although we believe that we have several
competitive advantages with respect to our potential competitors, we cannot
assure you that we will be able to compete successfully in our selected markets.
See "Risk Factors -- The markets we serve are highly competitive and many of our
competitors have much greater resources" and "Risk Factors -- Our growth will be
limited if we are unable to attract and retain qualified personnel."
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 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.
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<PAGE> 42
EMPLOYEES
As of September 1, 1999, we had 166 full-time employees, including 14 in
sales and marketing, six in management, 128 in operations and 18 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. 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 threatened against us.
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<PAGE> 43
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our executive officers and directors and their ages as of September 1, 1999
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 Brunton............................ 49 Chief Financial Officer
Michael D'Almada-Remedios................ 36 Chief Technology Officer
W. Corey West............................ 37 Group Vice President Sales & Marketing
James Barrington(1)(2)................... 58 Director
Glen 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 Incorporated, 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 Incorporated,
Phoenix Precision Graphics, Inc. and Phoenix American Incorporated. Each of
these entities is located in San Rafael, California. Mr. Constantin devotes
approximately 30% of his professional time to us, 30% to Phoenix Leasing, 5% to
Phoenix Cable, 20% to Phoenix Precision Graphics and 5% to Phoenix American.
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 M.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. For more than the
last five years, Mr. Tong has served as Senior Vice President, Financial
Operations for Phoenix American Incorporated and each of its active
subsidiaries. Mr. Tong devotes substantially all of his professional time to us.
At various times throughout his tenure with Phoenix Leasing Incorporated, 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 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 Incorporated and Phoenix American
Incorporated Mr. Brunton is currently an Assistant Vice President and Corporate
Controller of Phoenix Securities Inc., a registered broker/dealer. Mr. Brunton
devotes substantially all of his professional time to us. Mr. Brunton received
his B.A. in social welfare from the University of California at Chico and is a
Certified Public Accountant.
MICHAEL 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
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<PAGE> 44
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.
W. COREY WEST has served as Group Vice President Sales and Marketing since
October 1998. From July 1986 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.
JAMES BARRINGTON has been a director since September 1999. Mr. Barrington
is currently a private business consultant. From 1965 to 1999, Mr. Barrington
was with Arthur Andersen LLP, serving primarily as an audit and business
advisory partner. Mr. Barrington received his B.S. in accounting from San Jose
State University and his M.B.A. from the University of California at Berkeley.
GLEN 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 privately-held companies. Mr.
McLaughlin received his B.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 Incorporated and each of its active subsidiaries. Mr.
Constantin is the Chairman, Chief Executive Officer and controlling shareholder
of Phoenix American and each of its subsidiaries.
We provide services to Phoenix Leasing Incorporated, Phoenix Cable
Incorporated and Phoenix Precision Graphics, Inc., and we lease real estate from
Phoenix American Incorporated. 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.
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<PAGE> 45
DIRECTOR COMPENSATION
Directors are elected each year for one-year terms and 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 540 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.
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
1,260,000 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 September 1, 1999,
options to purchase an aggregate of 846,291 shares of Class A common stock had
been granted, at a weighted average exercise price of $2.08 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
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<PAGE> 46
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 to an entity not controlled by us, 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.
STOCK OPTION GRANTS TO EMPLOYEES
On August 4, 1999, we granted options to purchase an aggregate of 846,291
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............................................. 402,314
David Brunton........................................... 42,480
Michael D'Almada-Remedios............................... 25,200
W. Corey West........................................... 53,856
</TABLE>
These options have an exercise price of $2.08 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 360,000 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 total 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.
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<PAGE> 47
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
15% 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 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. The term of the employment agreement is
until December 31, 2001 and is renewable for one-year periods thereafter. Under
the agreement, we are obligated to pay Mr. Tong an annual salary of $180,000,
current benefits, a car allowance and a bonus based on certain revenue, expense
and net income criteria. Effective upon our initial public offering, Mr. Tong's
salary will increase to $275,000. 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> 48
RELATIONSHIP WITH PHOENIX COMPANIES AND CERTAIN TRANSACTIONS
RELATIONSHIP WITH GUS CONSTANTIN
Upon completion of the offering, Gus Constantin will own approximately
62.9% of the common stock outstanding, or 58.0% if the underwriters'
over-allotment option is exercised in full. As the sole holder of our Class B
common stock, he controls 89.4% (87.2% 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.
On September 12, 1999, we paid a dividend of $1,000,000 to our sole
stockholder, the Gus and Mary Jane Constantin 1978 Living Trust. This dividend
was paid in the form of a promissory note, which accrues interest at 9% per
year. This note is secured by a security interest on our assets. We expect to
repay this note fully from the net proceeds of the offering, at which time the
security interest will be released.
From time to time, our sole stockholder, the Gus and Mary Jane Constantin
1978 Living Trust, has loaned money to our operating subsidiary,
ReSource/Phoenix, Inc., to fund its operations. As of September 14, 1999, we
owed an aggregate of $2.25 million to the living trust. These loans are
evidenced by promissory notes, which accrue interest at 9% per year. These loans
are secured by a security interest on the assets of ReSource/Phoenix, Inc. We
expect to repay these loans fully from the net proceeds of the offering, at
which time the security interest will be released.
Effective as of the date of our initial public offering, we have agreed to
pay Gus Constantin an annual salary of $275,000.
RELATIONSHIP WITH PHOENIX COMPANIES
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 include all
material information contained in the agreements, but are qualified by those
agreements, which are filed as exhibits to the registration statement of which
this prospectus is a part.
Administrative Services Agreements
We have entered into Administrative Services Agreements with each of
Phoenix Leasing Incorporated, Phoenix Cable Incorporated 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 Incorporated, $0.6 million by Phoenix
Cable Incorporated and $0.3 million by Phoenix Precision Graphics, Inc. under
prior agreements. Under the new agreements, Phoenix Leasing will pay us $243,000
per month, Phoenix Cable will pay us $42,000 per month and Phoenix Precision
Graphics will pay us $32,000 per month. We believe that the terms of these
agreements
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<PAGE> 49
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
Incorporated. 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 an unaffiliated
third party. Mr. Constantin is the Chairman, Chief Executive Officer and
controlling shareholder of Phoenix American.
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> 50
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of common stock as of September 1, 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).................... 540 * * 7,200,000 100.0% 89.4%
Bryant Tong(3)....................... 402,854 5.3% * -- 1.1 1.0
David Brunton(3)..................... 42,480 * * -- * *
James Barrington..................... 540 * * -- * *
Glenn McLaughlin..................... 540 * * -- * *
Roger Smith.......................... 540 * * -- * *
All directors and executive officers
as a group (8 persons)(4).......... 526,550 100.0% 11.0% 7,200,000 100.0% 89.6%
</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 September 1, 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. If the
over-allotment option is exercised, Mr. Tong will sell the first 80,500
shares to be sold pursuant to such option and Mr. Constantin will sell the
remainder of the shares to be sold pursuant to such option.
(2) All of these shares are held by the Gus and Mary Constantin 1978 Living
Trust, of which Mr. Constantin and his wife are trustees. The living trust
can be amended or revoked at any time at the option of Mr. Constantin and
his wife. Mr. Constantin and his wife, as trustees of the living trust, are
authorized to exercise all rights with respect to the Class B common stock
held by the trust, including the right to vote and dispose of such shares.
The address of each of Mr. Constantin and his wife is: c/o
ReSourcePhoenix.com, 2401 Kerner Boulevard, San Rafael, CA 94901-55529.
(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 526,550 shares of Class A Common Stock subject to options that will
fully vest upon the effectiveness of our initial public offering.
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<PAGE> 51
DESCRIPTION OF CAPITAL STOCK
Pursuant to our certificate of incorporation, we have authority to issue an
aggregate of 40,000,000 shares of capital stock, consisting of 27,800,000 shares
of Class A common stock, par value $0.001 per share, 7,200,000 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. The following
description and all information in this prospectus gives effect to a 1-to-0.72
reverse split of our common stock effected on September 14, 1999.
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.
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<PAGE> 52
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 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 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> 53
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. 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, would be unnecessary.
Annual meetings of stockholders will 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 will be fixed by resolution of the board. The size
of the board is currently fixed at five members. The directors will be elected
for annual terms 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 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 for specified 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 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 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 is
ChaseMellon Shareholder Services LLC.
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<PAGE> 54
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have 4,250,000 shares of Class A
common stock and 7,200,000 shares of Class B common stock outstanding assuming
no exercise of the underwriters' over-allotment option. Of this amount, the
4,250,000 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 846,291 shares of Class A common stock that are
currently subject to outstanding options and 7,200,000 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 4,250,000 Freely tradable shares sold in offering
181 days 8,046,291 Lock-up released, resales 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 114,500 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.
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<PAGE> 55
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.............................................
=========
INTERNATIONAL UNDERWRITER
BancBoston Robertson Stephens International Limited.........
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. Some of our security holders have granted to the
underwriters an option, exercisable during the 30-day period after the date of
this prospectus, to purchase up to 637,500 additional shares of Class A common
stock at the same price per share as we will receive for the 4,250,000 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 4,250,000 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 4,250,000 shares are
being sold. These security holders 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. We will not
receive any of the proceeds from the sale of these shares.
51
<PAGE> 56
The following table summarizes the compensation to be paid to the
underwriters by us and the selling security holders:
<TABLE>
<CAPTION>
TOTAL
----------------------
WITHOUT WITH
PER OVER- OVER-
SHARE ALLOTMENT ALLOTMENT
------ --------- ---------
<S> <C> <C> <C>
Underwriting discounts and commissions payable by
us................................................ $ $ $
Underwriting discounts and commissions payable by
selling security holders..........................
</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 $1,060,000.
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. 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 the date of 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 the date of 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 Sale."
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 will be determined through negotiations
between us and the representatives. Among the factors to be considered in such
negotiations will be prevailing market conditions, certain of our financial
information, market valuations of other companies that we and the
representatives believe 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, persons participating in this offering
may engage in transactions, include stabilizing bids,
52
<PAGE> 57
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 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 212,500 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 63 filed public offerings of equity securities, of which 33 have
been completed, and has acted as a syndicate member in an additional 32 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.
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<PAGE> 58
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.
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<PAGE> 59
RESOURCEPHOENIX.COM 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> 60
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder of
ReSourcePhoenix.com:
We have audited the accompanying consolidated balance sheets of
ReSourcePhoenix.com (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 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> 61
RESOURCEPHOENIX.COM 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................................................... 544 419 957
Receivable from affiliates................................ 345 182 89
Prepaid expenses and other current assets................. 51 20 159
------ ------ --------
Total current assets.............................. 1,046 1,124 1,333
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 $ 3,348
====== ====== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable and accrued liabilities.................. $ 874 $1,195 $ 962
Deferred revenue.......................................... -- 627 1,001
Payable to shareholder.................................... -- -- 79
------ ------ --------
Total current liabilities......................... 874 1,822 2,042
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; 27,800,000 shares
authorized, none issued and outstanding................ -- -- --
Class B common stock, $.001 par value; 7,200,000 shares
authorized, issued and outstanding at December 31, 1997
and 1998; 7,200,000 authorized, issued and outstanding
at June 30, 1999....................................... 1,598 6,397 15,291
Accumulated deficit....................................... (740) (6,397) (13,985)
------ ------ --------
Total stockholder's equity........................ 858 -- 1,306
------ ------ --------
Total liabilities and stockholder's equity........ $1,732 $1,822 $ 3,348
====== ====== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 62
RESOURCEPHOENIX.COM 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 $ 1,740
Contract service revenue-affiliate.......... -- 3,085 2,182 1,034 913
Software revenue............................ -- -- 44 38 1,508
---------- ---------- ---------- ---------- ----------
Total revenue........................ 1,175 5,340 4,686 2,312 4,161
Operating expenses:
Cost of providing services.................. 570 2,874 4,479 2,297 2,472
Cost of providing software revenue.......... -- -- 157 41 319
General and administrative.................. 298 2,035 2,072 750 1,172
Research and development.................... -- 566 2,216 654 1,289
Client acquisition.......................... 418 513 1,123 321 995
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) (7,605)
Other income (expense)........................ -- 41 11 (41) 17
---------- ---------- ---------- ---------- ----------
Net loss...................................... $ (123) $ (740) $ (5,657) $ (1,933) $ (7,588)
========== ========== ========== ========== ==========
Basic and diluted net loss per share.......... $ (0.02) $ (0.10) $ (0.79) $ (0.27) $ (1.05)
Shares used in computing basic and diluted net
loss per share.............................. 7,200,000 7,200,000 7,200,000 7,200,000 7,200,000
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
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RESOURCEPHOENIX.COM 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.................................. -- -- (7,588) (7,588)
Capital contribution from stockholder..... 3,603 -- -- 3,603
Cancellation of stock..................... (1,000) -- -- -- --
Issuance of Stock......................... 7,200,000 -- -- -- --
Compensation payable in stock............. 5,291 -- -- 5,291
---------- ------- ----- -------- -------
BALANCE AT JUNE 30, 1999 (UNAUDITED)...... 7,200,000 $15,291 $ -- $(13,985) $ 1,306
========== ======= ===== ======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 64
RESOURCEPHOENIX.COM 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) $(7,588)
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 (538)
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 2,129
Proceeds from Note payable to Shareholder................ -- -- -- -- 79
----- ------ ------- ------- -------
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> 65
RESOURCEPHOENIX.COM AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION:
The consolidated financial statements of ReSourcePhoenix.com and Subsidiary
("the Company") include the accounts of ReSourcePhoenix.com ("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> 66
RESOURCEPHOENIX.COM 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
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RESOURCEPHOENIX.COM 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> 68
RESOURCEPHOENIX.COM 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 $2,278
Software................................... 292 321 384
----- ------ ------
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
$389,000 less accumulated depreciation of $66,000 from PLI on January 1, 1997 at
historical cost. Also, effective June 1, 1999, property and equipment in the
amount of $1,592,000, less accumulated depreciation of $118,000 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 40,000,000 shares of capital
stock, consisting of 27,800,000 shares of Class A common stock, par value $0.001
per share, 7,200,000 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.
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RESOURCEPHOENIX.COM 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 $2.08 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
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RESOURCEPHOENIX.COM 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 1,260,000 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 846,291 shares of Class A common stock at a
weighted average exercise price of $2.08 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.
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
360,000 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 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
total 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
F-12
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RESOURCEPHOENIX.COM AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 7,200,000 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 7,200,000 shares
of Class B common stock of the Holding Company (as adjusted to give effect to
the Company's 1 to 0.72 reverse stock split on September 14, 1999).
<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) $(7,588,000)
Basic and diluted net loss per
common share.................. $ (0.02) $ (0.10) $ (0.79) $ (0.27) $ (1.05)
Weighted average number of
common shares used for basic
and diluted per share
amounts....................... 7,200,000 7,200,000 7,200,000 7,200,000 7,200,000
</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.
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 communica-
F-13
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RESOURCEPHOENIX.COM AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
tions. 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>
1999............................................ $ 268,250
2000............................................ 644,000
2001............................................ 376,000
----------
$1,288,250
</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.
NOTE 11. SUBSEQUENT EVENT (UNAUDITED):
On August 26, 1999, the Company issued two secured notes payable to its
shareholder for $1,245,000 and $1,005,000 (includes $79,000 payable to
shareholder at June 30, 1999). On September 12, 1999, the Company declared a
dividend of $1,000,000, which was paid in the form of a secured note payable to
its sole stockholder. All three notes bear interest at a rate of 9% per annum.
The proceeds are to be used to fund the operations of the Company.
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<PAGE> 73
RESOURCEPHOENIX.COM AND SUBSIDIARY
PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1999
The following consolidated financial statements present the
ReSourcePhoenix.com 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, 1999. 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> 74
RESOURCEPHOENIX.COM 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 $50,323 $ 50,451
Accounts receivable................................... 957 -- 957
Receivable from affiliates............................ 89 -- 89
Prepaid expenses and other current assets............. 159 -- 159
-------- ------- --------
Total current assets.......................... 1,333 -- 51,656
Property and equipment, net........................... 1,994 -- 1,994
Note from employee.................................... 21 21
-------- ------- --------
Total assets.................................. $ 3,348 $50,323 $ 53,671
======== ======= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable and accrued liabilities.............. $ 962 $ -- $ 962
Deferred revenue...................................... 1,001 -- 1,001
Payable to shareholder................................ 79 -- 79
-------- ------- --------
Total current liabilities..................... 2,042 -- 2,042
======== ======= ========
Commitments and contingencies
Stockholder's Equity:
Class A common stock.................................. -- 50,323 50,323
Class B common stock.................................. 15,291 3,948 19,239
-------- --------
Accumulated deficit................................... (13,985) (3,948) (17,933)
-------- ------- --------
Total stockholder's equity.................... 1,306 50,323 51,629
-------- ------- --------
Total liabilities and stockholder's equity.... $ 3,348 $50,323 $ 53,671
======== ======= ========
</TABLE>
F-16
<PAGE> 75
RESOURCEPHOENIX.COM AND SUBSIDIARY
PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR
YEAR ENDED
ENDED PRO FORMA 12/31/98
12/31/98 ADJUSTMENTS --------
-------- ----------- AS
ACTUAL (UNAUDITED) ADJUSTED
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Contract service revenue.................................. $ 2,460 -- $ 2,460
Contract service revenue -- affiliate..................... 2,182 -- 2,182
Software revenue.......................................... 44 -- 44
------- ------- -------
Total revenue............................................... 4,686 -- 4,686
Operating expenses:
Cost of providing services................................ 4,479 -- 4,479
Cost of providing software revenue........................ 157 -- 157
General and administrative................................ 2,072 -- 2,072
Research development...................................... 2,216 -- 2,216
Client acquisition........................................ 1,123 -- 1,123
Depreciation and amortization............................. 307 -- 307
Stock-related compensation................................ -- 3,948 3,948
------- ------- -------
Total operating expenses.................................... 10,354 3,948 14,302
------- ------- -------
Loss from operations........................................ (5,668) (3,948) (9,616)
Other income................................................ 11 -- 11
------- ------- -------
Net loss.................................................... $(5,657) (3,948) $(9,605)
======= ======= =======
Pro forma basic and diluted net loss per share.............. $ (0.84)
=======
Share used in computing pro forma basic and diluted net loss
per share................................................. 11,450
</TABLE>
F-17
<PAGE> 76
RESOURCEPHOENIX.COM AND SUBSIDIARY
PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
SIX MONTHS ENDED
ENDED 6/30/99
6/30/99 PRO FORMA AS
ACTUAL ADJUSTMENTS ADJUSTED
---------- ----------- ----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenue:
Contract service revenue............................... $ 1,740 -- $ 1,740
Contract service revenue -- affiliate.................. 913 -- 913
Software revenue....................................... 1,508 -- 1,508
------- -------- --------
Total revenue............................................ 4,161 -- 4,161
Operating expenses:
Cost of providing services............................. 2,472 -- 2,472
Cost of providing software revenue..................... 319 -- 319
General and administrative............................. 1,172 -- 1,172
Research and development............................... 1,289 -- 1,289
Client acquisition..................................... 995 -- 995
Depreciation and amortization.......................... 228 -- 228
Stock-related compensation............................. 5,291 -- 5,291
------- -------- --------
Total operating expenses................................. 11,766 -- 11,766
Loss from operations..................................... (7,605) -- (7,605)
------- -------- --------
Other income............................................. 17 -- 17
------- -------- --------
Net loss................................................. $(7,588) -- $ (7,588)
======= ======== ========
Pro forma basic and diluted net loss per share........... $ (0.66)
Shares used in computing pro forma basic and diluted net
loss per share......................................... 11,450
</TABLE>
F-18
<PAGE> 77
RESOURCEPHOENIX.COM 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, 1999.
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 4,250,000 shares of
Class A common stock upon the Company's proposed initial public offering and the
payment of $1,060,000 of estimated 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 $3,948,000. 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 $13.00 per share.
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.
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 4,250,000 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 not adjusted to include the issuance of stock options to purchase
846,291 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, as they are antidilutive.
F-19
<PAGE> 78
Description of Artwork
Back Cover
ReSourcePhoenix.com logo
<PAGE> 79
[RESOURCEPHOENIX.COM LOGO]
<PAGE> 80
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........................................ $ 19,023
NASD filing fee............................................. 7,342
Nasdaq National Market listing fee.......................... 95,000
Printing and engraving expenses............................. 250,000
Legal fees and expenses..................................... 350,000
Accounting fees and expenses................................ 325,000
Blue Sky qualification fees and expenses.................... 5,000
Transfer agent and registrar fees........................... 5,000
Miscellaneous fees.......................................... 3,635
----------
Total....................................................... $1,060,000
==========
</TABLE>
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 7,200,000 shares of Class B Common Stock to
Gus Constantin in exchange for the outstanding capital stock of
ReSource/Phoenix, 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 846,291
shares of Class A common stock at an exercise price of $2.08 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> 81
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 Amended and Restated 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 Restated 1999 Stock Plan.
10.5 Restated 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# Software License, Support and Professional Services
Agreement, dated June 29, 1999 between Necho Systems Corp.
and Registrant.
10.14** Lease, dated August 1, 1999, between Phoenix American
Incorporated and Registrant.
10.15 Sublease dated August 31, 1999 between ReSource/Phoenix,
Inc. and PeopleSoft USA Inc.
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** Powers of Attorney for Messrs. Constantin, Tong, Brunton and
Smith.
24.2 Power of Attorney for Mr. Barrington
24.3 Power of Attorney for Mr. McLaughlin
27.1** Financial Data Schedule.
</TABLE>
- ---------------
** Previously filed.
# Confidential treatment requested for portions of this exhibit.
II-2
<PAGE> 82
(b) Financial Statement Schedules
None.
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> 83
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has had duly caused this Amendment No. 1 to the Registration Statement on Form
S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in
San Rafael, California on this 14th day of September, 1999.
RESOURCEPHOENIX.COM
By: /s/ BRYANT TONG
------------------------------------
Bryant Tong
President and Chief Operating
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has had been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
* Chairman of the Board and September 14, 1999
- ----------------------------------------------------- Chief Executive Officer
Gus Constantin (Principal Executive
Officer)
/s/ BRYANT TONG President, Chief Operating September 14, 1999
- ----------------------------------------------------- Officer and Director
Bryant Tong
/s/ DAVID BRUNTON Chief Financial Officer September 14, 1999
- ----------------------------------------------------- (Principal Financial and
David Brunton Accounting Officer)
* Director September 14, 1999
- -----------------------------------------------------
James Barrington
* Director September 14, 1999
- -----------------------------------------------------
Glen McLaughlin
* Director September 14, 1999
- -----------------------------------------------------
Roger Smith
*By: /s/ BRYANT TONG
------------------------------------------------
Bryant Tong
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 84
EXHIBIT INDEX
<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 Amended and Restated 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 Restated 1999 Stock Plan.
10.5 Restated 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# Software License, Support and Professional Services
Agreement between Necho Systems Corp. and Registrant.
10.14** Lease, dated August 1, 1999, between Phoenix American
Incorporated and Registrant.
10.15 Sublease dated August 31, 1999 between ReSource/Phoenix,
Inc. and PeopleSoft USA Inc.
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** Powers of Attorney for Messrs. Constantin, Tong, Brunton and
Smith.
24.2 Power of Attorney for Mr. Barrington
24.3 Power of Attorney for Mr. McLaughlin
27.1** Financial Data Schedule.
</TABLE>
- ---------------
** Previously filed.
# Confidential treatment requested for portions of this exhibit.
<PAGE> 1
Exhibit 1.1
UNDERWRITING AGREEMENT
October ___, 1999
BancBoston Robertson Stephens Inc.
Thomas Weisel Partners LLC
As Representatives of the several Underwriters
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, CA 94104
Ladies and Gentlemen:
INTRODUCTORY. ReSourcePhoenix.com, a Delaware corporation
(the "Company"), proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of [___] shares (the "Firm Shares")
of its Common Stock, par value $[___] per share (the "Common Shares"). In
addition, the Company and the stockholders of the Company named in Schedule B
(the "Selling Stockholders") have severally granted to the Underwriters an
option to purchase up to an additional [___] Common Shares (the "Option Shares")
as provided in Section 2. The Firm Shares and, if and to the extent such option
is exercised, the Option Shares are collectively called the "Shares". BancBoston
Robertson Stephens Inc. and Thomas Weisel Partners LLC have agreed to act as
representatives of the several Underwriters (in such capacity, the
"Representatives") in connection with the offering and sale of the Shares.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-1
(File No. 333-84589), which contains a form of prospectus to be used in
connection with the public offering and sale of the Shares. Such registration
statement, as amended, including the financial statements, exhibits and
schedules thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933 and the rules and regulations
promulgated thereunder (collectively, the "Securities Act"), including any
information deemed to be a part thereof at the time of effectiveness pursuant to
Rule 430A or Rule 434 under the Securities Act, is called the "Registration
Statement". Any registration statement filed by the Company pursuant to Rule
462(b) under the Securities Act is called the "Rule 462(b) Registration
Statement", and from and after the date and time of filing of the Rule 462(b)
Registration Statement the term "Registration Statement" shall include the Rule
462(b) Registration Statement. Such prospectus, in the form first used by the
Underwriters to confirm sales of the Shares, is called the "Prospectus";
provided, however, if the Company has, with the consent of BancBoston Robertson
Stephens Inc., elected to rely upon Rule 434 under the Securities Act, the term
"Prospectus" shall mean the Company's prospectus subject to completion (each, a
"preliminary prospectus") dated [___] (such preliminary prospectus is called the
"Rule 434 preliminary prospectus"), together with the applicable term sheet (the
"Term Sheet") prepared and filed by the Company with the Commission under Rules
434 and 424(b) under the Securities Act and all references in this Agreement to
the date of the Prospectus shall mean the date of the Term Sheet. All
<PAGE> 2
references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a preliminary prospectus, the Prospectus or the Term
Sheet, or any amendments or supplements to any of the foregoing, shall include
any copy thereof filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR").
The Company hereby confirms its agreements with the Underwriters
as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
A. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND GUS CONSTANTIN
(THE "PRINCIPAL STOCKHOLDER"). THE COMPANY AND THE PRINCIPAL STOCKHOLDER HEREBY
REPRESENTS, WARRANTS AND COVENANTS TO EACH UNDERWRITER AS FOLLOWS:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has complied
to the Commission's satisfaction with all requests of the Commission for
additional or supplemental information. No stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed
complied in all material respects with the Securities Act and, if filed by
electronic transmission pursuant to EDGAR (except as may be permitted by
Regulation S-T under the Securities Act), was identical to the copy thereof
delivered to the Underwriters for use in connection with the offer and sale of
the Shares. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times, complied and will comply in all material
respects with the Securities Act and did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Prospectus, as amended or supplemented, as of its date and at all subsequent
times, did not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
The representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements thereto,
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by the Representatives expressly
for use therein. There are no contracts or other documents required to be
described in the Prospectus or to be filed as exhibits to the Registration
Statement which have not been described or filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to each of the Representatives one complete conformed copy of the
Registration Statement and of each consent and certificate of experts filed as a
part thereof, and conformed copies of the Registration Statement (without
exhibits) and preliminary prospectuses and the Prospectus, as amended or
supplemented, in such quantities and at such places as the Representatives have
reasonably requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company. The Company
has not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a preliminary prospectus, the
Prospectus or the Registration Statement.
2.
<PAGE> 3
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement of,
the Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(e) Authorization of the Shares To Be Sold by the Company. The
Shares to be purchased by the Underwriters from the Company have been duly
authorized for issuance and sale pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement, will be validly issued,
fully paid and nonassessable.
(f) Authorization of the Shares To Be Sold by the Selling
Stockholders. The Common Shares to be purchased by the Underwriters from the
Selling Stockholders, when issued, were validly issued, fully paid and
nonassessable.
(g) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(h) No Material Adverse Change. Subsequent to the respective dates
as of which information is given in the Prospectus: (i) there has been no
material adverse change, or any development that could reasonably be expected to
result in a material adverse change, in the condition, financial or otherwise,
or in the earnings, business, operations or prospects, whether or not arising
from transactions in the ordinary course of business, of the Company and its
subsidiary, considered as one entity (any such change or effect, where the
context so requires, is called a "Material Adverse Change" or a "Material
Adverse Effect"); (ii) the Company and its subsidiary, considered as one entity,
have not incurred any material liability or obligation, indirect, direct or
contingent, not in the ordinary course of business nor entered into any material
transaction or agreement not in the ordinary course of business; and (iii) there
has been no dividend or distribution of any kind declared, paid or made by the
Company or, except for dividends paid to the Company or other subsidiary, its
subsidiary on any class of capital stock or repurchase or redemption by the
Company or its subsidiary of any class of capital stock.
(i) Independent Accountants. Arthur Anderson LLP, who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) filed with the Commission as
a part of the Registration Statement and included in the Prospectus, are
independent public or certified public accountants as required by the Securities
Act.
(j) Preparation of the Financial Statements. The financial
statements filed with the Commission as a part of the Registration Statement and
included in the Prospectus present fairly the consolidated financial position of
the Company and its subsidiary as of and at the dates indicated and the results
of their operations and cash flows for the periods specified. Such financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved, except
as may be expressly stated in the related notes thereto. No other financial
statements or supporting schedules are required to be included in the
Registration Statement. The financial data set forth in the Prospectus under the
captions "Summary--Summary Selected Financial Data", "Selected Financial Data"
and "Capitalization" fairly present the information set forth therein on a basis
consistent with that of the audited financial statements contained in the
Registration Statement.
The pro forma consolidated financial statements of the Company and its
subsidiary and the related notes thereto included under the caption "Prospectus
Summary - Summary Pro Forma
3.
<PAGE> 4
Consolidated and Pro Forma Financial Data", and elsewhere in the Prospectus and
in the Registration Statement present fairly the information contained therein,
have been prepared in accordance with the Commission's rules and guidelines with
respect to pro forma financial statements and have been properly presented on
the bases described therein, and the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein. No other pro forma
financial information is required to be included in the Registration Statement
pursuant to Regulation S-X.
(k) Company's Accounting System. The Company and its subsidiary
maintain a system of accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(l) Subsidiary of the Company. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the subsidiary listed in Exhibit 21.1 to the Registration Statement.
(m) Incorporation and Good Standing of the Company and its
Subsidiary. Each of the Company and its subsidiary has been duly organized and
is validly existing as a corporation or limited liability company, as the case
may be, in good standing under the laws of the jurisdiction in which it is
organized with full corporate power and authority to own its properties and
conduct its business as described in the prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification.
(n) Capitalization of the Subsidiary. All the outstanding shares of
capital stock of the subsidiary have been duly and validly authorized and issued
and are fully paid and nonassessable, and, except as otherwise set forth in the
Prospectus, all outstanding shares of capital stock of the subsidiary are owned
by the Company either directly or through its wholly owned subsidiary free and
clear of any security interests, claims, liens or encumbrances.
(o) No Prohibition on Subsidiary from Paying Dividends or Making
Other Distributions. No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from making
any other distribution on such subsidiary's capital stock, from repaying to the
Company any loans or advances to such subsidiary from the Company or from
transferring any of such subsidiary's property or assets to the Company or any
other subsidiary of the Company, except as described in or contemplated by the
Prospectus.
(p) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options described in the Prospectus).
The Common Shares (including the Shares) conform in all material respects to the
description thereof contained in the Prospectus. All of the issued and
outstanding Common Shares have been duly authorized and validly issued, are
fully paid and nonassessable and have been issued in compliance with federal and
state securities laws. None of the outstanding Common Shares were issued in
violation of any preemptive rights, rights of first refusal or other similar
rights to subscribe for or purchase securities of the Company. There are no
authorized or outstanding options, warrants, preemptive rights, rights of first
refusal or other rights to purchase, or
4.
<PAGE> 5
equity or debt securities convertible into or exchangeable or exercisable for,
any capital stock of the Company or its subsidiary other than those accurately
described in the Prospectus. The description of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted thereunder, set forth in the Prospectus accurately and fairly
presents the information required to be shown with respect to such plans,
arrangements, options and rights.
(q) Stock Exchange Listing. The Shares have been approved for
listing on the Nasdaq National Market, subject only to official notice of
issuance.
(r) No Consents, Approvals or Authorizations Required. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the Underwriters in the manner contemplated here and in the Prospectus, (ii) by
the National Association of Securities Dealers, LLC and (iii) by the federal and
provincial laws of Canada.
(s) Non-Contravention of Existing Instruments Agreements. Neither
the issue and sale of the Shares nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or its subsidiary
pursuant to, (i) the charter or by-laws of the Company or its subsidiary, (ii)
the terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument to which the Company or its subsidiary is a party or bound or to
which its or their property is subject or (iii) any statute, law, rule,
regulation, judgment, order or decree applicable to the Company or its
subsidiary of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company or its
subsidiary or any of its or their properties.
(t) No Defaults or Violations. Neither the Company nor its
subsidiary is in violation or default of (i) any provision of its charter or
by-laws, (ii) the terms of any indenture, contract, lease, mortgage, deed of
trust, note agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which it is a party or bound or to which its property
is subject or (iii) any statute, law, rule, regulation, judgment, order or
decree of any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or such
subsidiary or any of its properties, as applicable, except any such violation or
default which would not, singly or in the aggregate, result in a Material
Adverse Change except as otherwise disclosed in the Prospectus.
(u) No Actions, Suits or Proceedings. No action, suit or proceeding
by or before any court or governmental agency, authority or body or any
arbitrator involving the Company or its subsidiary or its or their property is
pending or, to the best knowledge of the Company, threatened that (i) could
reasonably be expected to have a Material Adverse Effect on the performance of
this Agreement or the consummation of any of the transactions contemplated
hereby or (ii) could reasonably be expected to result in a Material Adverse
Effect.
(v) All Necessary Permits, Etc. The Company and its subsidiary
possess such valid and current certificates, authorizations or permits issued by
the appropriate state, federal or foreign regulatory agencies or bodies
necessary to conduct their respective businesses, and neither the Company nor
any subsidiary has received any notice of proceedings relating to the revocation
or modification of, or non-compliance with, any such certificate, authorization
or permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could result in a Material Adverse Change.
5.
<PAGE> 6
(w) Title to Properties. Except as otherwise disclosed in the
Prospectus, the Company and its subsidiary has good and marketable title to all
the properties and assets reflected as owned in the financial statements
referred to in Section 1(A)(i) above (or elsewhere in the Prospectus), in each
case free and clear of any security interests, mortgages, liens, encumbrances,
equities, claims and other defects, except such as do not materially and
adversely affect the value of such property and do not materially interfere with
the use made or proposed to be made of such property by the Company or such
subsidiary. The real property, improvements, equipment and personal property
held under lease by the Company or any subsidiary are held under valid and
enforceable leases, with such exceptions as are not material and do not
materially interfere with the use made or proposed to be made of such real
property, improvements, equipment or personal property by the Company or such
subsidiary.
(x) Tax Law Compliance. The Company and its consolidated subsidiary
have filed all necessary federal, state and foreign income and franchise tax
returns and have paid all taxes required to be paid by any of them and, if due
and payable, any related or similar assessment, fine or penalty levied against
any of them. The Company has made adequate charges, accruals and reserves in the
applicable financial statements referred to in Section 1(A)(i) above in respect
of all federal, state and foreign income and franchise taxes for all periods as
to which the tax liability of the Company or its consolidated subsidiary has not
been finally determined. The Company is not aware of any tax deficiency that has
been or might be asserted or threatened against the Company that could result in
a Material Adverse Change.
(y) Intellectual Property Rights. Each of the Company and its
subsidiary owns or possesses adequate rights to use all patents, patent rights
or licenses, inventions, collaborative research agreements, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which are
necessary to conduct its businesses as described in the Registration Statement
and Prospectus; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not result in a
Material Adverse Change that is not otherwise disclosed in the Prospectus; the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by others with
respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights; and the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a Material Adverse Change. There is no
claim being made against the Company regarding patents, patent rights or
licenses, inventions, collaborative research, trade secrets, know-how,
trademarks, service marks, trade names or copyrights. The Company and its
subsidiary do not in the conduct of their business as now or proposed to be
conducted as described in the Prospectus infringe or conflict with any right or
patent of any third party, or any discovery, invention, product or process which
is the subject of a patent application filed by any third party, known to the
Company or its subsidiary, which such infringement or conflict is reasonably
likely to result in a Material Adverse Change.
(z) Year 2000 Preparedness. There are no issues related to the
Company's, or its subsidiary's, preparedness for the Year 2000 that (i) are of a
character required to be described or referred to in the Registration Statement
or Prospectus by the Securities which have not been accurately described in the
Registration Statement or Prospectus or (ii) might reasonably be expected to
result in any Material Adverse Change or that might materially affect their
properties, assets or rights. All internal computer systems and each Constituent
Component (as defined below) of those systems and all computer-related products
and each Constituent Component (as defined below) of those products of the
Company and its subsidiary fully comply with Year 2000 Qualification
Requirements. "Year 2000 Qualifications Requirements" means that the internal
computer systems and each Constituent Component (as defined below) of those
systems and all computer-related products and each Constituent Component (as
defined
6.
<PAGE> 7
below) of those products of the Company and each of its Subsidiaries (i) have
been reviewed to confirm that they store, process (including sorting and
performing mathematical operations, calculations and computations), input and
output data containing date and information correctly regardless of whether the
date contains dates and times before, on or after January 1, 2000, (ii) have
been designated to ensure date and time entry recognition and calculations, and
date data interface values that reflect the century, (iii) accurately manage and
manipulate data involving dates and times, including single century formulas and
multi-century formulas, and will not cause an abnormal ending scenario within
the application or generate incorrect values or invalid results involving such
dates, (iv) accurately process any date rollover, and (v) accept and respond to
two-digit year date input in a manner that resolves any ambiguities as to the
century. "Constituent Component" means all software (including operating
systems, programs, packages and utilities), firmware, hardware, networking
components, and peripherals provided as part of the configuration. The Company
has inquired of material vendors as to their preparedness for the Year 2000 and
has disclosed in the Registration Statement or Prospectus any issues that might
reasonably be expected to result in any Material Adverse Change.
(aa) 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 issuance and sale by the Company
of the shares.
(bb) Company Not an "Investment Company". The Company has been
advised of the rules and requirements under the Investment Company Act of 1940,
as amended (the "Investment Company Act"). The Company is not, and after receipt
of payment for the Shares will not be, an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act and will conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(cc) Insurance. Each of the Company and its subsidiary are insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company
and its subsidiary against theft, damage, destruction, acts of vandalism and
earthquakes, general liability and directors and officers liability. The Company
has no reason to believe that it or any subsidiary will not be able (i) to renew
its existing insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change. Neither of the Company nor any
subsidiary has been denied any insurance coverage which it has sought or for
which it has applied.
(dd) Labor Matters. To the best of Company's knowledge, no labor
disturbance by the employees of the Company or its subsidiary exists or is
imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers that might be
expected to result in a Material Adverse Change.
(ee) No Price Stabilization or Manipulation. The Company has not
taken and will not take, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in stabilization or manipulation
of the price of the Common Stock to facilitate the sale or resale of the Shares.
(ff) Lock-Up Agreements. Each officer and director of the Company and
each beneficial owner of one or more percent of the outstanding issued share
capital of the Company has agreed to sign
7.
<PAGE> 8
an agreement substantially in the form attached hereto as Exhibit A (the
"Lock-up Agreements"). The Company has provided to counsel for the Underwriters
a complete and accurate list of all securityholders of the Company and the
number and type of securities held by each securityholder. The Company has
provided to counsel for the Underwriters true, accurate and complete copies of
all of the Lock-up Agreements presently in effect or effected hereby. The
Company hereby represents and warrants that it will not release any of its
officers, directors or other stockholders from any Lock-up Agreements currently
existing or hereafter effected without the prior written consent of BancBoston
Robertson Stephens Inc.
(gg) Lock-Up Notice to Optionholders. The Company (i) has notified
each holder of a currently outstanding option issued under the 1999 Incentive
Stock Plan (the "Option Plan") and each person who has acquired shares of Common
Stock pursuant to the exercise of any option granted under the Option Plan and
who has not entered into a Lock-Up Agreement that pursuant to the terms of the
Option Plan, that none of such options or shares may be sold or otherwise
transferred or disposed of for a period of 180 days after the date of the
Prospectus and (ii) has imposed a stop-transfer instruction with the Company's
transfer agent in order to enforce the foregoing lock-up provision imposed
pursuant to the Option Plan.
(hh) Related Party Transactions. There are no business relationships
or related-party transactions involving the Company or any subsidiary or any
other person required to be described in the Prospectus which have not been
described as required.
(ii) No Unlawful Contributions or Other Payments. Neither the Company
nor its subsidiary nor, to the best of the Company's knowledge, any employee or
agent of the Company or its subsidiary, has made any contribution or other
payment to any official of, or candidate for, any federal, state or foreign
office in violation of any law or of the character required to be disclosed in
the Prospectus.
(jj) Environmental Laws. (i) the Company is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Change, (ii) the Company has received no
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) the Company will not be required to make
future material capital expenditures to comply with Environmental Laws and (iv)
no property which is owned, leased or occupied by the Company has been
designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et
seq.), or otherwise designated as a contaminated site under applicable state or
local law.
(kk) ERISA Compliance. The Company and its subsidiary and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or maintained by
the Company, its subsidiary or their "ERISA Affiliates" (as defined below) are
in compliance in all material respects with ERISA. "ERISA Affiliate" means, with
respect to the Company or a subsidiary, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the "Code") of which the Company or such subsidiary is a member. No "reportable
event" (as defined under ERISA) has occurred or is reasonably expected to occur
with respect to any "employee benefit plan" established or maintained by the
Company, its subsidiary or any of their ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company, its subsidiary or any of their
ERISA Affiliates, if such "employee benefit plan" were terminated, would have
any "amount of unfounded benefit liabilities" (as defined under ERISA). Neither
the Company, its subsidiary nor any of their
8.
<PAGE> 9
ERISA Affiliates has incurred or reasonably expects to incur any liability under
(i) Title IV of ERISA with respect to termination of, or withdrawal from, any
"employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code.
Each "employee benefit plan" established or maintained by the Company, its
subsidiary or any of their ERISA Affiliates that is intended to be qualified
under Section 401(a) of the Code is so qualified and nothing has occurred,
whether by action or failure to act, which would cause the loss of such
qualification.
(ll) Any certificate signed by an officer of the Company and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to each Underwriter as
to the matters set forth therein.
B. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Selling Stockholder represents, warrants and covenants to each Underwriter as
follows:
(a) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by or on behalf of such Selling Stockholder
and is a valid and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms, except as rights to indemnification hereunder may be
limited by applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(b) The Custody Agreement and Power of Attorney. Each of the (i)
Custody Agreement signed by such Selling Stockholder and ____________, as
custodian (the "Custodian"), relating to the deposit of the Shares to be sold by
such Selling Stockholder (the "Custody Agreement") and (ii) Power of Attorney
appointing certain individuals named therein as such Selling Stockholder's
attorneys-in-fact (each, an "Attorney-in-Fact") to the extent set forth therein
relating to the transactions contemplated hereby and by the Prospectus (the
"Power of Attorney"), of such Selling Stockholder has been duly authorized,
executed and delivered by such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder, enforceable in accordance with its terms,
except as rights to indemnification thereunder may be limited by applicable law
and except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles. Each
Selling Stockholder agrees that the Shares to be sold by such Selling
Stockholder on deposit with the Custodian is subject to the interests of the
Underwriters, that the arrangements made for such custody are to that extent
irrevocable, and that the obligations of such Selling Stockholder hereunder
shall not be terminated, except as provided in this Agreement or in the Custody
Agreement, by any act of the Selling Stockholder, by operation of law, by death
or incapacity of such Selling Stockholder or by the occurrence of any other
event. If such Selling Stockholder should die or become incapacitated, or in any
other event should occur, before the delivery of the Shares to be sold by such
Selling Stockholder hereunder, the documents evidencing the Shares to be sold by
such Selling Stockholder then on deposit with the Custodian shall be delivered
by the Custodian in accordance with the terms and conditions of this Agreement
as if such death, incapacity or other event had not occurred, regardless of
whether or not the Custodian shall have received notice thereof.
(c) Title to Shares to be Sold. Such Selling Stockholder is the
lawful owner of the Shares to be sold by such Selling Stockholder hereunder and
upon sale and delivery of, and payment for, such Shares, as provided herein,
such Selling Stockholder will convey good and marketable title to such Shares,
free and clear of all liens, encumbrances, equities and claims whatsoever.
(d) All Authorizations Obtained. Such Selling Stockholder has, and
on the First Closing Date and the Second Closing Date (as defined below) will
have, good and valid title to all of the Company Shares which may be sold by
such Selling Stockholder pursuant to this Agreement on such date and the
9.
<PAGE> 10
legal right and power, and all authorizations and approvals required by law [and
under its charter or by-laws,] [partnership agreement,] [trust agreement] [or
other organizational documents] to enter into this Agreement and its Custody
Agreement and Power of Attorney, to sell, transfer and deliver all of the Shares
which may be sold by such Selling Stockholder pursuant to this Agreement and to
comply with its other obligations hereunder and thereunder.
(e) No Further Consents, Authorization or Approvals. No consent,
approval, authorization or order of any court or governmental agency or body is
required for the consummation by such Selling Stockholder of the transactions
contemplated herein, except such as may have been obtained under the Securities
Act and such as may be required under the federal and provincial securities laws
of Canada or the blue sky laws or any jurisdiction in connection with the
purchase and distribution of the Shares by the Underwriters and such other
approvals as have been obtained.
(f) Non-Contravention. Neither the sale of the Securities being sold
by such Selling Stockholder nor the consummation of any other of the
transactions herein contemplated by such Selling Stockholder or the fulfillment
of the terms hereof by such Selling Stockholder will conflict with, result in a
breach or violation of, or constitute a default under any law or the terms of
any indenture or other agreement or instrument to which such Selling Stockholder
is party or bound, any judgment, order or decree applicable to such Selling
Stockholder or any court or regulatory body, administrative agency, governmental
body or arbitrator having jurisdiction over such Selling Stockholder.
(g) No Registration or Other Similar Rights. Such Selling
Stockholder does not have any registration or other similar rights to have any
equity or debt securities registered for sale by the Company under the
Registration Statement or included in the offering contemplated by this
Agreement, except for such rights as are described in the Prospectus under
"Shares Eligible for Future Sale".
(h) No Preemptive, Co-sale or other Rights. Such Selling Stockholder
does not have, or has waived prior to the date hereof, any preemptive right,
co-sale right or right of first refusal or other similar right to purchase any
of the Shares that are to be sold by the Company or any of the other Selling
Stockholders to the Underwriters pursuant to this Agreement; and such Selling
Stockholder does not own any warrants, options or similar rights to acquire, and
does not have any right or arrangement to acquire, any capital stock, right,
warrants, options or other securities from the Company, other than those
described in the Registration Statement and the Prospectus.
(i) Disclosure Made by Such Selling Stockholder in the Prospectus.
All information furnished by or on behalf of such Selling Stockholder in writing
expressly for use in the Registration Statement and Prospectus is, and on the
First Closing Date and the Second Closing Date (as defined below) will be, true,
correct, and complete in all material respects, and does not, and on the First
Closing Date and the Second Closing Date will not, contain any untrue statement
of a material fact or omit to state any material fact necessary to make such
information not misleading. Such Selling Stockholder confirms as accurate the
number of shares of Company Shares set forth opposite such Selling Stockholder's
name in the Prospectus under the caption "Principal and Selling Stockholders"
(both prior to and after giving effect to the sale of the Shares).
(j) No Price Stabilization or Manipulation. Such Selling Stockholder
has not taken and will not take, directly or indirectly, any action designed to
or that might be reasonably expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares.
(k) 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
10.
<PAGE> 11
connection with the execution and delivery of this Agreement or the sale by the
Selling Stockholders of the Shares.
(l) Distribution of Offering Materials by the Selling Stockholders.
The Selling Stockholders have not distributed and will not distribute, prior to
the later of the Second Closing Date (as defined below) and the completion of
the Underwriters' distribution of the Shares, any offering material in
connection with the offering and sale of the Shares by such Selling Stockholder
other than a preliminary prospectus, the Prospectus or the Registration
Statement.
(m) Confirmation of Company Representations and Warranties. Such
Selling Stockholder has no reason to believe that the representations and
warranties of the Company contained in Section 1(A) hereof are not true and
correct, is familiar with the Registration Statement and the Prospectus and has
no knowledge of any material fact, condition or information not disclosed in the
Registration Statement or the Prospectus which has had or may result in a
Material Adverse Change on the condition, financial or otherwise, or on the
earnings, business, operation or prospects, whether or not arising from
transactions in the ordinary course of business of the Company and its
subsidiaries, considered as one entity, and is not prompted to sell the Shares
to be sold by such Selling Stockholder by any information concerning the Company
which is not set forth in the Registration Statement and the Prospectus.
Any certificate signed by or on behalf of any Selling Stockholder and delivered
to the Representative[s] or to counsel for the Underwriters shall be deemed to
be a representation and warranty by such Selling Stockholder to each Underwriter
as to the matters covered thereby.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) The Firm Shares. The Company agrees to issue and sell to the
several Underwriters the Firm Shares upon the terms herein set forth. On the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Underwriters
agree, severally and not jointly, to purchase from the Company the respective
number of Firm Shares set forth opposite their names on Schedule A. The purchase
price per Firm Share to be paid by the several Underwriters to the Company shall
be $[___] per share.
(b) The First Closing Date. Delivery of the Firm Shares to be
purchased by the Underwriters and payment therefor shall be made by the Company
and the Representatives at 6:00 a.m. San Francisco time, at the offices of
Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, CA 94304 (or at
such other place as may be agreed upon among the Representatives and the
Company), (i) on the third (3rd) full business day following the first day that
Shares are traded, (ii) if this Agreement is executed and delivered after 1:30
P.M., San Francisco time, the fourth (4th) full business day following the day
that this Agreement is executed and delivered or (iii) at such other time and
date not later that seven (7) full business days following the first day that
Shares are traded as the Representatives and the Company may determine (or at
such time and date to which payment and delivery shall have been postponed
pursuant to Section 8 hereof), such time and date of payment and delivery being
herein called the "Closing Date;" provided, however, that if the Company has not
made available to the Representatives copies of the Prospectus within the time
provided in Section 2(g) and 3(e) hereof, the Representatives may, in their sole
discretion, postpone the Closing Date until no later that two (2) full business
days following delivery of copies of the Prospectus to the Representatives.
(c) The Option Shares; the Second Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company and
the Selling Stockholders hereby grants an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of _______________
11.
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Option Shares from the Company and the Selling Stockholders at the purchase
price per share to be paid by the Underwriters for the Firm Shares. The option
granted hereunder is for use by the Underwriters solely in covering any
over-allotments in connection with the sale and distribution of the Firm Shares.
The option granted hereunder may be exercised at any time upon notice by the
Representatives to the Company and the Selling Stockholders, which notice may be
given at any time within 30 days from the date of this Agreement. The time and
date of delivery of the Option Shares, if subsequent to the First Closing Date,
is called the "Second Closing Date" and shall be determined by the
Representatives and shall not be earlier than three nor later than five full
business days after delivery of such notice of exercise. If any Option Shares
are to be purchased, each Underwriter agrees, severally and not jointly, to
purchase the number of Option Shares (subject to such adjustments to eliminate
fractional shares as the Representatives may determine) that bears the same
proportion to the total number of Option Shares to be purchased as the number of
Firm Shares set forth on Schedule A opposite the name of such Underwriter bears
to the total number of Firm Shares. The Representatives may cancel the option at
any time prior to its expiration by giving written notice of such cancellation
to the Company and the Selling Stockholders.
(d) Public Offering of the Shares. The Representatives hereby advise
the Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representatives, in its sole judgment, has determined
is advisable and practicable.
(e) Payment for the Shares. Payment for the Shares shall be made at
the First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer in immediately available-funds to the order of the Company. Payment for
the Shares to be sold by the Selling Stockholders shall be made at the Second
Closing Date by wire transfer of immediately available funds to the order of the
Custodian.
It is understood that the Representatives have been authorized,
for their own account and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Shares and any Option Shares the Underwriters have agreed to purchase.
BancBoston Robertson Stephens Inc., individually and not as the Representatives
of the Underwriters, may (but shall not be obligated to) make payment for any
Shares to be purchased by any Underwriter whose funds shall not have been
received by the Representatives by the First Closing Date or the Second Closing
Date, as the case may be, for the account of such Underwriter, but any such
payment shall not relieve such Underwriter from any of its obligations under
this Agreement.
Each Selling Stockholder hereby agrees that (i) it will pay all
stock transfer taxes, stamp duties and other similar taxes, if any, payable upon
the sale or delivery of the Shares to be sold by such Selling Stockholder to the
several Underwriters, or otherwise in connection with the performance of such
Selling Stockholder's obligations hereunder and (ii) the Custodian is authorized
to deduct for such payment any such amounts from the proceeds to such Selling
Stockholder hereunder and to hold such amounts for the account of such Selling
Stockholder with the Custodian under the Custody Agreement.
(f) Delivery of the Shares. The Company shall deliver, or cause to
be delivered, a credit representing the Firm Shares to an account or accounts at
The Depository Trust Company, as designated by the Representatives for the
accounts of the Representatives and the several Underwriters at the First
Closing Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company shall
also deliver, or cause to be delivered, a credit representing the Option Shares
the Underwriters have agreed to purchase at the First Closing Date (or the
Second Closing Date, as the case may be), to an account or accounts at The
Depository Trust Company as designated by the Representatives for the accounts
of the Representatives and the several Underwriters, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the
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purchase price therefor. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
(g) Delivery of Prospectus to the Underwriters. Not later than 12:00
noon on the second business day following the date the Shares are released by
the Underwriters for sale to the public, the Company shall deliver or cause to
be delivered copies of the Prospectus in such quantities and at such places as
the Representatives shall request.
SECTION 3. COVENANTS OF THE COMPANY AND THE SELLING STOCKHOLDERS.
A. COVENANTS OF THE COMPANY.The Company further covenants and
agrees with each Underwriter as follows:
(a) Registration Statement Matters. The Company will (i) use its
best efforts to cause a registration statement on Form 8-A (the "Form 8-A
Registration Statement") as required by the Securities Exchange Act of 1934 (the
"Exchange Act") to become effective simultaneously with the Registration
Statement, (ii) use its best efforts to cause the Registration Statement to
become effective or, if the procedure in Rule 430A of the Securities Act is
followed, to prepare and timely file with the Commission under Rule 424(b) under
the Securities Act a Prospectus in a form approved by the Representatives
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Securities Act and (iii)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which the Representatives shall not previously have been advised
and furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Securities Act. If
the Company elects to rely on Rule 462(b) under the Securities Act, the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) under the Securities Act prior to the time
confirmations are sent or given, as specified by Rule 462(b)(2) under the
Securities Act, and shall pay the applicable fees in accordance with Rule 111
under the Securities Act.
(b) Securities Act Compliance. The Company will advise the
Representatives promptly (i) when the Registration Statement or any
post-effective amendment thereto shall have become effective, (ii) of receipt of
any comments from the Commission, (iii) of any request of the Commission for
amendment of the Registration Statement or for supplement to the Prospectus or
for any additional information and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the use
of the Prospectus or of the institution of any proceedings for that purpose. The
Company will use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(c) Blue Sky Compliance. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(d) Amendments and Supplements to the Prospectus and Other
Securities Act Matters. The Company will comply with the Securities Act and the
Exchange Act, and the rules and regulations of the Commission thereunder, so as
to permit the completion of the distribution of the Shares as contemplated
13.
<PAGE> 14
in this Agreement and the Prospectus. If during the period in which a prospectus
is required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Representatives or counsel for the Underwriters, it becomes
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances existing at the time the Prospectus
is delivered to a purchaser, not misleading, or, if it is necessary at any time
to amend or supplement the Prospectus to comply with any law, the Company
promptly will prepare and file with the Commission, and furnish at its own
expense to the Underwriters and to dealers, an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances when it
is so delivered, be misleading, or so that the Prospectus will comply with the
law.
(e) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the period
beginning on the date hereof and ending on the later of the First Closing Date
or such date, as in the opinion of counsel for the Underwriters, the Prospectus
is no longer required by law to be delivered in connection with sales by an
Underwriter or dealer (the "Prospectus Delivery Period"), as many copies of the
Prospectus and any amendments and supplements thereto as the Representatives may
request.
(f) Insurance. The Company shall (i) obtain directors and officers
liability insurance in the minimum amount of $10 million which shall apply to
the offering contemplated hereby and (ii) shall cause BancBoston Robertson
Stephens Inc. to be added as an additional insured to such policy in respect of
the offering contemplated hereby.
(g) Notice of Subsequent Events. If at any time during the ninety
(90) day period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Company Shares has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(h) Use of Proceeds. The Company shall apply the net proceeds from
the sale of the Shares sold by it in the manner described under the caption "Use
of Proceeds" in the Prospectus.
(i) Transfer Agent. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Company Shares.
(j) Earnings Statement. As soon as practicable, the Company will
make generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month period
ending December 31, 2000 that satisfies the provisions of Section 11(a) of the
Securities Act.
(k) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under the
Exchange Act.
(l) Agreement Not to Offer or Sell Additional Securities. The
Company will not, without the prior written consent of BancBoston Robertson
Stephens Inc., for a period of 180 days following the date of the Prospectus,
offer, sell or contract to sell, or otherwise dispose of or enter into any
transaction which is designed to, or could be expected to, result in the
disposition (whether by actual disposition or effective
14.
<PAGE> 15
economic disposition due to cash settlement or otherwise by the Company or any
affiliate of the Company or any person in privity with the Company or any
affiliate of the Company) directly or indirectly, or announce the offering of,
any other Common Shares or any securities convertible into, or exchangeable for,
Common Shares; provided, however, that the Company may (i) issue and sell Common
Shares pursuant to any director or employee stock option plan, stock ownership
plan or dividend reinvestment plan of the Company in effect at the date of the
Prospectus and described in the Prospectus so long as none of those shares may
be transferred on during the period of 180 days from the date that the
Registration Statement is declared effective (the "Lock-Up Period") and the
Company shall enter stop transfer instructions with its transfer agent and
registrar against the transfer of any such Common Shares and (ii) the Company
may issue Common Shares issuable upon the conversion of securities or the
exercise of warrants outstanding at the date of the Prospectus and described in
the Prospectus.
(m) Future Reports to the Representatives. During the period of five
years hereafter the Company will furnish to the Representatives (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
or certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the National Association of Securities Dealers, LLC
or any securities exchange; and (iii) as soon as available, copies of any report
or communication of the Company mailed generally to holders of its capital
stock.
B. COVENANTS OF THE SELLING STOCKHOLDERS. Each Selling Stockholder
further covenants and agrees with each Underwriter:
(a) Agreement Not to Offer or Sell Additional Securities. Such
Selling Stockholder will not, during the Lock-Up Period, make a disposition of
Securities (as defined in Exhibit A hereto) now owned or hereafter acquired
directly by such person or with respect to which such person has or hereafter
acquires the power of disposition, otherwise than (i) as a bona fide gift or
gifts, provided the donee or donees thereof agree in writing to be bound by this
restriction, (ii) as a distribution to partners or stockholders of such person,
provided that the distributees thereof agree in writing to be bound by the terms
of this restriction, (iii) with respect to dispositions of Common Shares
acquired on the open market or (iv) with the prior written consent of BancBoston
Robertson Stephens Inc. The foregoing restriction has been expressly agreed to
preclude the holder of the Securities from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or result in
a disposition of Securities during the Lock-Up Period, even if such Securities
would be disposed of by someone other than such holder. Such prohibited hedging
or other transactions would include, without limitation, any short sale (whether
or not against the box) or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to any Securities or
with respect to any security (other than a broad-based market basket or index)
that includes, relates to or derives any significant part of its value from
Securities. Furthermore, such person has also agreed and consented to the entry
of stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by such person except in compliance with this
restriction.
(b) Delivery of Forms W-8 and W-9. To deliver to the Representatives
prior to the First Closing Date a properly completed and executed United States
Treasury Department Form W-8 (if the Selling Stockholder is a non-United States
person) or Form W-9 (if the Selling Stockholder is a United States Person).
15.
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(c) Notification of Untrue Statements, etc. If, at any time prior to
the date on which the distribution of the Common Shares as contemplated herein
and in the Prospectus has been completed, as determined by the
Representative[s], such Selling Stockholder has knowledge of the occurrence of
any event as a result of which the Prospectus or the Registration Statement, in
each case as then amended or supplemented, would include an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, such Selling Stockholder will promptly notify the Company and
the Representatives.
SECTION 4. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein on the First Closing Date and, with respect to the Option
Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Option Shares, as of the Second Closing Date as
though then made, to the timely performance by their respective covenants and
other obligations hereunder, and to each of the following additional conditions:
(a) Compliance with Registration Requirements; No Stop Order; No
Objection from the National Association of Securities Dealers, LLC. The
Registration Statement shall have become effective prior to the execution of
this Agreement, or at such later date as shall be consented to in writing by
you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of Underwriters' Counsel; and the National Association
of Securities Dealers, LLC shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(b) Corporate Proceedings. All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
(c) No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement and prior to the First Closing Date, or the Second
Closing Date, as the case may be,
(i) there shall not have been any Material Adverse Change in
the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company and its subsidiary considered as
one enterprise from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse and
that makes it, in your sole judgment, impracticable or inadvisable to
proceed with the public offering of the Shares as contemplated by the
Prospectus; and
(d) Opinion of Counsel for the Company. You shall have received on
the First Closing Date, or the Second Closing Date, as the case may be, an
opinion of Wilson Sonsini Goodrich & Rosati, counsel for the Company,
substantially in the form of Exhibit B attached hereto, dated the First Closing
Date, or the Second Closing Date, addressed to the Underwriters and with
reproduced copies or signed counterparts thereof for each of the Underwriters.
(e) Opinion of Counsel for the Underwriters. You shall have received
on the First Closing Date or the Second Closing Date, as the case may be, an
opinion Brobeck, Phleger & Harrison LLP,
16.
<PAGE> 17
substantially in the form of Exhibit D hereto. The Company shall have furnished
to such counsel such documents as they may have requested for the purpose of
enabling them to pass upon such matters.
(f) Accountants' Comfort Letter. You shall have received on the
First Closing Date and on the Second Closing Date, as the case may be, a letter
from Arthur Anderson LLP addressed to the Underwriters, dated the First Closing
Date or the Second Closing Date, as the case may be, confirming that they are
independent certified public accountants with respect to the Company within the
meaning of the Act and the applicable published Rules and Regulations and based
upon the procedures described in such letter delivered to you concurrently with
the execution of this Agreement (herein called the "Original Letter"), but
carried out to a date not more than four (4) business days prior to the First
Closing Date or the Second Closing Date, as the case may be, (i) confirming, to
the extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the First Closing Date or the Second Closing Date, as
the case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiary considered as one enterprise from
that set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. The Original Letter from Arthur Anderson LLP
shall be addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are independent certified public accountants with respect to the
Company within the meaning of the Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their examination of
the consolidated balance sheet of the Company as of December 31, 1999 and
related consolidated statements of operations, stockholders' equity, and cash
flows for the twelve (12) months ended December 31, 1999, (iii) state that
Arthur Anderson LLP has performed the procedures set out in Statement on
Auditing Standards No. 71 ("SAS 71") for a review of interim financial
information and providing the report of Arthur Anderson LLP as described in SAS
71 on the financial statements for each of the quarters in the two-quarter
period ended June 30, 1999 (the "Quarterly Financial Statements"), (iv) state
that in the course of such review, nothing came to their attention that leads
them to believe that any material modifications need to be made to any of the
Quarterly Financial Statements in order for them to be in compliance with
generally accepted accounting principles consistently applied across the periods
presented,] and address other matters agreed upon by Arthur Anderson LLP and
you. In addition, you shall have received from Arthur Anderson LLP a letter
addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's consolidated financial statements as
of December 31, 1999, did not disclose any weaknesses in internal controls that
they considered to be material weaknesses.
(g) Officers' Certificate. You shall have received on the First
Closing Date and the Second Closing Date, as the case may be, a certificate of
the Company, dated the First Closing Date or the Second Closing Date, as the
case may be, signed by the Chief Executive Officer and Chief Financial Officer
of the Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company and
the Principal Stockholder in this Agreement are true and correct, as if
made on and as of the First Closing Date or the Second Closing Date, as
the case may be, and the Company has complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied at or prior to the First Closing Date or the Second Closing
Date, as the case may be;
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(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to be
included therein by the Securities Act and in all material respects
conformed to the requirements of the Securities Act, the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
did not and does not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and, since the effective
date of the Registration Statement, there has occurred no event required
to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there
has not been (a) any material adverse change in the condition (financial
or otherwise), earnings, operations, business or business prospects of
the Company and its subsidiary considered as one enterprise, (b) any
transaction that is material to the Company and its subsidiary
considered as one enterprise, except transactions entered into in the
ordinary course of business, (c) any obligation, direct or contingent,
that is material to the Company and its subsidiary considered as one
enterprise, incurred by the Company or its subsidiary, except
obligations incurred in the ordinary course of business, (d) any change
in the capital stock or outstanding indebtedness of the Company or its
subsidiary that is material to the Company and its subsidiary considered
as one enterprise, (e) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or its
subsidiary, or (f) any loss or damage (whether or not insured) to the
property of the Company or its subsidiary which has been sustained or
will have been sustained which has a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiary considered as one
enterprise.
(h) Lock-up Agreement from Certain Stockholders of the Company. The
Company shall have obtained and delivered to you an agreement substantially in
the form of Exhibit A attached hereto from each officer and director of the
Company, and each beneficial owner of one or more percent of the outstanding
issued share capital of the Company.
(i) Opinion of Counsel for the Selling Stockholders. You shall have
received on the First Closing Date and the Second Closing Date, as the case may
be, the following opinion of Wilson, Sonsini, Goodrich & Rosati, counsel for the
Selling Stockholders substantially in the form of Exhibit E attached hereto,
dated as of such Closing Date, addressed to the Underwriters and with reproduced
copies or signed counterparts thereof for each of the Underwriters.
In rendering such opinion, such counsel may rely as to questions
of law not involving the laws of the United States or State of each Selling
Stockholder's residency and Delaware upon opinions of local counsel and as to
questions of fact upon representations or certificates of the Selling
Stockholders or officers of the Selling Stockholders (when the Selling
Stockholder is not a natural person), and of governmental officials, in which
case their opinion is to state that they are so relying and that they have no
knowledge of any material misstatement or inaccuracy of any material
misstatement or inaccuracy in any such opinion, representation or certificate so
relied upon shall be delivered to you, as Representative[s] of the Underwriters,
and to Underwriters' Counsel.
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(j) Selling Stockholders' Certificate. On each of the First Closing
Date and the Second Closing Date, as the case may be, the Representative[s]
shall received a written certificate executed [by the Attorney-in-Fact of] each
Selling Stockholder, dated as of such Closing Date, to the effect that:
(i) the representations, warranties and covenants of such
Selling Stockholder set forth in Section 1(B) of this Agreement are true
and correct with the same force and effect as though expressly made by
such Selling Stockholder on and as of such Closing Date; and
(ii) such Selling Stockholder has complied with all the
agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to such Closing Date.
(k) Selling Stockholders' Documents. At least three business days
prior to the date hereof, the Company and the Selling Stockholders shall have
furnished for review by the Representative[s] copies of the Powers of Attorney
and Custody Agreements executed by each of the Selling Stockholders and such
further information, certificates and documents as the Representative[s] may
reasonably request.
(l) Stock Exchange Listing. The Shares shall have been approved for
listing on the Nasdaq National Market, subject only to official notice of
issuance.
(m) Compliance with Prospectus Delivery Requirements. The Company
shall have complied with the provisions of Sections 2(g) and 3(e) hereof with
respect to the furnishing of Prospectuses.
(n) Additional Documents. On or before each of the First Closing
Date and the Second Closing Date, as the case may be, the Representatives and
counsel for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Shares as contemplated herein, or in
order to evidence the accuracy of any of the representations and warranties, or
the satisfaction of any of the conditions or agreements, herein contained.
If any condition specified in this Section 4 is not satisfied
when and as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 5 (Payment of Expenses),
Section 6 (Reimbursement of Underwriters' Expenses), Section 7 (Indemnification
and Contribution) and Section 10 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.
SECTION 5. PAYMENT OF EXPENSES. The Company and the Selling
Stockholders, jointly and severally, agree to pay all costs, fees and expenses
incurred in connection with the performance of their obligations hereunder and
in connection with the transactions contemplated hereby, including without
limitation (i) all expenses incident to the issuance and delivery of the Common
Shares (including all printing and engraving costs), (ii) all fees and expenses
of the registrar and transfer agent of the Common Stock, (iii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Shares to the Underwriters, (iv) all fees and expenses of the Company's
counsel, independent public or certified public accountants and other advisors,
(v) all costs and expenses incurred in connection with the preparation,
printing, filing, shipping and distribution of the Registration Statement
(including financial statements, exhibits, schedules, consents and certificates
of experts), each preliminary prospectus and the Prospectus, and all amendments
and supplements thereto, and this Agreement, (vi) all filing fees, attorneys'
fees and expenses incurred by the Company or the Underwriters in connection with
qualifying or registering (or obtaining exemptions from the qualification or
registration of) all or any part of the Shares for offer and sale under the
state securities or blue sky laws or the provincial securities laws
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of Canada or any other country, and, if requested by the Representatives,
preparing and printing a "Blue Sky Survey", an "International Blue Sky Survey"
or other memorandum, and any supplements thereto, advising the Underwriters of
such qualifications, registrations and exemptions, (vii) the filing fees
incident to, and the reasonable fees and expenses of counsel for the
Underwriters in connection with, the National Association of Securities Dealers,
LLC review and approval of the Underwriters' participation in the offering and
distribution of the Common Shares, (viii) the fees and expenses associated with
listing the Common Stock on the Nasdaq National Market, (ix) all costs and
expenses incident to the preparation and undertaking of "road show" preparations
to be made to prospective investors, and (x) all other fees, costs and expenses
referred to in Item 13 of Part II of the Registration Statement. Except as
provided in this Section 5, Section 6, and Section 7 hereof, the Underwriters
shall pay their own expenses, including the fees and disbursements of their
counsel.
The Selling Stockholders further agree with each Underwriter to
pay (directly or by reimbursement) all fees and expenses incident to the
performance of their obligations under this Agreement which are not otherwise
specifically provided for herein, including but not limited to (i) fees and
expenses of counsel and other advisors for such Selling Stockholders, (ii) fees
and expenses of the Custodian and (iii) expenses and taxes incident to the sale
and delivery of the Common Shares to be sold by such Selling Stockholders to the
Underwriters hereunder (which taxes, if any, may be deducted by the Custodian
under the provisions of Section 2 of this Agreement).
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement is
terminated by the Representatives pursuant to Section 4, Section 7, Section 8,
Section 9, or if the sale to the Underwriters of the Shares on the First Closing
Date is not consummated because of any refusal, inability or failure on the part
of the Company to perform any agreement herein or to comply with any provision
hereof, the Company agrees to reimburse the Representatives and the other
Underwriters (or such Underwriters as have terminated this Agreement with
respect to themselves), severally, upon demand for all out-of-pocket expenses
that shall have been reasonably incurred by the Representatives and the
Underwriters in connection with the proposed purchase and the offering and sale
of the Shares, including but not limited to fees and disbursements of counsel,
printing expenses, travel expenses, postage, facsimile and telephone charges.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification of the Underwriters. The Company agrees to
indemnify and hold harmless each Underwriter, its officers and employees, and
each person, if any, who controls any Underwriter within the meaning of the
Securities Act and the Exchange Act against any loss, claim, damage, liability
or expense, as incurred, to which such Underwriter or such controlling person
may become subject, under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, or at common law or otherwise (including
in settlement of any litigation, if such settlement is effected with the written
consent of the Company, which consent shall not be unreasonably withheld),
insofar as such loss, claim, damage, liability or expense (or actions in respect
thereof as contemplated below) arises out of or is based (i) upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, including any information
deemed to be a part thereof pursuant to Rule 430A or Rule 434 under the
Securities Act, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading; or (ii) upon any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; or (iii)
in whole or in part upon any inaccuracy in the representations and warranties of
the Company contained herein; or (iv) in whole or in part upon any failure of
the Company to perform its obligations
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hereunder or under law; or (v) any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or relating in any manner
to, the Shares or the offering contemplated hereby, and which is included as
part of or referred to in any loss, claim, damage, liability or action arising
out of or based upon any matter covered by clause (i), (ii), (iii) or (iv)
above, provided that the Company shall not be liable under this clause (v) to
the extent that a court of competent jurisdiction shall have determined by a
final judgment that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be taken
by such Underwriter through its bad faith or willful misconduct; and to
reimburse each Underwriter and each such controlling person for any and all
expenses (including the fees and disbursements of counsel chosen by BancBoston
Robertson Stephens Inc.) as such expenses are reasonably incurred by such
Underwriter or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the foregoing indemnity
agreement shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto); and
provided, further, that with respect to any preliminary prospectus, the
foregoing indemnity agreement shall not inure to the benefit of any Underwriter
from whom the person asserting any loss, claim, damage, liability or expense
purchased Shares, or any person controlling such Underwriter, if copies of the
Prospectus were timely delivered to the Underwriter pursuant to Section 2 and a
copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage, liability
or expense. The indemnity agreement set forth in this Section 7(a) shall be in
addition to any liabilities that the Company may otherwise have.
(1) Each of the Selling Stockholders, jointly and severally, agrees
to indemnify and hold harmless each Underwriter, its officers and employees, and
each person, if any, who controls any Underwriter within the meaning of the
Securities Act and the Exchange Act against any loss, claim, damage, liability
or expense, as incurred, to which such Underwriter or such controlling person
may become subject, under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, or at common law or otherwise (including
in settlement of any litigation, if such settlement is effected with the written
consent of the Company, which consent shall not be unreasonably withheld),
insofar as such loss, claim, damage, liability or expense (or actions in respect
thereof as contemplated below) arises out of or is based (i) upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, including any information
deemed to be a part thereof pursuant to Rule 430A or Rule 434 under the
Securities Act, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading; or (ii) upon any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, in the
case of subparagraphs (i) and (ii) of this Section 7(a)(2) to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company or such Underwriter by such Other
Selling Stockholder, directly or through such Selling Stockholder's
representatives, specifically for use in the preparation thereof; or (iii) in
whole or in part upon any inaccuracy in the representations and warranties of
the Selling Stockholders contained herein; or (iv) in whole or in part upon any
failure of the Selling Stockholders to perform their respective obligations
hereunder or under law; or (v) any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or relating in any
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<PAGE> 22
manner to, the Shares or the offering contemplated hereby, and which is included
as part of or referred to in any loss, claim, damage, liability or action
arising out of or based upon any matter covered by clause (i), (ii), (iii) or
(iv) above, provided that the Other Selling Stockholders shall not be liable
under this clause (v) to the extent that a court of competent jurisdiction shall
have determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its bad faith or willful
misconduct; and to reimburse each Underwriter and each such controlling person
for any and all expenses (including the fees and disbursements of counsel chosen
by BancBoston Robertson Stephens Inc.) as such expenses are reasonably incurred
by such Underwriter or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the foregoing indemnity
agreement shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Selling Stockholders by the Representative[s] expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto); and provided, further, that with respect to
any preliminary prospectus, the foregoing indemnity agreement shall not inure to
the benefit of any Underwriter from whom the person asserting any loss, claim,
damage, liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The indemnity agreement
set forth in this Section 7(a) shall be in addition to any liabilities that the
Selling Stockholders may otherwise have; and provided, further, that the
liability of each Selling Stockholder under the foregoing indemnity agreement
shall be limited to an amount equal to the initial public offering price of the
Shares sold by such Selling Stockholder, less the underwriting discount, as set
forth on the front cover page of the Prospectus.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company by the
Representatives expressly for use therein; and to reimburse the Company, or any
such director, officer or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. The indemnity
agreement set forth in this Section 7(b) shall be in addition to any liabilities
that each Underwriter may otherwise have.
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(c) Information Provided by the Underwriters. The Company, the
Principal Stockholders and the Selling Stockholders hereby acknowledges that the
only information that the Underwriters have furnished to the Company expressly
for use in the Registration Statement, any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) are the statements set forth
in the table in the first paragraph and the second paragraph under the caption
"Underwriting" in the Prospectus; and the Underwriters confirm that such
statements are correct.
(d) Notifications and Other Indemnification Procedures. Promptly
after receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 7 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party (BancBoston Robertson Stephens Inc. in the case of Section
7(b) and Section 8), representing the indemnified parties who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying party.
(e) Settlements. The indemnifying party under this Section 7 shall
not be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior
23.
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written consent of the indemnified party, effect any settlement, compromise or
consent to the entry of judgment in any pending or threatened action, suit or
proceeding in respect of which any indemnified party is or could have been a
party and indemnity was or could have been sought hereunder by such indemnified
party, unless such settlement, compromise or consent includes (i) an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.
(f) Contribution. If the indemnification provided for in this
Section 7 is unavailable to or insufficient to hold harmless an indemnified
party under Section 7(a) or (b) above in respect of any losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law then each indemnifying party shall contribute to such amount paid or payable
by such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bears to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 7(f) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7(f). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 7(f) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (f), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this Section 7(f)
to contribute are several in proportion to their respective underwriting
obligations and not joint.
(g) Timing of Any Payments of Indemnification. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than thirty
(30) days of invoice to the indemnifying party.
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(h) Survival. The indemnity and contribution agreements contained in
this Section 7 and the representation and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor to
any Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 7.
(i) Acknowledgements of Parties. The parties to this Agreement
hereby acknowledge that they are sophisticated business persons who were
represented by counsel during the negotiations regarding the provisions hereof
including, without limitation, the provisions of this Section 7, and are fully
informed regarding said provisions. They further acknowledge that the provisions
of this Section 7 fairly allocate the risks in light of the ability of the
parties to investigate the Company and its business in order to assure that
adequate disclosure is made in the Registration Statement and Prospectus as
required by the Securities Act and the Exchange Act.
SECTION 8. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Shares that
it or they have agreed to purchase hereunder on such date, and the aggregate
number of Common Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase does not exceed 10% of the aggregate number of
the Shares to be purchased on such date, the other Underwriters shall be
obligated, severally, in the proportions that the number of Firm Common Shares
set forth opposite their respective names on Schedule A bears to the aggregate
number of Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as may be specified by the
Representatives with the consent of the non-defaulting Underwriters, to purchase
the Shares which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase on such date. If, on the First Closing Date or the Second
Closing Date, as the case may be, any one or more of the Underwriters shall fail
or refuse to purchase Shares and the aggregate number of Shares with respect to
which such default occurs exceeds 10% of the aggregate number of Shares to be
purchased on such date, and arrangements satisfactory to the Representatives and
the Company for the purchase of such Shares are not made within 48 hours after
such default, this Agreement shall terminate without liability of any party to
any other party except that the provisions of Section 4, and Section 7 shall at
all times be effective and shall survive such termination. In any such case
either the Representatives or the Company shall have the right to postpone the
First Closing Date or the Second Closing Date, as the case may be, but in no
event for longer than seven days in order that the required changes, if any, to
the Registration Statement and the Prospectus or any other documents or
arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be
deemed to include any person substituted for a defaulting Underwriter under this
Section 8. Any action taken under this Section 8 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
SECTION 9. TERMINATION OF THIS AGREEMENT. Prior to the First Closing
Date, this Agreement may be terminated by the Representatives by notice given to
the Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq Stock Market, or trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the National Association of
Securities Dealers, LLC; (ii) a general banking moratorium shall have been
declared by
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any of federal, New York, Delaware or California authorities; (iii) there shall
have occurred any outbreak or escalation of national or international
hostilities or any crisis or calamity, or any change in the United States or
international financial markets, or any substantial change or development
involving a prospective change in United States' or international political,
financial or economic conditions, as in the judgment of the Representatives is
material and adverse and makes it impracticable or inadvisable to market the
Common Shares in the manner and on the terms described in the Prospectus or to
enforce contracts for the sale of securities; (iv) in the judgment of the
Representatives there shall have occurred any Material Adverse Change; or (v)
the Company shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as in the judgment of the
Representatives may interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have been
insured. Any termination pursuant to this Section 9 shall be without liability
on the part of (a) the Company to any Underwriter, except that the Company shall
be obligated to reimburse the expenses of the Representatives, of the Selling
Stockholders and the Underwriters pursuant to Sections 5 and 6 hereof, (b) any
Underwriter to the Company, or (c) of any party hereto to any other party except
that the provisions of Section 7 shall at all times be effective and shall
survive such termination.
SECTION 10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Shares sold hereunder and any termination of this Agreement.
SECTION 11. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
BANCBOSTON ROBERTSON STEPHENS INC.
555 California Street
San Francisco, California 94104
Facsimile: (415) 676-2696
Attention: General Counsel
If to the Company or the Subsidiary:
ReSourcePhoenix.com, Inc.
2401 Kerner Boulevard
San Rafael, CA 94901
Facsimile: (415) 458-____
Attention: Bryant Tong
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 12. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 9 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 7, and to their
respective successors, and no other person will have any right or obligation
hereunder. The term "successors" shall
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not include any purchaser of the Shares as such from any of the Underwriters
merely by reason of such purchase.
SECTION 13. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 14. GOVERNING LAW PROVISIONS.
(a) Governing Law. This agreement shall be governed by and construed
in accordance with the internal laws of the state of New York applicable to
agreements made and to be performed in such state.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the City and County of San Francisco or the
courts of the State of California in each case located in the City and County of
San Francisco (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT Corporation System, which currently
maintains a San Francisco office at 49 Stevenson Street, San Francisco,
California 94105, United States of America, as its agent to receive service of
process or other legal summons for purposes of any such suit, action or
proceeding that may be instituted in any state or federal court in the City and
County of San Francisco.
(c) Waiver of Immunity. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise be entitled in the Specified Courts, and with respect
to any Related Judgment, each party waives any such immunity in the Specified
Courts or any other court of competent jurisdiction, and will not raise or claim
or cause to be pleaded any such immunity at or in respect of any such Related
Proceeding or Related Judgment, including, without limitation, any immunity
pursuant to the United States Foreign Sovereign Immunities Act of 1976, as
amended.
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SECTION 15. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
[The remainder of this page has been intentionally left blank.]
28.
<PAGE> 29
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
RESOURCEPHOENIX.COM, INC.
By:
-------------------------------------
[Title]
-------------------------------------
[SELLING STOCKHOLDERS]
By:
-------------------------------------
Attorney-in-fact for the Selling
Stockholders named in Schedule B
hereto
The foregoing Underwriting Agreement is hereby confirmed and
accepted by the Representatives as of the date first above written.
BANCBOSTON ROBERTSON STEPHENS INC.
THOMAS WEISEL PARTNERS LLC
On their behalf and on behalf of each of the several underwriters named in
Schedule A hereto.
BY BANCBOSTON ROBERTSON STEPHENS INC.
By:
----------------------------------
Authorized Signatory
29.
<PAGE> 30
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF FIRM COMMON SHARES TO
UNDERWRITERS BE PURCHASED
------------ -------------------------------
<S> <C>
BANCBOSTON ROBERTSON STEPHENS INC..................................... [___]
THOMAS WEISEL PARTNERS LLC............................................ [___]
[---]................................................................. [---]
[---]................................................................. [---]
[---]................................................................. [---]
Total......................................................... [___]
</TABLE>
S-A
<PAGE> 31
SCHEDULE B
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF
NUMBER OF FIRM OPTION SHARES
SELLING STOCKHOLDER SHARES TO BE SOLD TO BE SOLD
------------------- ----------------- -----------------
<S> <C> <C>
Selling Stockholder #1
[address]
Attention: [___]................................... [___] [___]
Selling Stockholder #2
[address]
Attention: [___]................................... [___] [___]
Total:..................................... [___] [___]
====== ======
</TABLE>
S-B
<PAGE> 32
EXHIBIT A
LOCK-UP AGREEMENT
BancBoston Robertson Stephens Inc.
Thomas Weisel Partners LLC
As Representatives of the Several Underwriters
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, California 94104
RE: ReSourcePhoenix.com, Inc. (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain
shares of Common Stock of the Company ("Common Stock") or securities convertible
into or exchangeable or exercisable for Common Stock. The Company proposes to
carry out a public offering of Common Stock (the "Offering") for which you will
act as the representatives (the "Representatives") of the underwriters. The
undersigned recognizes that the Offering will be of benefit to the undersigned
and will benefit the Company by, among other things, raising additional capital
for its operations. The undersigned acknowledges that you and the other
underwriters are relying on the representations and agreements of the
undersigned contained in this letter in carrying out the Offering and in
entering into underwriting arrangements with the Company with respect to the
Offering.
In consideration of the foregoing, the undersigned hereby agrees
that the undersigned will not offer to sell, contract to sell, or otherwise
sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") 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 (collectively, "Securities") now
owned or hereafter acquired directly by such person or with respect to which
such person has or hereafter acquires the power of disposition, otherwise than
(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution to partners or
stockholders of such person, provided that the distributees thereof agree in
writing to be bound by the terms of this restriction, (iii) with respect to
dispositions of Common Shares acquired on the open market, (iv) with respect to
sales or purchases of Common Stock acquired on the open market or (v) with the
prior written consent of BancBoston Robertson Stephens Inc., for a period
commencing on the date hereof and continuing to a date 180 days after the
Registration Statement is declared effective by the Securities and Exchange
Commission (the "Lock-up Period") The foregoing restriction has been expressly
agreed to preclude the holder of the Securities from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than such holder. Such
prohibited hedging or other transactions would include, without limitation, any
short sale (whether or not against the box) or any purchase, sale or grant of
any right (including, without limitation, any put or call option) with respect
to any Securities or with respect to any security (other than a broad-based
market basket or index) that included, relates to or derives any significant
part of its value from Securities. The undersigned also agrees and consents to
the entry of stop transfer instructions with the Company's transfer agent and
registrar against the transfer of shares of Common Stock or Securities held by
the undersigned except in compliance with the foregoing restrictions.
A-1
<PAGE> 33
This agreement is irrevocable and will be binding on the
undersigned and the respective successors, heirs, personal representatives, and
assigns of the undersigned.
Dated
----------------------------------
----------------------------------------
----------------------------------------
Printed Name of Holder
By:
-------------------------------------
----------------------------------------
Signature
----------------------------------------
Printed Name of Person Signing
(and indicate capacity of person signing
if signing as custodian,
trustee, or on behalf of an entity)
A-2
<PAGE> 34
EXHIBIT B
MATTERS TO BE COVERED IN THE OPINION OF COMPANY COUNSEL
(i) The Company and each Significant Subsidiary (as that term is
defined in Regulation S-X of the Act) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation;
(ii) The Company and each Significant Subsidiary has the corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus;
(iii) The Company and each Significant Subsidiary is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction, if any, in which the ownership or leasing of its
properties or the conduct of its business requires such qualification,
except where the failure to be so qualified or be in good standing would
not have a Material Adverse Effect. To such counsel's knowledge, the
Company does not own or control, directly or indirectly, any
corporation, association or other entity other than ReSource/Phoenix,
Inc.;
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and
outstanding shares of capital stock of the Company have been duly and
validly issued and are fully paid and nonassessable, and, to such
counsel's knowledge, will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration right,
right of first refusal or other similar right;
(v) All issued and outstanding shares of capital stock of each
Significant Subsidiary of the Company have been duly authorized and
validly issued and are fully paid and nonassessable, and, to such
counsel's knowledge, have not been issued in violation of or subject to
any preemptive right, co-sale right, registration right, right of first
refusal or other similar right and are owned by the Company free and
clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest;
(vi) The Firm Shares or the Option Shares, as the case may be, to be
issued by the Company pursuant to the terms of this Agreement have been
duly authorized and, upon issuance and delivery against payment therefor
in accordance with the terms hereof, will be duly and validly issued and
fully paid and nonassessable, and will not have been issued in violation
of or subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right.
(vii) The Company has the corporate power and authority to enter into
this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
(viii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed
and delivered by the Company and, assuming due authorization, execution
and delivery by you, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights
generally or by general equitable principles];
(ix) The Registration Statement has become effective under the Act
and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been
B-1
<PAGE> 35
issued and no proceedings for that purpose have been instituted or are
pending or threatened under the Securities Act;
(x) The 8-A Registration Statement complied as to form in all
material respects with the requirements of the Exchange Act; the 8-A
Registration Statement has become effective under the Exchange Act; and
the Firm Shares or the Option Shares have been validly registered under
the Securities Act and the Rules and Regulations of the Exchange Act and
the applicable rules and regulations of the Commission thereunder;
(xi) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements
(including supporting schedules) and financial data derived therefrom as
to which such counsel need express no opinion), as of the effective date
of the Registration Statement, complied as to form in all material
respects with the requirements of the Act and the applicable Rules and
Regulations; and the financial data derived therefrom as to which such
counsel need express no opinion) complied when filed pursuant to the
Exchange Act as to form in all material respects with the requirements
of the Act and the Rules and Regulations of the Exchange Act and the
applicable rules and regulations of the Commission thereunder;]
(xii) The information in the Prospectus under the caption "Description
of Capital Stock," to the extent that it constitutes matters of law or
legal conclusions, has been reviewed by such counsel and is a fair
summary of such matters and conclusions; and the forms of certificates
evidencing the Common Stock and filed as exhibits to the Registration
Statement comply with Delaware law;
(xiii) The description in the Registration Statement and the Prospectus
of the charter and bylaws of the Company and of statutes are accurate
and fairly present the information required to be presented by the
Securities Act;
(xiv) To such counsel's knowledge, there are no agreements, contracts,
leases or documents to which the Company is a party of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement
which are not described or referred to therein or filed as required;
(xv) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the
Company's indemnification obligations hereunder, concerning which no
opinion need be expressed) will not (a) result in any violation of the
Company's charter or bylaws or (b) to such counsel's knowledge, result
in a material breach or violation of any of the terms and provisions of,
or constitute a default under, any bond, debenture, note or other
evidence of indebtedness, or any lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or
instrument known to such counsel to which the Company is a party or by
which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any
order, writ or decree of any court, government or governmental agency or
body having jurisdiction over the Company or its subsidiary, or over any
of their properties or operations;
(xvi) No consent, approval, authorization or order of or qualification
with any court, government or governmental agency or body having
jurisdiction over the Company or its subsidiary, or over any of their
properties or operations is necessary in connection with the
consummation by the Company of the transactions herein contemplated,
except (i) such as have been obtained under the Securities Act, (ii)
such as may be required under state or other securities or Blue Sky laws
in connection with the purchase and the distribution of the Shares by
the
B-2
<PAGE> 36
Underwriters, (iii) such as may be required by the National Association
of Securities Dealers, LLC and (iv) such as may be required under the
federal or provincial laws of Canada;
(xvii) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Company or its subsidiary
of a character required to be disclosed in the Registration Statement or
the Prospectus by the Securities Act, other than those described
therein;
(xviii) To such counsel's knowledge, neither the Company nor its
subsidiary is presently (a) in material violation of its respective
charter or bylaws, or (b) in material breach of any applicable statute,
rule or regulation known to such counsel or, to such counsel's
knowledge, any order, writ or decree of any court or governmental agency
or body having jurisdiction over the Company or its subsidiary, or over
any of their properties or operations; and
(xix) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Company Shares or
other securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company
having rights known to such counsel to registration of such shares of
Company Shares or other securities, because of the filing of the
Registration Statement by the Company have, with respect to the offering
contemplated thereby, waived such rights or such rights have expired by
reason of lapse of time following notification of the Company's intent
to file the Registration Statement or have included securities in the
Registration Statement pursuant to the exercise of and in full
satisfaction of such rights.
(xx) The Company is not and, after giving effect to the offering and
the sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as
such term is defined in the Investment Company Act of 1940, as amended.
(xxi) To such counsel's knowledge, the Company owns or possesses
sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals, trade secrets and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary to conduct their
business as now conducted; and the expected expiration of any such
Intellectual Property Rights would not result in a Material Adverse
Effect. The Company has not received any notice of infringement or
conflict with asserted Intellectual Property Rights of others, which
infringement or conflict, if the subject of an unfavorable decision,
would result in a Material Adverse Effect. To such counsel's knowledge,
the Company's discoveries, inventions, products, or processes referred
to in the Registration Statement or Prospectus do not infringe or
conflict with any right or patent which is the subject of a patent
application known to the Company.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the First Closing Date or Second Closing Date,
as the case may be, the Registration Statement and any amendment or supplement
thereto (other than the financial statements including supporting schedules and
other financial and statistical information derived therefrom, as to which such
counsel need express no comment) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or at the First Closing
Date or the Second Closing Date, as the case may be, the Registration Statement,
the Prospectus and any
B-3
<PAGE> 37
amendment or supplement thereto (except as aforesaid) contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading
B-4
<PAGE> 38
EXHIBIT D
MATTERS TO BE COVERED IN THE OPINION OF UNDERWRITERS' COUNSEL
(i) The Shares to be issued by the Company have been duly authorized
and, upon issuance and delivery and payment therefor in accordance with
the terms of the Underwriting Agreement, will be validly issued, fully
paid and non-assessable.
(ii) The Registration Statement complied as to form in all material
respects with the requirements of the Act; the Registration Statement
has become effective under the Act and, to such counsel's knowledge, no
stop order proceedings with respect thereto have been instituted or
threatened or are pending under the Securities Act.
(iii) The 8-A Registration Statement complied as to form in all
material respects with the requirements of the Exchange Act; the 8-A
Registration Statement has become effective under the Exchange Act; and
the Shares have been validly registered under the Securities Act and the
Rules and Regulations of the Exchange Act and the applicable rules and
regulations of the Commission thereunder;
(iv) The Underwriting Agreement has been duly authorized, executed
and delivered by the Company.
Such counsel shall state that such counsel has reviewed the
opinions addressed to the Representatives from Wilson Sonsini Goodrich & Rosati,
each dated the date hereof, and furnished to you in accordance with the
provisions of the Underwriting Agreement. Such opinions appear on their face to
be appropriately responsive to the requirements of the Underwriting Agreement.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the First Closing Date or Second Closing Date,
as the case may be, the Registration Statement and any amendment or supplement
thereto (other than the financial statements including supporting schedules and
other financial and statistical information derived therefrom, as to which such
counsel need express no comment) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or at the First Closing
Date or the Second Closing Date, as the case may be, the Registration Statement,
the Prospectus and any amendment or supplement thereto (except as aforesaid)
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
D-1
<PAGE> 39
EXHIBIT E
MATTERS TO BE COVERED IN THE OPINION OF SELLING STOCKHOLDER COUNSEL
(i) The Underwriting Agreement has been duly authorized, executed
and delivered by or on behalf of, and is a valid and binding agreement
of, such Selling Stockholder, enforceable in accordance with its terms,
except as rights to indemnification thereunder may be limited by
applicable law and except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general
equitable principles.
(ii) The execution and delivery by such Selling Stockholder of, and
the performance by such Selling Stockholder of its obligations under,
the Underwriting Agreement and its Custody Agreement and its Power of
Attorney will not contravene or conflict with, result in a breach of, or
constitute a default under, the charter or by-laws, partnership
agreement, trust agreement or other organization documents, as the case
may be, of such Selling Stockholder, or, to the best of such counsel's
knowledge, violate, result in a breach of or constitute a default under
the terms of any other agreement or instrument to which such Selling
Stockholder is a party or by which it is bound, or any judgement, order
or decree applicable to such Selling Stockholder of any court,
regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over such Selling Stockholder.
(iii) Such Selling Stockholder has good and valid title to all of the
Common Shares which may be sold by such Selling Stockholder under the
Underwriting Agreement and has the legal right and power, and all
authorization and approvals required [under its charter and by-laws,]
[partnership agreement,] [trust agreement] [or other organizational
documents, as the case may be,] to enter into the Underwriting Agreement
and its Custody Agreement and its Power of Attorney, to sell, transfer
and deliver all of the Common Shares which may be sold by such Selling
Stockholder under the Underwriting Agreement and to comply with its
other obligations under the Underwriting Agreement, its Custody
Agreement and its Power of Attorney.
(iv) Each of the Custody Agreement and Power of Attorney of such
Selling Stockholder has been duly authorized, executed and delivered by
such Selling Stockholder and is a valid and binding agreement of such
Selling Stockholder, enforceable in accordance with its terms, except as
[rights to indemnification thereunder may be limited by applicable law
and except as] the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
or affecting creditors' rights generally or by general equitable
principles.
(v) Assuming that the Underwriters purchase the Shares which are
sold by such Selling Stockholder pursuant to the Underwriting Agreement
for value, in good faith and without notice of any adverse claims, the
delivery of such Shares pursuant to the Underwriting Agreement will pass
good and valid title to such Shares, free and clear of any security
interest, mortgage, pledge, lieu encumbrance or other claim.
(vi) To the best of such counsel's knowledge, no consent, approval,
authorization or other order of, or registration or filing with, any
court or governmental authority or agency, is required for the
consummation by such Selling Stockholder of the transactions
contemplated in the Underwriting Agreement, except as required under the
Securities Act, applicable state securities or blue sky laws, and from
the National Association of Securities Dealers, LLC.
E-1
<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 (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 forty million
(40,000,000) shares. Thirty-five million (35,000,000) shares shall be designated
common stock (the "Common Stock"), of which twenty-seven million eight hundred
thousand (27,800,000) shares shall be designated Class A common stock (the
"Class A Common Stock") and seven million two hundred thousand (7,200,000)
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.
Upon filing of this Amended and Restated Certificate of Incorporation,
there shall be effected a 0.72-for-1 reverse stock split with respect to the
Common Stock pursuant to which each outstanding share of Class A Common Stock is
converted into 0.72 of a share of Class A Common Stock and each outstanding
share of Class B Common Stock is converted into 0.72 of a share of Class B
Common Stock.
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
<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
-2-
<PAGE> 3
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, 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.
-3-
<PAGE> 4
(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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<PAGE> 5
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
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<PAGE> 6
Delaware 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.
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<PAGE> 7
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 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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<PAGE> 8
THIRD: The foregoing amendment and restatement of the Certificate of
Incorporation has been duly adopted by the Board of Directors of the Corporation
in accordance with the provisions of Section 242 of the General Corporation Law
of Delaware.
FOURTH: The foregoing amendment and restatement of the Certificate of
Incorporation has been duly adopted by the sole stockholder of the Corporation
in accordance with the provisions of Section 242 of the General Corporation Law
of Delaware.
FIFTH: The foregoing amendment and restatement of the Certificate of
Incorporation has been duly adopted in accordance with Section 245 of the
General Corporation Law of Delaware.
IN WITNESS WHEREOF, ReSourcePhoenix.com, Inc. has caused this
certificate to be executed by Bryant Tong, its President and Chief Operating
Officer, this 13th day of September 1999.
RESOURCEPHOENIX.COM, INC.,
a Delaware corporation
By:/s/ BRYANT TONG
---------------------------------
Bryant Tong, President and Chief
Operating Officer
<PAGE> 1
EXHIBIT 5.1
[WILSON SONSINI GOODRICH & ROSATI LETTERHEAD]
September 14, 1999
ReSourcePhoenix.com
2401 Kerner Boulevard
San Rafael, California 94901
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 filed by you with
the Securities and Exchange Commission on August 5, 1999 (the "Registration
Statement"), in connection with the registration under the Securities Act of
1933, as amended, of up to 4,887,500 shares of your Class A Common Stock (the
"Shares"). As your legal counsel, we have examined the proceedings taken, and
are familiar with the proceedings proposed to be taken, by you in connection
with the sale of the Shares.
It is our opinion that the Shares, when sold and issued in accordance with
the Registration Statement, will be legally issued, fully paid and
non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
<PAGE> 1
EXHIBIT 10.4
RESOURCEPHOENIX.COM
RESTATED 1999 STOCK PLAN
1. Purposes of the Plan. The purposes of this Restated 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, 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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<PAGE> 3
(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, Restated 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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<PAGE> 4
(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 1,260,000 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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<PAGE> 5
(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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<PAGE> 6
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 360,000 Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional 360,000
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;
-7-
<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
RESTATED EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Restated Employee Stock
Purchase Plan of ResourcePhoenix.com.
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 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 Restated 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 2,880
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 three hundred sixty thousand (360,000) 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
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<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.
-8-
<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.
-9-
<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.
-10-
<PAGE> 11
EXHIBIT A
RESOURCEPHOENIX.COM
RESTATED 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. Restated Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan") and subscribes to purchase shares of the
Company's Class A Common Stock in accordance with this Subscription
Agreement and the Restated 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 Restated 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 Class A Common Stock at the applicable Purchase
Price determined in accordance with the Restated 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 Restated Employee Stock Purchase
Plan. I understand that my participation in the Restated 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
Restated Employee Stock Purchase Plan.
5. Shares purchased for me under the Restated 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 Restated Employee Stock
Purchase Plan. The effectiveness of this Subscription Agreement is
dependent upon my eligibility to participate in the Restated 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
Restated Employee Stock Purchase Plan:
NAME: (Please print)____________________________________________________
(First) (Middle) (Last)
_________________________ ________________________________________
Relationship
________________________________________
(Address)
-2-
<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)
-3-
<PAGE> 14
EXHIBIT B
RESOURCEPHOENIX.COM
RESTATED EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the
RESOURCEPHOENIX.COM Restated 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 10.9
[ORACLE LETTERHEAD]
BUSINESS ALLIANCE PROGRAM AGREEMENT
This Business Alliance Program Agreement (the "Agreement") is between Oracle
Corporation with its principal place of business at 500 Oracle Parkway, Redwood
City, California 94085 ("Oracle") and ReSource/Phoenix, Inc. (legal name) with
its principal place of business at 2401 Kerner Boulevard, San Rafael, CA 94901
(the "Alliance Member"). The terms of this Agreement shall apply to each
Program license granted and to all services provided by Oracle under this
Agreement. When completed and executed by both parties, an Order Form shall
evidence the Program licenses granted and the services that are to be provided.
1. DEFINITIONS
1.1 "COMMENCEMENT DATE" shall mean the date on which the Programs are
delivered by Oracle, or if no delivery is necessary, the Effective Date
set forth on the relevant Order Form.
1.2 "DESIGNATED SYSTEM" shall mean the computer hardware and operating system
designated on the relevant Order Form or Sublicense report for use in
conjunction with a Sublicensed Program, Development License, or Marketing
Support License.
1.3 "ORDER FORM" shall mean the document by which the Alliance Member orders
Program licenses, Sublicenses, and services, and which is agreed to by
the parties. The Order Form shall reference the Effective Date of this
Agreement.
1.4 "PRICE LIST" shall mean Oracle's standard commercial fee schedule that is
in effect when a Program license, Sublicense, or services are ordered by
the Alliance Member.
1.5 "PROGRAM" shall mean the computer software in object code form owned or
distributed by Oracle for which the Alliance Member is granted a license
or grants a Sublicense pursuant to this Agreement; the user guides and
manuals for use of the software ("Documentation"); and Updates. "LIMITED
PRODUCTION PROGRAM" shall mean a Program not specified on the Price List
or which is designated as Limited Production by Oracle.
1.6 "SUBLICENSE ADDENDA" shall mean the addenda to this Agreement specifying
additional Sublicense terms and Sublicense rates and fees for the various
types of Sublicenses which may be granted by the Alliance Member.
1.7 "SUBLICENSE" shall mean a nonexclusive, nontransferable right granted by
or through the Alliance Member to an end user to use an object code copy
of the Programs with the Value-Added Package under authority of a
Sublicense Addendum. "SUBLICENSEE" shall mean a third party who is granted
a Sublicense of the Programs with the Value-Added Package for such
party's own internal data processing purposes and not for purposes of any
further distribution.
1.8 "SUPPORTED PROGRAM LICENSE" shall mean a Development License or Marketing
Support License for which the Alliance Member has ordered Technical
Support for the relevant time period. "TECHNICAL SUPPORT" shall mean
Program support provided under Oracle's policies in effect on the date
Technical Support is ordered.
1.9 "UPDATE" shall mean a subsequent release of a Program which is generally
made available for Supported Program Licenses at no additional charge,
other than media and handling charges. Update shall not include any
release, option or future product which Oracle licenses separately.
1.10 "USER," unless otherwise specified in the Order Form or Sublicense report
for a user type specified in the Price List in effect when the Program is
Sublicensed, shall mean a specific individual employed by the Alliance
Member or Sublicensee (as the case may be) who is authorized by such
party to use the Programs, regardless of whether the individual is
actively using the Programs at any given time.
1.11 "VALUE-ADDED PACKAGE" shall mean the hardware or software products or
services having added value which are developed, sold, and/or licensed
with the Programs to a Sublicensee by the Alliance Member, as provided
under the applicable Sublicense Addenda.
2. LICENSES GRANTED
2.1 DEVELOPMENT LICENSES AND TRIAL LICENSES
A. Oracle grants to the Alliance Member a nonexclusive license to use the
Development Licenses the Alliance Member obtains under this Agreement and
applicable Sublicense Addenda, as follows:
1. to develop or prototype the Value-Added Package on the Designated
System or on a backup system if the Designated System is inoperative, up
to any applicable maximum number of designated Users or other such
limitation as may be applicable;
2. to demonstrate the Programs to potential Sublicensees solely in
conjunction with the Value-Added Package;
3. to provide training and technical support to employees and to
customers solely in conjunction with the Value-Added Package;
4. to use the Documentation provided with the Programs in support of the
Alliance Member's authorized use of the Programs; and
5. to copy the programs for archival or backup purposes; no other copies
shall be made without Oracle's prior written consent. All titles,
trademarks, and copyright and restricted rights notices shall be
reproduced in such copies. All archival and backup copies of the Programs
are subject to the terms of this Agreement.
B. The Alliance Member may order temporary trial licenses ("Trial
Licenses") for its evaluation purposes only, and not for development or
prototype purposes, for use during a period specified in the Order Form.
Each Order Form for Trial Licenses shall clearly state
<PAGE> 2
the trial period and shall indemnify that the order is for a Trial
License.
2.2 MARKETING SUPPORT LICENSES
Oracle grants to the Alliance Member a nonexclusive license to use the
Marketing Support Licenses the Alliance Member obtains under this
Agreement and applicable Sublicense Addenda, as follows:
A. to demonstrate the Programs to potential Sublicensees solely in
conjunction with the Value-Added Package, up to any maximum number of
designated Users or other such limitation as may be applicable;
B. to develop customized prototypes of the Value-Added Package for
prospective Sublicensees on the Designated System if the Alliance Member
does not receive any fees related to the development of such customized
prototypes;
C. to use the Documentation provided with the Programs in support of the
Alliance Member's authorized use of the Programs; and
D. to copy the Programs for archival or backup purposes: no other copies
shall be made without Oracle's prior written consent. All titles,
trademarks, and copyright and restricted rights notices shall be
reproduced in such copies. All archival and backup copies of the Programs
are subject to the terms of this Agreement.
2.3 SUBLICENSING
A. LICENSE TO SUBLICENSE PROGRAMS
As further set forth in the applicable Sublicense Addenda, Oracle hereby
grants the Alliance Member a nonexclusive, nontransferable license to
market and grant Sublicenses as set forth in such Sublicense Addenda and
at the rates and fees set forth in such Sublicense Addenda. The Alliance
Member shall only have the right to Sublicense Programs pursuant to an
effective Sublicense Addendum between the parties hereto.
The Alliance Member shall Sublicense the Programs solely through a
written Sublicense agreement as provided under Section 2.3.B. Upon
Oracle's request, the Alliance Member shall provide Oracle with a copy of
the Alliance Member's standard Sublicense agreement.
B. SUBLICENSE AGREEMENT
Every Sublicense agreement shall include, at a minimum, contractual
provisions which:
1. Restrict use of the Programs to object code, subject to the
restrictions provided under the applicable Sublicense Addenda and
consistent with the Sublicense fees payable to Oracle;
2. Prohibit (a) transfer of the Programs except for temporary transfer in
the event of computer malfunction; (b) assignment, timesharing and rental
of the Programs; and (c) title to the Programs from passing to the
Sublicensee or any other party;
3. Prohibit the reverse engineering, disassembly or decompilation of the
Programs and prohibit duplication of the Programs except for a single
backup or archival copy;
4. Disclaim, to the extent permitted by applicable law, Oracle's liability
for any damages, whether direct, indirect, incidental or consequential,
arising from the use of the Programs;
5. Require the Sublicensee, at the termination of the Sublicense, to
discontinue use and destroy or return to the Alliance Member all copies of
the Programs and Documentation;
6. Prohibit publication of any results of benchmark tests run on the
Programs;
7. Require the Sublicensee to comply fully with all relevant export laws
and regulations of the United States to assure that neither the Programs,
nor any direct product thereof, are exported, directly or indirectly, in
violation of United States law; and
8. Specify Oracle as a third party beneficiary of the Sublicense agreement
to the extent permitted by applicable law.
C. MARKETING/SUBLICENSING PRACTICES
In marketing and Sublicensing the Programs, the Alliance Member shall:
1. Not engage in any deceptive, misleading, illegal or unethical
practices that may be detrimental to Oracle or to the Programs;
2. Not make any representations, warranties, or guarantees to
Sublicensees concerning the Programs that are inconsistent with or in
addition to those made in this Agreement or by Oracle; and
3. Comply with all applicable federal, state, and local laws and
regulations in performing its duties with respect to the Programs.
2.4 ACCEPTANCE OF PROGRAMS
For each Program license for which delivery from Oracle is required under
this Agreement, the Alliance Member shall have a 15 day Acceptance
Period, beginning on the Commencement Date, in which to evaluate the
Program. During the Acceptance Period, the Alliance Member may cancel the
license by giving written notice to Oracle and returning the Program in
accordance with Section 6.6 below. Unless such cancellation notice is
given, the license will be deemed to have been accepted by the Alliance
Member at the end of the Acceptance Period.
2.5 LIMITATIONS ON USE
The Alliance Member shall not use or duplicate the Programs (including
the Documentation) for any purpose other than as specified in this
Agreement or make the Programs available to unauthorized third parties.
The Alliance Member shall not (a) use the Programs for its internal data
processing or for processing customer data; (b) rent, electronically
distribute, or timeshare the Programs or market the Programs by
interactive cable or remote processing services or otherwise distribute
the Programs other than as specified in this Agreement; or (c) cause or
permit the reverse engineering, disassembly, or decompilation of the
Programs.
2.6 TITLE
Oracle shall retain all title, copyright, and other proprietary rights in
the Programs and any modifications or translations thereof. The Alliance
Member and its Sublicensees do not acquire any
1
<PAGE> 3
rights in the Programs other than those specified in this Agreement.
2.7 TRANSFER OF PROGRAMS
The Alliance Member may transfer a Development License or Marketing
Support License within its organization upon notice to Oracle: transfers
are subject to the terms and fees specified in Oracle's transfer policy in
effect at the time of the transfer.
2.8 USE OF PROGRAMS BY AGENTS
The Alliance Member and each Sublicensee (as the case may be) shall
have the right to allow each such party's own third party agents to use
each such party's licensed Programs as licensed or Sublicensed under this
Agreement so long as the applicable party ensures that its agents use the
Programs in accordance with the terms of this Agreement or the applicable
Sublicense agreement.
2.9 PRE-PRODUCTION PROGRAMS
As an accommodation to the Alliance Member, Oracle may supply the
Alliance Member with pre-production releases of Programs (which may be
labeled "Alpha" or "Beta"). These products are not suitable for production
use.
3. TECHNICAL SERVICES
3.1 TECHNICAL SUPPORT SERVICES
Oracle shall provide Technical Support services ordered by the
Alliance Member under Oracle's Technical Support policies in effect on the
date Technical Support is ordered, subject to the payment by the Alliance
Member of the applicable fees. Reinstatement of lapsed Technical Support
services is subject to Oracle's Technical Support reinstatement fees in
effect on the date Technical Support is re-ordered. The Alliance Member may
obtain Technical Support services for Limited Production Programs and
pre-production releases of Programs on a time and materials basis.
3.2 TRAINING SERVICES
Oracle will provide training services agreed to by the parties under
the terms of this Agreement. For any on-site services requested by the
Alliance Member, the Alliance Member shall reimburse Oracle for actual,
reasonable travel and out-of-pocket expenses incurred.
4. FEES AND PAYMENTS
4.1 LICENSE FEES AND SUBLICENSE FEES
The Alliance Member may order Development Licenses or Marketing
Support Licenses at the standard Program license fees set forth in the
Price List or at the fees otherwise provided in a Sublicense Addendum. For
each Sublicense granted by the Alliance Member, the Alliance Member agrees
to pay Oracle a Sublicense fee as set forth in the applicable Sublicense
Addenda. The Alliance Member shall not be relieved of its obligation to pay
Sublicense fees owed to Oracle by the nonpayment of such fees by the
Sublicensee.
The Alliance Member is free to determine unilaterally its own license
fees to its Sublicensees. If the Alliance Member or a Sublicensee upgrades
the Programs to a larger computer, transfers the Programs outside the
United States and/or to another operating system, or increases the licensed
number of Users, the Alliance Member will pay additional Sublicense fees to
Oracle as provided under Oracle's transfer policies and rates in effect at
the time the Program is upgraded or transferred.
4.2 TECHNICAL SUPPORT FEES
Technical Support services ordered by the Alliance Member for
Development Licenses and Marketing Support Licenses will be provided under
Oracle's Technical Support policies and rates in effect on the date
Technical Support is ordered.
4.3 GENERAL PAYMENT TERMS
Except as otherwise provided in a Sublicense Addendum, invoices for
payment of license fees shall be payable 30 days from the Commencement
Date. Technical Support fees for Sublicenses shall be payable as specified
in the applicable Sublicense Addendum. Technical Support fees for
Development Licenses and Marketing Support Licenses shall be payable
annually in advance, net 30 days from the renewal date; such fees will be
those in effect at the beginning of the period for which the fees are paid.
All payments made shall be in United States currency and shall be made
without deductions based on any taxes or withholdings, except where such
deduction is based on gross income. Any amounts payable by the Alliance
Member hereunder which remain unpaid after the due date shall be subject to
a late change equal to 1.5% per month from the due date until such amount
is paid. The Alliance Member agrees to pay applicable media and shipping
charges. The Alliance Member shall issue a purchase order, or alternative
document acceptable to Oracle, on or before the Effective Date of the
applicable Order Form.
4.4 TAXES
The fees listed in this Agreement do not include taxes; if Oracle is
required to pay sales, use, property, value-added, or other federal, state
or local taxes based on the licenses granted under this Agreement, or the
Sublicenses granted by the Alliance Member, then such taxes shall be billed
to and paid by the Alliance Member. This shall not apply to taxes based on
Oracle's income.
5. RECORDS
5.1 RECORDS INSPECTION
The Alliance Member shall maintain adequate books and records in
connection with activity under this Agreement. Such records shall include,
without limitation, executed Sublicense agreements, the information
required in or related to the Sublicense reports required under a
Sublicense Addendum, the number of copies of Programs used or Sublicensed
by the Alliance Member, the computers on which the Programs are installed,
and the number of Users using the Programs. Oracle may audit the relevant
books and records of the Alliance Member to ensure compliance with the
terms of this Agreement upon reasonable notice to the Alliance Member. Any
such audit shall be conducted during regular business hours at the Alliance
Member's offices and shall not interfere unreasonably with the Alliance
Member's business activities. If an audit reveals that the Alliance Member
has underpaid fees to Oracle, the Alliance Member shall be invoiced for
such underpaid
<PAGE> 4
fees based on the Price List in effect at the time the audit is completed.
If the underpaid fees exceed five percent (5%) of the applicable license
fees or Sublicense fees paid, then the Alliance Member shall pay Oracle's
reasonable costs of conducting the audit. Audits shall be made no more
than once annually.
5.2 NOTICE OF CLAIM
The Alliance Member will notify the Oracle legal department promptly
in writing of: (a) any claim or proceeding involving the Programs that
comes to its attention; and (b) any material change in the management or
control of the Alliance Member.
6. TERM AND TERMINATION
6.1 TERM
This Agreement shall become effective on the Effective Date and shall
be valid until the expiration or termination of all Sublicense Addenda
hereunder, unless terminated earlier as set forth herein. If not otherwise
specified on the Order Form, each Program license granted under this
Agreement shall remain in effect perpetually under the terms of this
Agreement unless the license or this Agreement is terminated as provided
in this Article 6 below. The term of each Sublicense Addendum hereunder
shall be as set forth in each such Addendum.
6.2 TERMINATION BY THE ALLIANCE MEMBER
The Alliance Member may terminate any Program license, any Sublicense
Addenda, or this Agreement at any time; however, termination shall not
relieve the Alliance Member's obligations specified in Sections 6.5 and
6.6.
6.3 TERMINATION BY ORACLE
Oracle may terminate any Program license, any Sublicense Addenda, or
this Agreement upon written notice if the Alliance Member breaches this
Agreement and fails to correct the breach within 30 days following written
notice specifying the breach.
6.4 FORCE MAJEURE
Neither party shall be liable to the other for failure or delay in
the performance of a required obligation if such failure or delay is
caused by strike, riot, fire, flood, natural disaster, or other similar
cause beyond such party's control, provided that such party gives prompt
written notice of such condition and resumes its performance as soon as
possible, and provided further that the other party may terminate this
Agreement if such condition continues for a period of one hundred eighty
(180) days.
6.5 EFFECT OF TERMINATION
Upon expiration or termination of a Sublicense Addendum or this
Agreement, all the Alliance Member's rights to market and Sublicense the
Programs as set forth in such Sublicense Addendum or this Agreement shall
cease.
The termination of this Agreement, a Sublicense Addendum, or any
license shall not limit either party from pursuing any other remedies
available to it, including injunctive relief, nor shall such termination
relieve the Alliance Member's obligation to pay all fees that have accrued
or that the Alliance Member has agreed to pay under a Sublicense Addendum
or any Order Form, other similar ordering document under this Agreement,
or that appear in a Sublicense report. The parties' rights and obligations
under Sections 2.5, 2.6, 2.7 and Articles 4, 5, 6, 7, and 8 shall survive
termination of this Agreement.
6.6 HANDLING OF PROGRAMS UPON TERMINATION
If a license granted under this Agreement expires or otherwise
terminates, the Alliance Member shall: (a) cease using the applicable
Programs; and (b) certify to Oracle within one month after expiration or
termination that the Alliance Member has destroyed or has returned to
Oracle the Programs and all copies. This requirement applies to copies in
all forms, partial and complete, in all types of media and computer
memory, and whether or not modified or merged into other materials. Before
returning Programs to Oracle, the Alliance Member shall acquire a Return
Material Authorization ("RMA") number from Oracle.
7. INDEMNITY, WARRANTIES, REMEDIES
7.1 INFRINGEMENT INDEMNITY
Oracle will defend and indemnify the Alliance Member against a claim
that Programs infringe a copyright or patent, provided that: (a) the
Alliance Member notifies Oracle in writing within 30 days of the claim; (b)
Oracle has sole control of the defense and all related settlement
negotiations; and (c) the Alliance Member provides Oracle with the
assistance, information and authority necessary to perform Oracle's
obligations under this Section. Reasonable out-of-pocket expenses incurred
by the Alliance Member in providing such assistance will be reimbursed by
Oracle.
Oracle shall have no liability for any claim of infringement based on
use of a superseded or altered release of Programs if the infringement
would have been avoided by the use of a current unaltered release of the
Programs which Oracle provides to the Alliance Member.
In the event the Programs are held or are believed by Oracle to
infringe, Oracle shall have the option, at its expense, to (a) modify the
Programs to be noninfringing; (b) obtain for the Alliance Member a license
to continue using the Programs; or (c) terminate the license for the
infringing Programs and refund the license fees paid for those Programs,
prorated over a five year term from the Commencement Date. This Section
7.1 states Oracle's entire liability and the Alliance Member's exclusive
remedy for infringement.
7.2 WARRANTIES AND DISCLAIMERS
A. PROGRAM WARRANTY
Oracle warrants for a period of one year from the Commencement Date
that each unmodified Program for which the Alliance Member has a Supported
Program License will perform the functions described in the Documentation
provided by Oracle when operated on the Designated System.
B. MEDIA WARRANTY
Oracle warrants the tapes, diskettes or other media to be free of
defects in materials and workmanship under normal use for 90 days from the
Commencement Date.
C. SERVICES WARRANTY
Oracle warrants that its Technical Support and training services will
be performed consistent with
3
<PAGE> 5
generally accepted industry standards. This warranty shall be valid for 90
days from performance of service.
D. DISCLAIMERS
THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Oracle does not warrant that the Programs will run properly on all
Hardware, that the Programs will meet requirements of the Alliance Member
or the Sublicensees or operate in the combinations which may be selected
for use by the Alliance Member or the Sublicensees, that the operation of
the Programs will be uninterrupted or error free, or that all Program
errors will be corrected. Limited Production Programs, Pre-Production
Releases of Programs, and Computer-Based Training Products are Distributed
"As Is."
The Alliance Member shall not make any warranty on Oracle's behalf.
7.3 EXCLUSIVE REMEDIES
For any breach of the warranties contained in Section 7.2 above, the
Alliance Member's exclusive remedy, and Oracle's entire liability, shall
be:
A. FOR PROGRAMS
The correction of Program errors that cause breach of the warranty, or
if Oracle is unable to make the Program operate as warranted, the Alliance
Member shall be entitled to recover the fees paid to Oracle for the Program
license.
B. FOR MEDIA
The replacement of defective media returned within 90 days of the
Commencement Date.
C. FOR SERVICES
The reperformance of the services, or if Oracle is unable to perform
the services as warranted, the Alliance Member shall be entitled to recover
the fees paid to Oracle for the unsatisfactory services.
7.4 INDEMNIFICATION OF ORACLE
The Alliance Member agrees to enforce the terms of its Sublicense
agreements required by this Agreement and to notify Oracle of any known
breach of such terms. The Alliance Member will defend and indemnify Oracle
against:
A. All claims and damages to Oracle arising from any use by the
Alliance Member or its Sublicensees of any product not provided by Oracle
but used in combination with the Programs if such claim would have been
avoided by the exclusive use of the Programs;
B. All claims and damages to Oracle caused by the Alliance Member's
failure to include the required contractual terms set forth in Section
2.3.B. hereof in each Sublicense agreement; and
C. All claims and damages to Oracle caused by Sublicensees' breach of
any of the applicable provisions required by Section 2.3 hereof.
7.5 EQUITABLE RELIEF
The Alliance Member acknowledges that any breach of its obligations
with respect to proprietary rights of Oracle will cause Oracle irreparable
injury for which there are inadequate remedies at law and that Oracle shall
be entitled to equitable relief in addition to all other remedies available
to it.
8. GENERAL TERMS AND CONDITIONS
8.1 NONDISCLOSURE
Neither party shall, without first obtaining the written consent of
the other party disclose the terms and conditions of this Agreement, except
as may be required to implement and enforce the terms of this Agreement, or
as may be required by legal procedures or by law. No other information
exchanged between the parties shall be deemed confidential unless the
parties otherwise agree in writing. The Alliance Member shall not disclose
the results of benchmark tests or other evaluation of the Programs to any
third party without Oracle's prior written approval.
8.2 COPYRIGHTS
The Programs are copyrighted by Oracle. The Alliance Member shall
retain all Oracle copyright notices on the Programs used by the Alliance
Member under its Development Licenses or Marketing Support Licenses. The
Alliance Member shall include the following on all copies of the Programs
in software Value-Added Packages incorporating the Programs distributed by
the Alliance Member:
A. A reproduction of Oracle's copyright notice; or
B. A copyright notice indicating that the copyright is vested in the
Alliance Member containing the following
1. A "c" in a circle and the word "copyright";
2. The Alliance Member's name;
3. The date of copyright; and
4. The words "All Rights Reserved."
Such notices shall be placed on the Documentation, the sign-on screen
for any software Value-Added Package incorporating the Programs, and the
diskette or tape labels. Notwithstanding any copyright notice by the
Alliance Member to the contrary, the copyright to the Program included in
any such application package shall remain in Oracle. Other than as
specified above, on any reproduction or translation of any Programs,
Documentation, or promotional material, the Alliance Member agrees to
reproduce Oracle's copyright notices intact.
8.3 TRADEMARKS
"Oracle" and any other trademarks and service marks adopted by Oracle
to identify the Programs and other Oracle products and services belong to
Oracle; the Alliance Member will have no rights in such marks except as
expressly set forth herein and as specified in writing from time to time.
The Alliance Member's use of Oracle's trademarks shall be under Oracle's
trademark policies and procedures in effect from time-to-time. The Alliance
Member agrees not to use the trademark "ORACLE," or any mark beginning with
the letters "Ora," or any other mark likely to cause confusion with the
trademark "ORACLE" as any portion of the Alliance Member's tradename,
trademark for the Alliance Member's Value-Added Package, or trademark for
any other products of the Alliance Member. The Alliance Member shall have
the right to use the trademark "ORACLE" and other
4
<PAGE> 6
Oracle trademarks solely to refer to Oracle's Programs, products and services.
The Alliance Member agrees with respect to each registered trademark of
Oracle, to include in each advertisement, brochure, or other such use of the
trademark, the trademark symbol "circle R" and the following statement:
________ is a registered trademark of Oracle Corporation, Redwood City,
California
Unless otherwise notified in writing by Oracle, the Alliance Member
agrees, with respect to every other trademark of Oracle, to include in each
advertisement, brochure, or other such use of the trademark, the symbol "TM" and
the following statement:
________ is a trademark of Oracle Corporation, Redwood City, California
The Alliance Member shall not market the Oracle Programs in any way which
implies that the Oracle Programs are the proprietary product of the Alliance
Member or of any party other than Oracle. Oracle shall not have any liability to
the Alliance Member for any claims made by third parties relating to the
Alliance Member's use of Oracle's trademarks.
8.4 RELATIONSHIPS BETWEEN PARTIES
In all matters relating to this Agreement, the Alliance Member will act as
an independent contractor. The relationship between Oracle and the Alliance
Member is that of licensor/licensee. Neither party will represent that it has
any authority to assume or create any obligation, express or implied, on behalf
of the other party, nor to represent the other party as agent, employee,
franchisee, or in any other capacity. Nothing in this Agreement shall be
construed to limit either party's right to independently develop or distribute
software which is functionally similar to the other party's product, so long as
proprietary information of the other party is not included in such software.
8.5 ASSIGNMENT
The Alliance Member may not assign or otherwise transfer any rights under
this Agreement without Oracle's prior written consent.
8.6 NOTICE
All notices, including notices of address change, required to be sent
hereunder shall be in writing and shall be deemed to have been given when
deposited in first class mail to the first address listed in the relevant Order
Form (if to the Alliance Member) or to the Oracle address on the Order Form (if
to Oracle).
To expedite order processing, the Alliance Member agrees that Oracle may
treat documents faxed by the Alliance Member to Oracle as original documents;
nevertheless, either party may require the other to exchange original signed
documents.
8.7 GOVERNING LAW/JURISDICTION
This Agreement, and all matters arising out of or relating to this
Agreement, shall be governed by the substantive and procedural laws of the State
of California and shall be deemed to be executed in Redwood City, California.
The parties agree that any legal action or proceeding relating to this Agreement
shall be instituted in any state or federal court in San Francisco or San Mateo
County, California. Oracle and the Alliance Member agree to submit to the
jurisdiction of, and agree that venue is proper in, these courts in any such
legal action or proceeding.
8.8 SEVERABILITY
In the event any provision of this Agreement is held to be invalid or
unenforceable, the remaining provisions of this Agreement will remain in full
force and effect.
8.9 EXPORT
The Alliance Member agrees to comply fully with all relevant export laws
and regulations of the United States ("Export Law") to assure that neither the
Programs, nor any direct product thereof, are (a) exported, directly or
indirectly, in violation of Export Laws; or (b) are intended to be used for any
purposes prohibited by the Export Laws, including, without limitation, nuclear,
chemical, or biological weapons proliferation.
8.10 LIMITATION OF LIABILITY
In no event shall either party be liable for any indirect, incidental,
special or consequential damages, or damages for loss of profits, revenue, data
or use, incurred by either party or any third party, whether in an action in
contract or tort, even if the other party or any other person has been advised
of the possibility of such damages. Oracle's liability for damages hereunder
shall in no event exceed the amount of fees paid by the Alliance Member under
this Agreement, and if such damages result from the Alliance Member's use of the
Program or services, such liability shall be limited to fees paid for the
relevant Program or services giving rise to the liability, prorated over a
five-year term from the Commencement Date of the applicable license or the date
of performance of the applicable services.
The provisions of this Agreement allocate the risks between Oracle and the
Alliance Member. Oracle's pricing reflects this allocation of risk and the
limitation of liability specified herein.
8.11 FEDERAL GOVERNMENT SUBLICENSES
If the Alliance Member grants a Sublicense to the United States
government, the Programs shall be provided with "Restricted Rights" and the
Alliance Member will place a legend, in addition to applicable copyright
notices, on the documentation, and on the tape or diskette lable, substantially
similar to the following:
RESTRICTED RIGHTS LEGEND
"Use, duplication or disclosure by the Government is subject to restrictions as
set forth in subparagraph (c)(1)(ii) of the Department of Defense Regulations
Supplement ("DFARS") 252.227-7013, Rights in Technical Data and Computer
Software (October 1988) and Federal Acquisition Regulation ("FAR") 52.227-14,
Rights in Data-General, including Alternate III (June 1987), as applicable.
Oracle Corporation, 500 Oracle Parkway, Redwood City, CA 94065."
8.12 WAIVER
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.
Except for actions for non-payment or breach of Oracle's
5
<PAGE> 7
proprietary rights in the Programs, no action, regardless of form,
arising out of this Agreement may be brought by either party more than
one year after the cause of action has accrued.
8.13 ENTIRE AGREEMENT
This Agreement constitutes the complete agreement between the
parties and supersedes all prior or contemporaneous agreements or
representations, written or oral, concerning the subject matter of this
Agreement. This Agreement may not be modified or amended except in a
writing signed by a duly authorized representative of each party; no
other act, document, usage or custom shall be deemed to amend or modify
this Agreement. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute together but one and the same document.
It is expressly agreed that the terms of this Agreement and any
Order Form shall supersede the terms in any Alliance Member purchase
order or other ordering document. This Agreement shall also supersede the
terms of any shrinkwrap or break-the-seal license agreement included in
any package for Oracle-furnished software, except terms contained in such
license agreement that grant specific use rights for the Programs.
The Effective Date of this Agreement shall be May 15, 1997.
EXECUTED BY THE ALLIANCE MEMBER: EXECUTED BY ORACLE CORPORATION:
/s/ RAY CHARTRAIN /s/ LLOYD E. ALEXANDER
- -------------------------------- -------------------------------
Authorized Signature: Authorized Signature:
Name: Ray Chartrain Name: Lloyd E. Alexander
-------------------------- -------------------------
Title: Director of Information Title: Manager-East Region
Technology Alliance Sales Support
------------------------- ------------------------
Oracle Corporation
500 Oracle Parkway
Redwood Shores, CA 94065
(415) 506-7000
Oracle is a registered trademark of Oracle Corporation.
1-95
6
<PAGE> 8
RUNTIME SUBLICENSE ADDENDUM
This document (the "Addendum") is between Oracle Corporation ("Oracle") and
ReSource/Phoenix, Inc. (the "Alliance Member") and shall be governed by the
terms of the Business Alliance Program Agreement between the Alliance Member and
Oracle effective May 15, 1997 (the "Agreement") and the terms set forth below.
1. SUBLICENSES
1.1 SUBLICENSE PROGRAMS AND TERMS
The Alliance Member may only Sublicense Runtime Programs for which
the Alliance Member has previously acquired a Supported Development
License for the applicable Designated System. Notwithstanding any other
provision of this Agreement, the Alliance Member shall have no right to
Sublicense Programs designated as Oracle Applications Programs, Oracle
Express Programs, Limited Production Programs, or other Programs specified
by Oracle from time-to-time without the prior written consent of Oracle.
The Alliance Member shall have the right to market and grant
Sublicenses of Runtime Programs under the conditions set forth in the
Agreement and under the following restrictions:
A. Sublicense Runtime Programs with the Application Program in the
Application Package for use on Designated Systems to Sublicensees. Each
copy of the Runtime Programs distributed shall be for the Sublicensee's
own internal use in the Territory only on a single Designated System
limited to a maximum number of Users; and
B. Make and deliver to the Sublicensee a single copy of the Runtime
Programs in the Application Package for each Sublicense granted.
The Alliance Member shall use all practical means available, both
contractual and technical, to control the restricted use of each Runtime
Program Sublicense. If a Sublicensee uses the Runtime Program beyond the
limited functionality described in Section 1.2 hereof, the Alliance Member
or Distributor shall immediately notify the Sublicensee of such
unauthorized use and if the Sublicensee fails to discontinue such
unauthorized use following notification either terminate the Sublicense or
forward to Oracle one hundred percent (100%) of the applicable Full Use
standard Program license fees in effect at the time the payment is made to
Oracle together with a written request by the Sublicensee for a Full Use
Program license from Oracle. Oracle must approve, in writing, the
Sublicensee's request before continued use of the Programs by the
Sublicensee shall be deemed authorized.
1.2 RUNTIME PROGRAMS
For the purposes of this Addendum, "Runtime Program(s)" shall mean
Programs which shall be limited to use solely for the purpose of executing
an unmodified standard version of the Alliance Member's Application
Program. Runtime Programs may not be used to build or modify reports or
applications. "Full Use Programs" shall mean unaltered versions of the
Programs with all functions intact.
1.3 VALUE-ADDED PACKAGE
For the purposes of this Addendum, "Application Program(s)" shall
mean the Alliance Member's value-added application software, described in
the attached Application Package Attachment with which the Runtime
Programs are to be coupled. "Application Package(s)" shall mean the
Runtime Programs coupled with the Application Programs. For purposes of
the Agreement, the Application Program shall be regarded as the Alliance
Member's Value-Added Package.
1.4 TRIAL SUBLICENSES
The Alliance Member and its Distributors shall be entitled to
grant, at no charge, up to a maximum combined total of ten (10) temporary
Trial Sublicenses of the Application Package at any one time. Such
Sublicenses shall be for evaluation purposes only and shall be for a
period not to exceed thirty (30) days. The Alliance Member shall pay
Oracle Sublicense fees for any Trial Sublicenses in excess of thirty (30)
days. Each such Trial Sublicense shall be Sublicensed under a Sublicense
agreement which provides for such trial use.
1.5 DISTRIBUTORS
Oracle grants the Alliance Member the right to appoint third parties
("Distributors") to market and Sublicense the Runtime Programs in the
Territory, under the terms of the Agreement and this Addendum. However,
Distributors shall have no right to make copies of the Programs for
Sublicensing and shall obtain all such Programs from the Alliance Member.
Each Distributor shall execute a written agreement with the Alliance
Member binding the Distributor to provisions substantially similar to
those contained in Sections 2.3, 2.5, 2.6, 5.1, 5.2, 6.1, 6.3, 6.4, 6.5,
7.2.D, 7.5, 8.1, 8.2, 8.3, 8.5, 8.7, 8.9 and 8.11 of the Agreement and to
those contained in Sections 1 (except 1.5), 3, 4, 5, and 6 of this
Addendum. Each obligation of the Alliance Member under such provisions
shall also be applicable to each Distributor. Each Distributor agreement
shall also contain any other provisions necessary for the Alliance Member
to satisfy its commitments under the Agreement. The Alliance Member shall
notify Oracle promptly in writing of the appointment of each such
Distributor.
In addition, the Alliance Member shall keep executed Distributor
agreements and records of the Distributor Information required under the
Alliance Member's Sublicense reports, and shall allow Oracle to inspect
such information as specified under the Agreement. The Alliance Member
will defend and indemnify Oracle against all damages to Oracle caused by
(i) the Distributor's failure to include the
<PAGE> 9
required contractual terms set forth in Section 2.3.B of the Agreement in
each Sublicense agreement, and (ii) the Distributors' breach of any of the
applicable provisions required in its Distributor agreement.
1.6 DOCUMENTATION
The Alliance Member shall be responsible for providing documentation
for Sublicensees. The Alliance Member shall have the right to incorporate
portions of the Documentation into the Alliance Member's documentation,
subject to the provisions of Section 8.2 of the Agreement.
2. SUBLICENSE FEES
2.1 SUBLICENSE FEES AND RATE
For each copy of the Programs Sublicensed by the Alliance Member or
its Distributor in the Application Package, the Alliance Member agrees to
pay Oracle a Sublicense fee equal to * percent * of the applicable
license fee for each such Program, as specified in the applicable Price
List and Alliance Member Price List supplement to such Price List in effect
at the time the applicable Programs are Sublicensed.
As further specified in Section 6 of this Addendum, Sublicense fees
shall be due and payable within twenty (20) days of the last day of each
month. The Alliance Member shall not be relieved of its obligation to pay
Sublicense fees owed to Oracle by the nonpayment of such fees by the
Sublicensee.
On or after each anniversary during the Term of this Addendum, Oracle
may amend the Sublicense fee percentage rate set forth above based on
Oracle's then-current standard Sublicense fee percentage rate schedule and
the actual amount of Sublicense fees received by Oracle hereunder.
2.2 PRICE LIST FOR SUBLICENSES
Notwithstanding any other provision of the Agreement, the applicable
Price List for determining Sublicense fees shall be the standard Price
List in effect at the time the Applicable Package is Sublicensed.
Notwithstanding any other provision of this Agreement, if the
Alliance Member issues a written Sublicense quote and such quote is
accepted by the applicable Sublicensee, for a period of ninety (90) days
after the date of submission of the quote to the Sublicensee, the
Sublicense fee applicable to the Programs identified in the quote shall be
based on the Price List in effect on such date.
2.3 USERS
The Sublicense fees for a Program shall be based and priced on the
applicable User Level for the maximum number of Users for such Program, as
specified in the Price List. The Alliance Member shall have the right to
Sublicense Programs on any User basis specified in the Price List in
effect at the time the applicable Program is Sublicensed.
3. TERM.
This Addendum shall become effective on the Effective Date of this
Addendum and shall be valid for three (3) years (the "Term") from the
Effective Date, unless terminated as provided in the Agreement. Any
renewal of this Addendum shall be subject to renegotiation of terms and
fees.
Unless the expiration or termination is for default by the Alliance
Member, the Alliance Member may continue using the release of the Programs
then in the Alliance Member's possession on the Designated Systems for
which Development Licenses were granted, solely for the purpose of
continuing technical support for Sublicenses granted prior to termination.
Such continued use of the Programs shall be subject to all the provisions
of this Agreement, including, without limitation, payment of the Technical
Support Fees specified herein.
4. TERRITORY
The Alliance Member shall have the right to market and grant
Sublicenses of Programs in the United States only (the "Territory").
5. TECHNICAL SUPPORT
5.1 TECHNICAL SUPPORT FOR SUBLICENSEES
A. INSTALLATION
The Alliance Member or its Distributors will be responsible for any
assistance needed to install the Application Package at Sublicensee sites.
B. SUBLICENSING SUPPORT
The Alliance Member is responsible for providing all technical
support, training and consultations to its Sublicensees and Distributors.
In consideration of the payments specified in Section 5.2, the Alliance
Member shall have the right to use the Oracle Technical Support services
acquired for its Supported Development Licenses to provide technical
support services to its Sublicensees as further set forth in the
Agreement. The Alliance Member shall continuously maintain Oracle
Technical Support services for the Development Licenses during the period
during which the Alliance Member provides technical support services to
any Sublicensees. Any questions from the Alliance Member's Sublicensees or
Distributors will be referred by Oracle to the Alliance Member.
5.2 TECHNICAL SUPPORT FEES
For Technical Support services for Sublicensees, each year the
Alliance Member agrees to pay Oracle annual Technical Support Fees for
each Runtime Program Sublicensed under this Addendum, a previous Alliance
Member Addendum, or previous distribution agreement between the parties
hereto where the Sublicensee received technical support services for such
Runtime Program during the applicable support period from the Alliance
Member. Annual Technical Support Fees for a Program shall be equal to the
applicable Technical Support Percentage Rate specified below,
corresponding to the highest Technical Support Services level specified
below for any Development License used under this Addendum, of the
cumulative Sublicense fees accrued to Oracle for a Sublicensed Program
supported by the Alliance Member.
<TABLE>
<CAPTION>
Technical Support Technical Support
Services Level Percentage Rate
----------------- -----------------
<S> <C>
Bronze *%
Silver *%
Gold *%
</TABLE>
* Confidential treatment requested.
2
<PAGE> 10
Upon December 31 of each year, the Alliance Member shall provide
Oracle a report setting forth all of the Alliance Members' Sublicenses and
those Sublicensed Programs which were supported by the Alliance Member
during the calendar year. The report shall also include the applicable
Technical Support Fees due and payable to Oracle for such calendar year.
The Alliance Member shall provide Oracle with payment of all Technical
Support Fees for such calendar year required under the applicable
December 31 report with such report in the form of a check made out in the
amount of such fees. All Technical Support Fees paid to Oracle are
noncancelable and nonrefundable.
On or after each anniversary during the Term of this Addendum, Oracle
may amend the Technical Support Percentage Rates set forth above based on
Oracle's then-current standard Technical Support percentage rate schedule.
6. SUBLICENSE REPORTS
Within twenty (20) days of the last day of each month, the Alliance
Member shall send Oracle a report detailing for that month:
A. For each Sublicensed Application Package shipped during the prior
month, Sublicensee name, address, make/model and operating system of the
Designated System, date of shipment, Runtime Programs shipped, maximum
number of licensed Users, whether the Sublicense is a Trial Sublicense, and
total Sublicense fees and Technical Support Fees due to Oracle;
B. For each Application Program licensed to end-users to be used with
previously installed software licensed by Oracle in conjunction with the
Application Program, Sublicensee name, address, make/model and operating
system of the computer, and date of installation; and
C. The Distributor agreements executed during the prior month, including
names and addresses of the Distributors.
The Alliance Member shall require its Distributors to report this
information to the Alliance Member on a monthly basis and will include it
in the report for the month in which the Alliance Member received the
information. The Alliance Member shall provide Oracle with payment of all
fees required under the monthly report with such report in the form of a
check made out in the amount of such fees.
7. ADDITIONAL LICENSES
During the Term, the Alliance Member may order production release
versions of Oracle off-the-shelf Programs available as production release
as of the Effective Date of this Addendum and listed on the Price List in
effect as of such date. The license fee for Development Licenses shall be
equal to Oracle's standard list license fees in effect when an order is
placed. The Alliance Member shall have the right to order Programs for use
as Marketing Support Licenses at no further charge to the Alliance Member.
The Alliance Member may obtain Technical Support services from Oracle for
such Programs under Oracle's applicable Technical Support fees and policies
in effect when such services are ordered.
The Effective Date of this Addendum shall be May 15, 1997.
<TABLE>
<S> <C>
EXECUTED BY THE ALLIANCE MEMBER: EXECUTED BY ORACLE CORPORATION:
Authorized Signature: /s/ RAY CHARTRAIN Authorized Signature: /s/ LLOYD E. ALEXANDER
------------------- ------------------------
Name: Ray Chartrain Name: Lloyd E. Alexander
----------------------------------- ----------------------------------------
Title: Director of Information Technology Title: Manager - East Region
---------------------------------- Alliances Sales Support
--------------------------------------
</TABLE>
ORACLE
Oracle Corporation
500 Oracle Parkway
Redwood Shores, CA 94065
(415) 506-7000
Oracle is a registered trademark of Oracle Corporation.
8-95
3
<PAGE> 11
AMENDMENT ONE
TO THE
RUNTIME SUBLICENSE ADDENDUM
TO THE
BUSINESS ALLIANCE PROGRAM AGREEMENT
BETWEEN
RESOURCE/PHOENIX, INC.
AND
ORACLE CORPORATION
This document ("Amendment One") shall serve to amend the Runtime Sublicense
Addendum between Resource/Phoenix, Inc. (the "Alliance Member") and Oracle
Corporation ("Oracle") dated May 15, 1997 (the "Addendum"). The Addendum and
this Amendment One are governed by the terms of the Business Alliance Agreement
between the Alliance Member and Oracle dated May 15, 1997 (the "Agreement").
The Addendum is amended as follows:
1. In the first sentence of Section 1.4, delete the words "ten (10)" and
replace them with the words "thirty (30)".
2. Add the following to the end of the last sentence of Section 1.5:
"of which the Alliance Member has had notice."
Other than the modifications set forth above, the terms and conditions of the
Addendum remain unchanged and in full force and effect.
The Effective Date of this Amendment One is May 15, 1997.
RESOURCE/PHOENIX, INC. ORACLE CORPORATION
By: /s/ RAY CHARTRAIN By: /s/ LLOYD E. ALEXANDER
-------------------------------------- ----------------------------
Name: Ray Chartrain Name: Lloyd E. Alexander
------------------------------------ --------------------------
Title: Director of Information Technology Title: MANAGER - EAST REGION
---------------------------------- ALLIANCES SALES SUPPORT
-------------------------
<PAGE> 12
ON ORACLE(TM) Trademark Usage Addendum
This Trademark Usage Addendum (the "Addendum") is between Oracle
Corporation ("Oracle") and ReSource/Phoenix, Inc. (the "Alliance
Member") and shall be governed by the terms of the Business Alliance
Program Agreement between the Alliance Member and Oracle effective June
30, 1997 (the "Agreement") and the terms set forth below. In the event
of any conflict between the terms of this Addendum and the terms of the
Agreement, the terms of this Addendum shall have precedence with respect
to the subject matter herein.
1. DEFINITIONS SPECIFIC TO THE ADDENDUM
1.1 "Mark" shall mean the trademark design which incorporates the words "On
Oracle," described in the On Oracle Logo Getting Started brochure
provided under separate cover, which may be changed by Oracle from time
to time.
1.2 "Qualified Product" shall mean those products of the Alliance Member's
Value-Added Package that connect and interact with the Oracle7(TM)
database, the Oracle8(TM) database, the Oracle(R) Universal Server
database, or any other designated qualifying Oracle database.
1.3 "Qualified Web Site" shall mean any World Wide Web site that uses the
Oracle Web Application Server product to run the Web site and either
uses a Qualified Product or uses no database.
2. RIGHTS GRANTED
2.1 Subject to the terms and conditions set forth in this Addendum and the
Agreement, Oracle hereby grants to Alliance Member a non-exclusive,
non-transferable, paid-up, personal right to use the Mark on the
Qualified Web Site, Qualified Product and promotional materials for the
Qualified Product.
2.2 Alliance Member agrees not to use the Mark in any manner that Oracle,
in its sole judgment, deems to (i) be in poor taste, (ii) be unlawful,
or (iii) have the purpose, object or intent to encourage unlawful
activity by others.
3. "ON ORACLE" TRADEMARK
Alliance Member agrees to comply with the terms set forth herein and in
the On Oracle Logo Program Identity Guidelines as provided by Oracle
from time to time.
A. Alliance Member shall be a current member of the Oracle Alliance
program (formerly known as the Business Alliance Program) and shall
submit to the Oracle Alliance program an updated company profile at
least once every three months.
B. Alliance Member shall comply with all other requirements set forth in
the "Qualifying Partners Requirements" section contained in the On
Oracle Logo Getting Started brochure.
C. Alliance Member may use the Mark worldwide only in connection with the
promotion of the Qualified Product and/or the Qualified Web Site and
only in accordance with the terms and conditions of this Addendum. The
Mark may not be used in connection with the display, advertising, or
promotion of any non-Qualified Product or non-Qualified Web Site.
D. The Mark is not to be altered and must be reproduced from the supplied
On Oracle Logo Identity Kit as provided by Oracle from time to time.
The Mark is not to be used in close proximity with any other trademark
or design, i.e., the Mark must stand alone in terms of commercial
impression generated by the particular usage.
E. Alliance Member agrees to take no action contrary to Oracle's ownership
of and rights in the Mark both during the term of this Addendum and
forever thereafter. Alliance Member's use of the Mark shall inure
solely to Oracle's benefit.
F. With each usage of the Mark, Alliance Member agrees to identify the
Mark as a trademark of Oracle Corporation in the following format: "The
On Oracle logo is a trademark of Oracle Corporation."
G. Alliance Member must exercise care in the use of the Mark so as not to
indicate to the public that Alliance Member is a division or affiliate
of Oracle or otherwise related to Oracle or that the Qualified Product
or Qualified Web Site is produced or has been tested, approved,
endorsed, certified, or warranted by Oracle.
H. Alliance Member must not adopt as its own trademark or use any word(s)
or design(s) confusingly similar to the Mark.
<PAGE> 13
4. PRODUCT QUALITY
4.1 Alliance Member agrees to maintain the quality of the Qualified
Product to a level of quality at least comparable with the current
quality of the Qualified Product.
4.2 Oracle may take all reasonable precautions to insure that the quality
of the Qualified Product is maintained, including inspecting the
Qualified Product. Alliance Member agrees to permit Oracle or its
appointed agent to inspect the Qualified Product and peripheral
materials, including, among other things, packaging, manuals,
instruction manuals, brochures, catalogs, and point-of-purchase
displays, which make use of the Mark, so as to determine whether such
usage of the Mark is in compliance with this Addendum.
4.3 Alliance Member agrees that if at any time it discontinues using the
Oracle Web Application Server product to power its Web Page, it shall
immediately discontinue using the Mark in connection with such Web
Page. Oracle may take reasonable precautions to ensure that the
Alliance Member has maintained and continues to maintain a Qualified
Web Site. Member agrees to permit Oracle or its appointed agent to
inspect the Qualified Web Site and peripheral materials, such as
packaging, manuals, instruction manuals, brochures, catalogs and
point-of-purchase displays which make use of the Mark, so as to
determine whether such usage of the Mark is in compliance with this
Addendum.
4.4 In the event that Oracle determines that the Qualified Product or the
Qualified Web Site does not meet Oracle's standards, Oracle shall
have the right to rescind its approval of the Alliance Member's use
of the Mark and to terminate this Addendum pursuant to Section 5
below.
5. TERM AND TERMINATION
5.1 Term
This Addendum shall become effective on the Effective Date and shall
be valid until May 31, 1998 (the "Expiration Date"), unless
terminated earlier as set forth herein. Oracle may, at its
discretion, extend the term of this Addendum beyond the Expiration
Date by providing notice to Alliance Member that such an extension
has been granted.
5.2 Termination
Either Party may terminate this Addendum at any time, provided,
however, that termination shall not relieve Alliance Member's
obligations specified in Sections 3E, 3G, 3H, 5.3, and 6. Termination
shall have no effect on the Agreement.
5.3 Effect of Termination or Expiration
Upon expiration or termination of this Addendum for any reason,
Alliance Member shall immediately discontinue all use of the Mark.
4. INDEMNIFICATION OF ORACLE
Alliance Member agrees that, in addition to its obligations under the
Agreement, as defined herein, and any other agreements entered into
with Oracle Corporation, Alliance Member will defend and indemnify
Oracle against all claims and damages arising by any use by any party
of any Qualified Product and or any Qualified Web Site on or in
connection with which the Mark is used. However, Alliance Member
shall not be obligated to defend or indemnify Oracle Corporation on
account of any claim of trademark infringement based upon Alliance
Member's use of the Mark in compliance with the terms of this
Addendum.
7. PROTECTION OF INTEREST
In the event that Alliance Member becomes aware of any unauthorized
use of the Mark by a third party, Alliance Member agrees to inform
Oracle promptly thereof and to cooperate fully, at Oracle's expense,
in any enforcement of Oracle's rights against such third party. It
shall be within Oracle's sole discretion to decide whether or not to
initiate or pursue proceedings against any such infringer.
8. EFFECTIVE DATE
The effective date of this Addendum shall be June 30, 1997
------------------------
ORACLE CORPORATION ReSource/Phoenix, Inc.
- ---------------------------------- ----------------------------------
Oracle Corporation Alliance Member
/s/ ARLEEN URQUHART /s/ RAYMOND C. CHARTRAIN
- ---------------------------------- ----------------------------------
By: By:
Arleen Urquhart Raymond C. Chartrain
- ---------------------------------- ----------------------------------
Print Name: Print Name
Direct Marketing Mgr.
WW Alliances & Technologies Dir. Director, Information Technology
- ---------------------------------- ----------------------------------
Title: Title:
<PAGE> 1
EXHIBIT 10.10
AMENDMENT ONE
TO THE
BUSINESS ALLIANCE PROGRAM AGREEMENT
BETWEEN
RESOURCE/PHOENIX, INC.
AND
ORACLE CORPORATION
This document ("Amendment One") shall serve to amend the Business Alliance
Program Agreement between Resource/Phoenix, Inc. (the "Alliance Member") and
Oracle Corporation ("Oracle") dated May 15, 1997 (the "Agreement").
The Agreement is amended as follows:
1. In line 4 of Section 6.3, "30" shall be deleted and replaced with "60".
2. Add the following to the end of Section 6.5:
"Each Sublicense granted by the Alliance Member effective at the time of
expiration or termination of this Agreement shall survive such expiration
or termination and shall continue in full force and effect until each such
Sublicense expires or terminates pursuant to the Sublicense agreement
relating to such Sublicense; provided, however, that the Alliance Member
shall immediately terminate a Sublicense upon the failure of the
Sublicensee to cure a breach of or default under the Sublicense agreement
within thirty (30) days after notification to the Sublicensee by the
Alliance Member or Oracle of the Sublicensee's failure to comply with its
duties and obligations under the applicable Sublicense agreement."
3. Insert the following at the end of Section 7.4.C:
"of which the Alliance Member has had notice."
Other than the modifications set forth above, the terms and conditions of the
Agreement remain unchanged and in full force and effect.
The Effective Date of this Amendment One is May 15, 1997.
RESOURCE/PHOENIX, INC. ORACLE CORPORATION
By: /s/ RAY CHARTRAIN By: /s/ LLOYD E. ALEXANDER
-------------------------- ---------------------------
Name: Ray Chartrain Name: Lloyd E. Alexander
------------------------ -------------------------
Title: Director of Information Title: Manager-East Region
Technology Alliances Sales Support
------------------------ -------------------------
<PAGE> 1
EXHIBIT 10.11
[ORACLE LOGO]
SOFTWARE LICENSE AND SERVICES AGREEMENT
This Software License and Services Agreement ("Agreement") is between Oracle
Corporation ("Oracle") and the Customer identified below. The terms of this
Agreement shall apply to each Program license granted and to all services
provided by Oracle under this Agreement, which will be identified on one or
more Order Forms.
1. DEFINITIONS
1.1. "PROGRAM" means the software in object code form distributed by Oracle for
which Customer is granted a license pursuant to this Agreement, and the
media, Documentation and Updates therefor.
1.2. "DOCUMENTATION" means the user guides and manuals for installation and use
of the Program software. Documentation is provided in CD-ROM or bound
form, whichever is generally available.
1.3. "UPDATE" means a subsequent release of the Program which Oracle generally
makes available for Program licenses at no additional license fee other
than media and handling charges, provided Customer has ordered Technical
Support for such licenses for the relevant time period. Update shall not
include any release, option or future product which Oracle licenses
separately.
1.4. "ORDER FORM" means the document in hard copy or electronic form by which
Customer orders Program licenses and services, and which is agreed to by
the parties. The Order Form shall reference the Effective Date of this
Agreement.
1.5. "DESIGNATED SYSTEM" means the computer hardware and operating system
designated on the relevant Order Form.
1.6. "TECHNICAL SUPPORT" means Program support provided under Oracle's policies
in effect on the date Technical Support is ordered.
1.7. "COMMENCEMENT DATE" means the date on which the Programs are delivered by
Oracle to Customer, or if no delivery is necessary, the Effective Date set
forth in the relevant Order Form.
II. PROGRAM LICENSE
2.1. RIGHTS GRANTED
A. Oracle grants to Customer a nonexclusive license to use the Programs
specified on an Order Form under this Agreement, as follows:
i. to use the Programs solely for Customer's operations on the
Designated System or on a backup system if the Designated System
is inoperative, consistent with the use limitations specified or
referenced in this Agreement, an Order Form, or the
Documentation. Customer may not relicense, rent or lease the
Programs or use the Programs for third-party training,
commercial time-sharing or service bureau use;
ii. to use the Documentation provided with the Programs in support
of Customer's authorized use of the Programs;
iii. to copy the Programs for archival or backup purposes, and to
make a sufficient number of copies for the use specified in the
Order Form. All titles, trademarks, and copyright and restricted
rights notices shall be reproduced in such copies;
iv. to modify the Programs and combine them with other software
products; and
v. to allow third parties to use the Programs for Customer's
operations so long as Customer ensures that use of the Programs
is in accordance with the terms of this Agreement.
Customer shall not copy or use the Programs (including the
Documentation) except as specified in this Agreement or an Order Form.
Customer shall have no right to use any other software program that
may be delivered with ordered Programs.
B. Customer agrees not to cause or permit the reverse engineering,
disassembly or decompilation of the Programs, except to the extent
required to obtain interoperability with other independently created
software or as specified by law.
C. Oracle shall retain all title, copyright and other proprietary rights
in the Programs. Customer does not acquire any rights, express or
implied, in the Programs, other than those specified in this
Agreement.
2.2 TRANSFER AND ASSIGNMENT
A. Customer may transfer a Program license within its organization upon
notice to Oracle; transfers are subject to the terms and fees
<PAGE> 2
specified in Oracle's transfer policy in effect at the time of the
transfer.
B. Customer may not assign this Agreement or transfer a Program License
to a legal entity separate from Customer without the prior written
consent of Oracle. Oracle shall not unreasonably withhold or delay
such consent.
2.3. VERIFICATION
At Oracle's written request, not more frequently than annually, Customer
shall furnish Oracle with a signed certification verifying that the
Programs are being used pursuant to the provisions of this Agreement and
applicable Order Forms.
Oracle may audit Customer's use of the Programs. Any such audit shall be
conducted during regular business hours at Customer's facilities and
shall not unreasonably interfere with Customer's business activities. If
an audit reveals that Customer has underpaid fees to Oracle, Customer
shall be invoiced for such underpaid fees. Audits shall be conducted no
more than once annually.
III. TECHNICAL SERVICES
3.1. TECHNICAL SUPPORT SERVICES
Technical Support services ordered by Customer will be provided under
Oracle's Technical Support policies in effect on the date Technical
Support is ordered.
3.2. CONSULTING AND TRAINING SERVICES
Oracle will provide consulting and training services agreed to by the
parties under the terms of this Agreement. All consulting services shall
be billed on a time and materials basis unless the parties expressly
agree otherwise in writing.
3.3. INCIDENTAL EXPENSES
For any on-site services requested by Customer, Customer shall reimburse
Oracle for actual, reasonable travel and out-of-pocket expenses incurred.
IV. TERM AND TERMINATION
4.1. TERM
If not otherwise specified on the Order Form, this Agreement and each
Program license granted under this Agreement shall continue perpetually
unless terminated under this Article IV.
4.2. TERMINATION BY CUSTOMER
Customer may terminate any Program license at any time; however,
termination shall not relieve Customer's obligations specified in Section
4.4.
4.3. TERMINATION BY ORACLE
Oracle may terminate this Agreement or any license upon written notice if
Customer materially breaches this Agreement and fails to correct the
breach within 30 days following written notice specifying the breach.
4.4. EFFECT OF TERMINATION
Termination of this Agreement or any license shall not limit either party
from pursuing other remedies available to it, including injunctive
relief, nor shall such termination relieve Customer's obligation to pay
all fees that have accrued or are otherwise owed by Customer under any
Order Form. The parties' rights and obligations under Sections 2.1.B,
2.1.C, and 2.2.B, and Articles IV, V, VI and VII shall survive
termination of this Agreement. Upon termination, Customer shall cease
using, and shall return or destroy, all copies of the applicable Programs.
V. INDEMNITY, WARRANTIES, REMEDIES
5.1. INFRINGEMENT INDEMNITY
Oracle will defend and indemnify Customer against a claim that the
Programs infringe a copyright or patent or other intellectual property
right, provided that: (a) Customer notifies Oracle in writing within 30
days of the claim; (b) Oracle has sole control of the defense and all
related settlement negotiations; and (c) Customer provides Oracle with
the assistance, information and authority necessary to perform Oracle's
obligations under this Section. Oracle will reimburse Customer's
reasonable out-of-pocket expenses incurred in providing such assistance.
Oracle shall have no liability for any claim of infringement based on use
of a superseded or altered release of Programs if the infringement would
have been avoided by the use of a current unaltered release of the
Programs which Oracle provides to Customer.
If the Programs are held or are believed by Oracle to infringe, Oracle
shall have the option, at its expense, to (a) modify the Programs to be
noninfringing; or (b) obtain for Customer a license to continue using the
Programs. If it is not commercially reasonable to perform either of the
above options, then Oracle may terminate the license for the infringing
Programs and refund the license fees paid for those Programs. This
Section 5.1 states Oracle's entire liability and Customer's exclusive
remedy for infringement.
5.2. WARRANTIES AND DISCLAIMERS
A. Program Warranty
Oracle warrants for a period of one year from the Commencement Date
that each unmodified Program license will perform the functions
described in the Documentation.
B. Media Warranty
Oracle warrants the tapes, diskettes or other media to be free of
defects in materials and workmanship under normal use for 90 days
from the Commencement Date.
<PAGE> 3
C. Services Warranty
Oracle warrants that its Technical Support, training and consulting
services will be performed consistent with generally accepted
industry standards. This warranty shall be valid for 90 days from
performance of service.
D. Disclaimers
THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED
WARRANTIES OR MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Oracle does not warrant that the Programs will operate in
combinations other than as specified in the Documentation or that
the operation of the Programs will be uninterrupted or error-free.
Pre-production releases of Programs and computer-based training
products are distributed "AS IS."
5.3. EXCLUSIVE REMEDIES
For any breach of the warranties contained in Section 5.2, Customer's
exclusive remedy, and Oracle's entire liability, shall be:
A. For Programs
The correction of Program errors that cause breach of the warranty,
or if Oracle is unable to make the Program operate as warranted,
Customer shall be entitled to terminate the Program license and
recover the fees paid to Oracle for the Program license.
B. For Media
The replacement of defective media returned within 90 days of the
Commencement Date.
C. For Services
The reperformance of the services, or if Oracle is unable to perform
the services as warranted, Customer shall be entitled to recover the
fees paid to Oracle for the unsatisfactory services.
VI. PAYMENT PROVISIONS
6.1. INVOICING AND PAYMENT
All fees shall be due and payable 30 days from the invoice date. Any
amounts payable by Customer hereunder which remain unpaid after the due
date shall be subject to a late charge equal to 1.5% per month from the
due date until such amount is paid. Customer agrees to pay applicable
media and shipping charges. Customer shall issue a purchase order, or
alternative document acceptable to Oracle, on or before the Effective
Date of the applicable Order Form.
6.2. TAXES
The fees listed in this Agreement do not include taxes; if Oracle is
required to pay sales, use, property, value-added or other taxes based on
the licenses or services granted in this Agreement or on Customer's use
of Programs or services, then such taxes shall be billed to and paid by
Customer. This Section shall not apply to taxes based on Oracle's income.
VII. GENERAL TERMS
7.1. NONDISCLOSURE
By virtue of this Agreement, the parties may have access to information
that is confidential to one another ("Confidential Information").
Confidential Information shall be limited to the Programs, the terms and
pricing under this Agreement, and all information clearly identified as
confidential.
A party's Confidential Information shall not include information that:
(a) is or becomes a part of the public domain through no act or omission
of the other party; (b) was in the other party's lawful possession prior
to the disclosure and had not been obtained by the other party either
directly or indirectly from the disclosing party; (c) is lawfully
disclosed to the other party by a third party without restriction on
disclosure; or (d) is independently developed by the other party.
Customer shall not disclose the results of any benchmark tests of the
Programs to any third party without Oracle's prior written approval.
The parties agree to hold each other's Confidential Information in
confidence during the term of this Agreement and for a period of two
years after termination of this Agreement. The parties agree, unless
required by law, not to make each other's Confidential Information
available in any form to any third party for any purpose other than the
implementation of this Agreement. Each party agrees to take all
reasonable steps to ensure that Confidential Information is not disclosed
or distributed by its employees or agents in violation of the terms of
this Agreement.
7.2. GOVERNING LAW
This Agreement, and all matters arising out of or relating to this
Agreement, shall be governed by the laws of the State of California.
7.3. JURISDICTION
Any legal action or proceeding relating to this Agreement shall be
instituted in a state or federal court in San Francisco or San Mateo
County, California. Oracle and Customer agree to submit to the
jurisdiction of, and agree that venue is proper in, these courts in any
such legal action or proceeding.
7.4. NOTICE
All notices, including notices of address change, required to be sent
hereunder shall be in writing and shall be deemed to have been given when
mailed by first class mail to the first address listed in the relevant
Order Form (if to Customer) or to the Oracle address on the Order Form
(if to Oracle).
<PAGE> 4
To expedite order processing, Customer agrees that Oracle may treat
documents faxed by Customer to Oracle as original documents; nevertheless,
either party may require the other to exchange original signed documents.
7.5. LIMITATION OF LIABILITY
In no event shall either party be liable for any indirect, incidental,
special or consequential damages, or damages for loss of profits, revenue,
data or use, incurred by either party or any third party, whether in an
action in contract or tort, even if the other party has been advised of the
possibility of such damages. Oracle's liability for damages hereunder shall
in no event exceed the amount of fees paid by Customer under this
Agreement, and if such damages result from Customer's use of the Program or
services, such liability shall be limited to fees paid for the relevant
Program or services giving rise to the liability.
The provisions of this Agreement allocate the risks between Oracle and
Customer. Oracle's pricing reflects this allocation of risk and the
limitation of liability specified herein.
7.6. SEVERABILITY
If any provision of this Agreement is held to be invalid or unenforceable,
the remaining provisions of this Agreement will remain in full force.
7.7. WAIVER
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.
Except for actions for nonpayment or breach of Oracle's proprietary rights
in the Programs, no action, regardless of form, arising out of this
Agreement may be brought by either party more than two years after the
cause of action has accrued.
7.8. EXPORT ADMINISTRATION
Customer agrees to comply fully with all relevant export laws and
regulations of the United States ("Export Laws") to assure that neither the
Programs nor any direct product thereof are (1) exported, directly or
indirectly, in violation of Export Laws; or (2) are intended to be used for
any purposes prohibited by the Export Laws, including, without limitation,
nuclear, chemical, or biological weapons proliferation.
7.9. ENTIRE AGREEMENT
This Agreement constitutes the complete agreement between the parties and
supersedes all prior or contemporaneous agreements or representations,
written or oral, concerning the subject matter of this Agreement. This
Agreement may not be modified or amended except in a writing signed by a
duly authorized representative of each party; no other act, document, usage
or custom shall be deemed to amend or modify this Agreement.
It is expressly agreed that the terms of this Agreement and any Order Form
shall supersede the terms in any Customer purchase order or other ordering
document. This Agreement shall also supersede all terms of any unsigned or
"shrinkwrap" license included in any package, media, or electronic version
of Oracle-furnished software and any such software shall be licensed under
the terms of this Agreement, provided that the use limitations contained in
an unsigned ordering document shall be effective for the specified
licenses.
The Effective Date of this Agreement shall be 11/14/97.
Executed by Customer:
--------------------------
Authorized Signature: /s/ BRYANT TONG
----------------------------
Name: Bryant Tong
-------------------------------------------
Title: Senior Vice President
------------------------------------------
Address: 2401 Kerner Blvd., San Rafael, CA
---------------------------------------
Executed by Oracle Corporation:
Authorized Signature: /s/ ANDREA BARCLAY
----------------------------
Name: Andrea Barclay
-------------------------------------------
Title: Senior Contract Specialist
------------------------------------------
Address: 500 Oracle Parkway, Redwood City, CA
---------------------------------------
Oracle is a registered trademark of Oracle Corporation
<PAGE> 5
[ORACLE LOGO]
NETWORK LICENSE ORDER FORM
Customer Name: Resource/Phoenix, Inc. Contract Administrator: Bryant Tong
Customer Location: 2401 Kerner Blvd. Phone: 415-485-4640
San Rafael, CA 94901 Fax: 415-485-4522
- --------------------------------------------------------------------------------
ORACLE CONTRACT INFORMATION
Agreement: Software License and Services Agreement
Agreement Name: SLSA-272168-14-NOV-97
This Network License Order Form and attachment(s) (Order Form)
are placed in accordance with the agreement specified above
("Agreement"). Customer hereby orders the Program licenses
described herein for use in the United States, unless otherwise
specified. The Network is defined as any number or combination
of Computers of the Designated Systems listed in this Order
Form, except for Power-Unit based, Computer-based,
Processor-based licenses or other similar licenses as specified
herein.
- --------------------------------------------------------------------------------
A. DESIGNATED SYSTEMS/PROGRAMS
Make/Model: DEC ALPHA Make/Model: PC Compatible
Operating System: UNIX Operating System: Windows NT
Media: CD Media: CD
CSI: ________ CSI: ________
Make/Model: SUN Make/Model: HP
Operating System: SOLARIS Operating System: HP-UX
Media: CD Media: CD
CSI: ________ CSI: ________
<PAGE> 6
Page 2 of 10
<TABLE>
<CAPTION>
DESCRIPTION QUANTITY LICENSE LEVEL LICENSE TYPE
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Per User Licenses:
For use in the U.S.
Oracle81 Enterprise Edition 231 Full Use Concurrent
Diagnostics Pack 231 Full Use Concurrent
Tuning Pack 231 Full Use Concurrent
Express Server 5 Full Use Concurrent
Per User Licenses:
For use in the U.S.
Oracle Developer Server 231 Full Use Concurrent
Oracle Applications Licenses:
Total of 350 Named users and 350 Casual users distributed as follows:
For use in the U.S.
*Oracle Financials 200 Full Use Named
*Oracle Discrete Manufacturing 35 Full Use Named
*Oracle Order Management 35 Full Use Named
*Oracle Purchasing 20 Full Use Named
*Oracle Project Costing 35 Full Use Named
*Oracle Financials 225 Full Use Casual
*Oracle Discrete Manufacturing 35 Full Use Casual
*Oracle Order Management 35 Full Use Casual
*Oracle Purchasing 20 Full Use Casual
*Oracle Project Costing 35 Full Use Casual
*Oracle Project Billing 25 Full Use Named
Oracle EDI Gateway 1 Full Use Computer
</TABLE>
<PAGE> 7
Page 3 of 10
<TABLE>
<CAPTION>
DESCRIPTION QUANTITY LICENSE LEVEL LICENSE TYPE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Client Licenses:
For use in the U.S.
Personal Express 5 Full Use Named
Oracle Discoverer End User Edition 10 Full Use Named
Oracle Discoverer Administration Edition 1 Full Use Named
Oracle Financial Analyzes 5 Full Use Named
Net License Fees: $ *
Less Credit for Terminated Licenses: $ *
----------
Adjusted Net License Fees: $ *
Initial Year Annual Technical Support Fee: $ *
Technical Support Type: Silver
TOTAL FEES: $ *
==========
</TABLE>
*For purposes of this Order Form, Named and Casual Users of the Applications
Programs above shall be counted based on the Primary Usage.
*Confidential treatment requested.
<PAGE> 8
Page 4 of 10
ORACLE
B. GENERAL TERMS
1. Customer Definition. For purposes of this Order Form, Customer shall be
defined as the company listed at the head of this Order Form and its
majority owned subsidiaries located in the U.S. as of the Effective
Date. Before accessing the Programs, each subsidiary must agree in
writing to be bound by the terms of the Agreement and this Order Form.
2. Technical Support. Annual Technical Support Services ordered by
Customer will be provided under Oracle's Technical Support Policies and
pricing in effect on the date Technical Support is ordered and shall be
effective upon shipment (or upon Order Form Effective Date for products
not requiring shipment); first year Technical Support is quoted above,
if ordered. Fees for Technical Support are due and payable annually in
advance.
3. Miscellaneous. Customer is licensed to use each Program only on the
Designated System(s) specified in Section A of this Order Form and for
which such Program is available on the Effective Date. The Product
Summary and/or the Shipment Summary included with this Order Form
specifies the Programs on the particular Designated Systems requested by
Customer, which have been shipped or currently are being shipped to
Customer. Oracle shall deliver to the Customer Location, for use in the
U.S., 1 copy of the software media ("Master Copy") and 1 set of
Documentation (in the form generally available) for each Program
currently available in production release as of the Effective Date below
for use on the Network. Customer shall have the right to make up to 1
copy of the Program(s), including Documentation, for each license of the
Program(s) and the Customer shall be responsible for installation of the
software. All fees under this Order Form shall be due and payable net 60
days from date of invoice, and shall be non-cancellable and the sums
paid nonrefundable. Customer agrees to pay applicable sales/use tax,
media and shipping charges. If Customer loses or damages the media
containing a Program licensed hereunder, upon Customer's written notice
Oracle will provide a replacement copy thereof, under Oracle's
then-current Technical Support policies, for a media and shipping
charge. The following shipping terms shall apply: FOB Destination,
Prepaid, and Add. These terms shall also apply to any options exercised
by Customer. Oracle may refer to Customer as a customer in sales
presentations, marketing vehicles and activities.
C. OTHER
1. Additional Programs. For a period of 1 year from the Effective Date,
Customer may add the Programs in the Categories specified below to this
Order Form if such Programs are available in production release and are
listed on Oracle's U.S. Price List for installation on the Designated
Systems types as of the Effective Date. The license fee for such
Programs shall be at the discounts, specified below, off Oracle's
standard applicable list license fees in effect as of the Effective
Date. Upon Customer's exercise of this option, Oracle shall ship the
Programs to Customer pursuant to the Miscellaneous section above.
Customer may acquire Technical Support from Oracle for such Programs
under Oracle's Technical Support fees and policies in effect when an
order is placed.
<TABLE>
<CAPTION>
Discount off Oracle's
Categories (see attached exhibit) License Level List License Fees
- --------------------------------- ------------- ---------------------
<S> <C> <C>
Server Programs Full Use *%
Tools Programs Full Use *%
Applications Programs Full Use *%
</TABLE>
*Confidential treatment requested.
<PAGE> 9
Page 5 of 10
2. Additional License Increments. For 1 year from the Effective Date, provided
Customer has continuously maintained Technical Support, Customer may
increase the quantity of each applicable License Type accessing the
Programs on this Order Form ("Additional License Increment") by paying
Oracle the license fee for such Additional License Increments at the
discounts, specified below, off Oracle's standard applicable list license
fees in effect as of the Effective Date:
<TABLE>
<CAPTION>
DISCOUNT OFF ORACLE'S
PROGRAM LICENSE TYPE LICENSE LEVEL LICENSE INCREMENT LIST LICENSE FEES
------- ------------ -------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Oracle81 Enterprise Edition Concurrent Full Use 1 $ *
Diagnostics Pack Concurrent Full Use 1 $ *
Tuning Pack Concurrent Full Use 1 $ *
Express Server Concurrent Full Use 1 $ *
Personal Express Named Full Use 1 $ *
Oracle Discoverer End User Edition Named Full Use 1 $ *
Oracle Discoverer Administration Edition Named Full Use 1 $ *
Oracle Financial Analyzer Named Full Use 1 $ *
Oracle Financials Named Full Use 1 $ *
Oracle Discrete Manufacturing Named Full Use 1 $ *
Oracle Order Management Named Full Use 1 $ *
Oracle Purchasing Named Full Use 1 $ *
Oracle Project Costing Named Full Use 1 $ *
Oracle Financials Casual Full Use 1 $ *
Oracle Discrete Manufacturing Casual Full Use 1 $ *
Oracle Order Management Casual Full Use 1 $ *
Oracle Purchasing Casual Full Use 1 $ *
Oracle Project Costing Casual Full Use 1 $ *
Oracle Project Billing Named Full Use 1 $ *
Oracle EDI Gateway Computer Full Use 1 $ *
</TABLE>
Each order placed for an Additional License Increment must be at least
$ * in net license fees; applicable sales tax will be added to the fee.
All applicable fees shall be due and payable on the date that Customer
notifies Oracle in writing of its exercise of this option; Oracle has no
shipment obligation. Upon election, this payment obligation is
non-cancellable, and the sum paid is nonrefundable. At the time of
election, Customer may obtain Technical Support services from Oracle for
Additional License Increment at Oracle's applicable Technical Support fees
and policies in effect when such services are ordered. After 1 year from
the Effective Date of this Order Form, Customer may re-negotiate with
Oracle to buy any products on Oracle's U.S. Price List.
3. Credit for Terminated Licenses. In consideration for terminating
Customer's Program licenses under Customer Support Identification (CSI)
numbers: 1642822, 1642824, 1697816, 1758442, 1826348, 1826350, 2291647,
2416903, and 2453700; as of the Effective Date, Customer shall receive a
credit toward the license fees due under this Order Form provided the
invoices for such licenses have been paid in full. This license credit is
reflected in Section A above. The support fees due under this Order Form
shall be reduced by the amount of unused Technical Support associated with
these CSI numbers, provided the invoices for such Technical Support have
been paid in full. This support fee reduction is not reflected in Section A
above; it will be processed upon the Effective Date of this Order Form.
*Confidential treatment requested.
<PAGE> 10
Page 6 of 10
4. International Deployment. Upon Oracle's written consent, which shall not
be unreasonably withheld, and subject to Oracle's transfer fees and
policies in effect at the time of transfer, Customer may deploy License
Types to Customer facilities outside of the U.S., subject to U.S. export
laws.
5. Use of Oracle Applications Programs by Third Parties.
A. Subscriber Rights.
Customer shall have the non-exclusive, non-transferable right to
allow its third party customers in the United States ("Subscribers")
to access and use the Oracle Applications Programs acquired under
this Order Form installed on Customer's Designated Systems for each
such customer's internal data processing use subject to the terms of
this Section and the Agreement. Each Subscriber under this Order
Form shall have the right to access the Oracle Applications
Programs, either remotely through a modem or directly at the
location of the applicable processor on which Customer has installed
the applicable Programs. Each Subscriber must have specific Named
Devices allocated for such access and these devices are included in
total number of Named Devices licensed under this Order Form. If the
Named Devices are to be transferred to another Subscriber, then a
transfer fee must be paid as outlined below in Section 5.D. In no
event shall Customer have the right to sublicense or distribute any
Programs, except as set forth herein.
B. Subscriber Agreements.
Prior to any use or access of the Programs, each Subscriber shall
execute an agreement ("Subscription Agreement") for licensing access
to the applicable Programs. Every Subscription Agreement shall
include, at a minimum, contractual provisions that provide for the
following:
i. The Subscriber shall not cause or permit the reverse
engineering, disassembly or decompilation of the
Subscriber Program, or use the Programs outside the
scope of the Oracle Applications Programs.
ii. Title to the Subscriber Program shall not pass to the
Subscriber.
iii. Oracle's liability for any damages, whether direct,
indirect, incidental or consequential arising from the
use of the Subscriber Program, shall be disclaimed to
the extent permitted by law.
iv. Subscriber may use the Subscriber Program only in object
code form, subject to the restrictions provided under
this Order Form and the Agreement.
v. Upon termination of the Subscription Agreement of any
reassignment of the Subscriber's Named Devices, the
Subscriber shall cease using the Subscriber Program.
vi. Oracle shall be a third party beneficiary of the
Subscription Agreement.
vii. The Subscriber shall not publish any result of benchmark
tests run on the Subscriber Program.
All use of the Subscriber Programs is subject to the terms and conditions
of the Agreement and this Order Form. Upon Oracle's request, Customer
shall provide Oracle with a copy of the Subscription Agreement used by
Customers. Customer agrees to defend and indemnify Oracle and hold Oracle
harmless from all claims, losses, liabilities and settlement costs
resulting from any claims brought against or incurred by Oracle arising
from any use of the Programs by Subscribers or caused by Customer's
failure to include the contractual terms set forth above in a Subscription
Agreement.
C. Technical Support.
Customer is responsible for providing all technical support, training and
consultation to its Subscribers. Any questions from Customer's Subscribers
will be referred by Oracle to Customer.
<PAGE> 11
Page 7 of 10
D. Subscriber Fees.
Customer shall initially assign and allocate each Named Device of the
Oracle Applications Programs acquired hereunder to a Subscriber(s) once at
no further charge. Each Named Device acquired hereunder shall be assigned
and used by only one Subscriber and may not be used by any other
Subscriber except as specified in Section 5.D. of this Order Form.
For each Subscriber thereafter for which Customer is reassigning or
reallocating use of the Named Devices of the Oracle Applications Programs
previously assigned and allocated to a previous Subscriber, Customer agrees
to pay Oracle a Subscriber fee equal to twenty percent (20%) of the
applicable net user license fee received by Oracle under this Order Form
for the applicable number of Named Devices provided by Customer to the
Subscriber.
Customer shall not grant Subscribers access to more Named Devices of the
Oracle Applications Programs than the maximum number of Named Devices of
such Programs licensed under this Order Form. In the event that a
Subscriber acquires additional Named Devices from Customer, Customer shall
pay additional Subscriber fees as specified above. All Subscriber fees
shall be due and payable with the applicable Subscriber report as
specified herein.
E. Subscriber Reports.
Within 30 days of each grant of Named Devices of the Programs by Customer
to a Subscriber, Customer shall send Oracle a report detailing for that
month for each such grant: Subscriber name, address, and contact
information, the number of Named Devices granted and associated log-on
ids, the applicable Programs, and the Subscriber fees due to Oracle.
Customer shall provide Oracle with payment of all fees required under the
report with such report in the form of a check made out in the amount of
such fees.
<PAGE> 12
Page 8 of 10
6. Assignment. Oracle hereby consents to the assignment of this Order Form
solely in connection with a merger, a sale, or other disposition involving
substantially all of the assets of Customer to an acquiring entity upon
notice to Oracle, provided that such acquiring entity is not a competitor
of Oracle's.
7. Additional Products. Oracle agrees that upon Customer's request the
parties shall negotiate, in good faith, the terms for additional programs
and or services to be acquired under the Agreement, based upon Oracle's
then current applicable Price List.
________________________________________________________________________________
Customer and Oracle agree that the terms and pricing of this Order Form shall
not be disclosed without the prior written consent of the other party. This
quote is valid through August 27, 1999 and shall become binding upon execution
by Customer and acceptance by Oracle.
RESOURCE/PHOENIX, INC. ORACLE CORPORATION
Signature: /s/ BRYANT TONG Signature:
------------------------- ------------------------
Name: Bryant Tong Name:
------------------------------ -----------------------------
Title: President Title:
----------------------------- ----------------------------
Effective Date: 8/31/99
--------------------
________________________________________________________________________________
SHIPMENT SUMMARY:
<PAGE> 13
Page 9 of 10
<TABLE>
<CAPTION>
PROGRAMS DESIGNATED SYSTEMS MEDIA TYPE
- -------- ------------------ ----------
<S> <C> <C>
Oracle8 Enterprise Edition DEC ALPHA/UNIX CD
Oracle Diagnostics Pack
Oracle Tuning Pack
Express Server
Oracle Financial Analyzer
Oracle Financials
Oracle Discrete Manufacturing
Oracle Order Management
Oracle Purchasing
Oracle Project Costing
Oracle Project Billing
Oracle EDI Gateway
Oracle8 Enterprise Edition SUN SPARC/SOLARIS2 CD
Oracle Diagnostics Pack
Oracle Tuning Pack
Express Server
Oracle Financial Analyzer
Oracle Financials
Oracle Discrete Manufacturing
Oracle Order Management
Oracle Purchasing
Oracle Project Costing
Oracle Project Billing
Oracle EDI Gateway
Oracle8 Enterprise Edition HP 98XX/HP-UX CD
</TABLE>
<PAGE> 14
Page 10 of 10
<TABLE>
<S> <C> <C>
Oracle Diagnostics Pack
Oracle Tuning Pack
Express Server
Oracle Financial Analyzer
Oracle Financials
Oracle Discrete Manufacturing
Oracle Order Management
Oracle Purchasing
Oracle Project Costing
Oracle Project Billing
Oracle EDI Gateway
Personal Express PC Compatible/Windows NT CD
Oracle Discover Administration Edition
Oracle Discover End User Edition
Oracle8 Enterprise Edition
Oracle Diagnostics Pack
Oracle Tuning Pack
Express Server
Oracle Financial Analyzer
Oracle Financials
Oracle Discrete Manufacturing
Oracle Order Management
Oracle Purchasing
Oracle Project Costing
Oracle Project Billing
Oracle EDI Gateway
</TABLE>
<PAGE> 15
[ORACLE LOGO]
JULY 1999 PRICE LIST DEFINITIONS
"Concurrent Devices" (or "Concur Dev"): is the maximum number of input devices
accessing the Programs at any given point in time. If multiplexing software or
hardware (e.g. a TP monitor, Webserver product) is used, this number must be
measured at the multiplexing front-end.
"Named User" (or "Named") or "Developer": is defined as an individual who is
authorized by Customer to use the Oracle Programs, regardless of whether the
individual is actively using Programs at any given time.
"Casual User" is defined as an individual authorized by the Customer to only
group queries or reports against Oracle Applications Programs. Casual Users are
licensed to use any of the above Oracle Applications Programs for which
Customer has acquired Named User licenses.
"Primary Usage" is defined as each licensed user being counted only once as a
designated Named or Casual User of the Oracle Application they will use most.
However, a licensed Named or Casual User may access all Oracle Applications
licensed under the Agreement which have been licensed under the same licensing
methodology, regardless of the designated Oracle Application of primary use.
"Mailbox" is defined as a point from which to send or receive electronic mail.
It is created when a user account or application is created in Oracle Offices.
"Computer": licensed for use on a single specified computer.
"Processor": shall be defined as the actual number of processors installed in
the licensed Computer and running the Oracle Programs, regardless of the number
of processors which the Computer is capable of running.
"Client": a computer which (1) is used by only one person at a time, and (2)
executes Oracle software in local memory or stores the software on a local
storage device.
"Full Use Programs" are unaltered versions of the Programs with all functions
intact.
"Deployment Programs" may be used only to execute existing applications or
reports. They may not be used to build or modify reports or applications.
Deployment Programs are to be generated by Customer from Full Use Programs.
"Application Specific Programs" (or "App Specific"): shall mean Programs which
are limited to use solely for Customer's application software defined on the
Order Form. Application Specific Programs are to be generated by Customer from
Full Use programs.
A "Web Specific" Program is defined as a Program license which may only be
accessed by third parties via internet networking protocols and which is
limited to use solely for deployment of Customer's public web site. Customer's
application may allow third party web access to a licensed Web Specific Program
solely for viewing, querying or adding data, provided such use is in accordance
with the other terms of the Agreement. No corporate use or internal data
processing by Customer or its clients shall be permitted with a Web Specific
Program. Prohibited corporate and internal uses shall include, but shall not be
limited to, the following types of uses: human resources, finance and
administration, internal messaging and communications, accounting, sales force
management, etc.
A "Web Application Specific" Program is defined as a Program license which may
be accessed and used solely for deployment of Customer's application software
as specified on the Order Form. The Web Application Specific Program may only
be accessed by third parties via internet networking protocols and is limited
to use solely for deployment of Customer's public web site. Customer's
application may allow third party web access to a licensed Web Application
Specific Program solely for viewing, querying or adding data, provided such use
is in accordance with the other terms of the Agreement. No corporate use or
internal data processing by Customer or its clients shall be permitted with a
Web Application Specific Program. Prohibited corporate and internal uses shall
include, but shall not be limited to, the following types of uses: human
resources, finance and administration, internal messaging and ??
For Oracle Human Resources and Oracle Training Administration "Employee" is
defined as an individual who is actively managed by Oracle Programs. The term
"Employee" includes, without limitation, Customers, employees, contractors,
retirees, and COBRA dependents.
For Oracle Payroll, "Employee" is defined as an individual whose payment, or
payment calculations, are generated by the Programs. The term "Employee":
includes, without limitation, Customers employees, contractors, retirees, and
employees covered by workers compensation laws or regulations.
For Oracle Time Management, "Employee" is defined as an individual who submits
timecards or other time records for payroll processing.
For Oracle Self-Service Human Resources, Oracle Self-Service Purchasing, Oracle,
Self-Service Expenses, and Business Intelligence System (BIS) Applications,
"Employee" is defined as an active employee of Customer.
"Foundation Services": This is limited support, and any license for which ??
is purchased is not a Support Program License.
An "Education Unit" entitles Customer to acquire education products and
services as specified in the Oracle Education catalogue in effect at the time
an Education Unit is utilized. Education Units are only valid for 12 months
from the Effective Date of the Order or as specifically stated in the
application. Order Education Units may only be used in the country where the
Education Units were acquired or within the Territory defined in the
application Order. Customer may be required to execute standard Oracle ordering
materials in conjunction with utilizing Education Units.
"Organizational Change Management Services" are services for assisting
Customers in managing change in their organizations. Customer's discounts for
consulting or training do not apply to such Organizational Change Management
Services.
A "Suite" consists of all the functional software components described in the
Documentation.
"Module" is defined as a single production database running the Oracle
Program(s).
"Per Entry": shall mean a unique item (e.g., object, person, entity or
information) stored within the Programs. Replicated entries stored within the
Program on multiple servers are counted as a single entry.
"Power Unit": One Power Unit is defined as one MHz of power in any Intel
compatible or RISC processor in any computer of the Designated Systems on the
Order Form on which the Programs are installed and operating. The total number
of Power Units is determined by adding together the number of MHz in all the
processors in all such computers. Customer may add processors and computers, or
modify existing processors and computers, provided that if, at any time,
Customer's use exceeds the total number of licensed Power Units, Customer will
acquire licenses for the additional Power Units. At Oracle's request, no more
than once annually, Customer shall certify in writing the Power Unit
computation, including the number of relevant computers and processors, and the
MHz of each such processor. (For example: two computers with two 400 MHz
processors each would equal 1,600 Power Units).
<PAGE> 16
Oracle Worldwide Customer Support Services
TECHNICAL SUPPORT POLICIES
SUPPORT TERMS
These Technical Support Policies are limited to Oracle licenses which are
supported with Technical Support, as provided by Oracle Worldwide Customer
Support Services (WCSS).
Technical Support is provided for problems which are demonstrable in the
current release of an Oracle licensed Program, running unaltered on an
acceptable hardware and operating system configuration as specified in the
Documentation. Current Oracle product release information is accessible via
electronic media, as available with Technical Support.
These Technical Support policies are Oracle's current policies and are subject
to change at Oracle's discretion.
TECHNICAL SUPPORT FEES
Technical Support Fees are due and payable annually in advance of a Support
Period commencement.
SUPPORT PERIOD
Oracle Support is normally provided in Support Periods consisting of 12 months.
REINSTATEMENT FEES
In the event that Oracle Support lapses or was never originally procured, a
Reinstatement Fee shall be assessed upon commencement of Technical Support.
Oracle currently calculates Reinstatement Fees from the date that the Technical
Support lapsed (or the license order date if the Program licenses were not
previously supported) to the date that the Technical Support is renewed based
on list OracleBRONZE Support Service fees in Oracle's Local Country Price List
in effect at the time the Technical Support is ordered.
LICENSE SET
A License Set is defined as a logically related group of licenses installed on
the same system(s) and/or used for the same applications.
MINIMUM FEES
All Oracle Support Services (i.e., OracleBRONZE, OracleSILVER or OracleGOLD)
are subject to a minimum support fee for each License Set, per Support Period.
Minimum Support fees can be found in Oracle's Local Country Price List in
effect at the time Technical Support is ordered.
TECHNICAL CONTACTS
With the acquisition of any Oracle Support, the Customer may designate one
primary and one backup employee ("Technical Contacts") per License Set, to
serve as liaisons with Oracle WCSS. Alternatively, with each $250,000 in net
license fees, Customer has the option to designate a total of two (2) primary
and four (4) backup Technical Contacts.
The designated Technical Contact is the sole liaison between the Customer and
Oracle for all software Program support and shall be based at the Customer
premises. To avoid interruptions in support services, Customer must notify
Oracle WCSS whenever their Technical Contact responsibilities are transferred
to another individual.
PROGRAM UPDATES
"Update" means a subsequent release of the Program which Oracle generally makes
available for Program licenses at no additional license fee other than media
and handling charges, provided Customer has ordered Technical Support for such
licenses for the relevant time period. Update shall not include any release,
option or future Program which Oracle licenses separately.
For any Technical Support Updates to the Programs, Oracle shall ship to the
specified Customer location one Technical Support Update copy for each
operating system. Customer shall be responsible for copying and installing the
Updates on the Designated System(s) for which these Programs are licensed.
Page 1
<PAGE> 17
ORACLE WORLDWIDE CUSTOMER SUPPORT SERVICES
TECHNICAL SUPPORT POLICIES
EXTENDED ASSISTANCE
Extended Assistance is provided once an Oracle Program has been desupported
under OracleMetal support, i.e., no development support of fixes is provided
via Oracle Support. Extended Assistance is intended for Customers who are
unable to upgrade to a current release of Oracle Programs which are still
supported with error correction under OracleMetal Support (i.e., OracleBRONZE,
OracleSILVER, or OracleGOLD). This level of support provides telephone and
electronic support consisting of answering Customer questions and assisting
Customers with migration plans to Oracle Support, but does not include new bug
fixes, or backperts.
TERMINATION
Customer may terminate Oracle Support at any time by notifying Oracle in
writing at lease thirty (30) days before the desired date of termination.
Oracle Support shall be terminated 30 days after receipt of such notice. Upon
termination, Oracle shall refund the unused portion of support fees paid by the
Customer for the period for which Oracle Support is terminated.
CUSTOMER CPU SUPPORT IDENTIFICATION (CSI) NUMBER, OR LOCAL COUNTRY EQUIVALENT
Customers shall receive a CSI number upon purchasing Oracle Support. The CSI
number identifies the Customer with respect to the following information:
- - Company Name and Address
- - Program Set and Version
- - Support Level and Duration
- - Operating System
- - Technical Contact Information
Oracle WCSS uses the CSI number to identify the Customer's Support contract
when a Customer calls an Oracle Support Center.
To locate your CSI number, check the following documents:
- - The Welcome Letter which you received inside the Support Welcome Pack
following purchase of an Oracle Support Service
- - The packing slip of the Support Welcome Pack dispatched by our
Manufacturing & Distribution facility.
INFORMATION CUSTOMERS NEED WHEN CALLING SUPPORT
Before Oracle WCSS can begin work on any problem, information about the nature
and location of the problem is required. Whenever a call is placed to an Oracle
Support Center, the following information should be provided:
- - The CPU Support Identification (CSI) number or PC registration number
- - The area code and phone number listed under the CSI number
- - FAX phone number including area code
- - Operating system (including version) on which Oracle Programs are
installed
- - The Oracle Program component and version number that this call concerns.
Support questions involve Program components -- constituent parts of an
Oracle Program.
- - The relevant Program version(s)
- - Any Program error numbers associated with the problem
- - Detailed description of the problem
- - Severity of the problem. Oracle WCSS classifies problems according to
how they impact the Customer's business. See list below for explanation
of Technical Assistance Request (TAR) Severity Levels.
OracleBRONZE SUPPORT SERVICE
OracleBRONZE Support includes:
- - Program Updates
- Minor and major new functionality releases
- Documentation updates
- - Transfer Rights
- - Technical Support
- Telephone assistance from 5:00 a.m. to 6:00 p.m. (Pacific Time)
Monday through Friday
- MetaLink -- Web based support system
- - Maintenance Releases
- Patches and fixes
- General maintenance releases
- - Information Access
- SupportNotes(TM) -- CD-ROM repository of technical information
Page 2
<PAGE> 18
Oracle Worldwide Customer Support Services
TECHNICAL SUPPORT POLICIES
o Virtual Support Analyst (VSA) - Email based Technical Assistance
Request (TAR) management and support system, (where available).
o Quarterly SupportNews Newsletter
o Client Relations - Non technical support services
ORACLESILVER SUPPORT SERVICE
OracleSILVER support includes all OracleBRONZE components, plus the following:
o Telephone assistance 24 hours a day / 7 days a week
o Global toll free telephone access
o Account management reporting - Faxed upon request
o Proactive Alerts
o Certain known problem and problem resolution information
o Faxed as applicable
ORACLEGOLD SUPPORT SERVICE
OracleGOLD support includes all OracleBRONZE and OracleSILVER Support
components, plus the following:
o Priority call routing & resolution
o Operations Readiness Assessment (ORA)
o Support Account Management (SAM)
o Regular review meetings
o Stability maintenance & software migration planning
o Patch Planning
o Version/Release Planning
o Alerts
o Reactive process management
o Technical support planning
The following support levels (Basic, Standard, and Extended) are not available
for new support contracts:
BASIC ANNUAL SUPPORT
Basic Annual Support includes:
o Telephone assistance (normal business hours)
o Program Updates
o On-line support system access
o Support information document
STANDARD SUPPORT
Standard Support includes Basic Support plus the following:
o Telephone assistance (24x7)
EXTENDED SUPPORT
Extended Support includes Standard Support plus the following:
o Toll-free telephone access
GENERIC SEVERITY DEFINITION
1. SEVERITY 1
The problem causes complete loss of service. Work cannot reasonably continue,
the operation is mission critical to the business and the situation is an
emergency. A Severity 1 problem has one or more of the following
characteristics:
o Data corrupted
o A critical function is not available
o System hangs indefinitely, causing unacceptable or indefinite delays for
resources or response
o System crashes, and crashes repeatedly after restart attempts
24-HOUR COMMITMENT TO SEVERITY 1 TARs:
Oracle will work 24x7 until the issue is resolved or as long as useful progress
can be made. The Customer must provide Oracle with a contact during this 24x7
period, either on site or by pager, to assist the Support and Development
Organizations with data gathering, testing, and applying all fixes to their
environment. Customers are requested to use this classification with great
care, so that valid Severity 1 situations obtain the necessary resource
allocation from Oracle.
2. SEVERITY 2
The problem causes a severe loss of service. No acceptable workaround is
available; however, operation can continue in a restricted fashion.
3. SEVERITY 3
The problem cause minor loss of service. The impact is an inconvenience, which
may require a workaround to restore functionality.
4. SEVERITY 4
The problem causes no loss of service. The result is a minor error, incorrect
behavior, or a
Page 3
<PAGE> 19
Oracle Worldwide Customer Support Services
TECHNICAL SUPPORT POLICIES
documentation error that in no way impedes the operation of a system.
SUPPORT FOR INTERNATIONAL LICENSES
Oracle makes Technical Support available to Customers who acquire Program
licenses for installation in more than one country under the following policies:
CENTRALIZED SUPPORT
Under Centralized Support, the Customer's international locations and
subsidiaries receive support through their own designated technical
representatives. These technical representatives channel all inquiries through
their designated Technical Contact. The Technical Contact is entitled to
contact the Oracle Support Center specified in their contract, and is
responsible for providing all subsidiaries with non-localized software Updates.
The Customer is entitled to receive localized software Updates from a local
WCSS center.
LOCAL COUNTRY SUPPORT
Local Country Support provides for phone support and software Updates in the
native language for the country of installation. In certain cases where the
Local Country Oracle WCSS Center cannot provide support (e.g., Oracle Financial
Applications or Vertical Market products), technical calls may be routed by
Oracle to another Oracle WCSS Center, where technical assistance will be
provided in English.
INTERNATIONAL ALLOCATION OF USERS
It is the responsibility of the Customer to inform Oracle of future deployments
and any movement of their global allocation of users. This information should
include, but not be limited to the following.
For Deployment:
- - Country where licenses will be installed
- - Program Set and number of users
- - Technical Contact name and shipping address
For movement of licenses:
- - Country from which licenses are being moved
- - Country where licenses will be installed
- - Number of users being moved
- - Program Set and Version
- - Technical Contact information
Please email information for deployments and movement of licenses to
[email protected].
PHONE NUMBERS AND ADDRESS INFORMATION
Phone numbers can be found in the Oracle U.S. Guide to Customer Support
(Part number C11071-2). To obtain a copy, please contact Oracle Worldwide
Customer Support Services at (415) 506-1500.
ORACLE WORLDWIDE CUSTOMER SUPPORT SERVICES
20 Davis Drive
Belmont
CA 94002
U.S.A.
Page 4
<PAGE> 1
EXHIBIT 10.12
AMENDMENT ONE
TO THE
SOFTWARE LICENSE AND SERVICES AGREEMENT
BETWEEN
RESOURCE PHOENIX
AND
ORACLE CORPORATION
This document ("Amendment One") amends the Software License and Services
Agreement, dated 11/14, 1997, and all amendments and addenda thereto (the
"Agreement"), between Resource Phoenix ("Customer") and Oracle Corporation
("Oracle").
The parties hereby agree to amend the Agreement as follows:
1. In Section 7.5, delete the second sentence of such Section and replace it
with the following:
"Except as set forth in Section 5.1 and except for any damages arising from
death, personal injury or loss of tangible personal property caused by
Oracle's willful misconduct, Oracle's liability for damages hereunder shall
in no event exceed the amount of fees paid by Customer under this
Agreement. The term "tangible personal property" shall not include
software, data, programs, and software processes."
2. In Section 7.9, after the word "Agreement" in the first sentence of such
Section add the words "together with any Order Forms and Attachments and
Amendments hereto."
Other than the addition of the changes above, the terms and conditions of the
Agreement remain unchanged and in full force and effect.
The Effective Date of this Amendment One is November 14, 1997.
RESOURCE PHOENIX ORACLE CORPORATION
By: /s/ BRYANT TONG By: /s/ ANDREA BARCLAY
---------------------------- ------------------------------
Name: Bryant Tong Name: Andrea Barclay
-------------------------- ----------------------------
Title: Senior Vice President Title: Senior Contract Specialist
------------------------- ---------------------------
<PAGE> 1
EXHIBIT 10.13
Agreement No:
Effective Date: JUNE 29, 1999
SOFTWARE LICENSE, SUPPORT, AND
PROFESSIONAL SERVICES AGREEMENT
This Agreement dated as of the effective date noted above (the "Effective Date")
is entered into by and between:
<TABLE>
<S> <C>
ReSourcePhoenix.com and Necho Systems Corp.
2401 Kerner Boulevard 10 Kingsbridge Garden Circle, Suite 200
San Rafael, CA 94901 Mississauga, ON L5R 3K6
(herein after referred to as "Customer") (herein after referred to as "Necho")
</TABLE>
Necho agrees to provide, and Customer agrees to purchase, in accordance with the
terms and conditions contained in this Agreement, the license to use the
Licensed Standard Software, Software Maintenance and Support Services, and the
Professional Services outlined in this Agreement.
IN CONSIDERATION of the mutual promises contained herein, Necho and Customer
agree as follows:
1. SUBJECT OF AGREEMENT
The subject matter of this Agreement is: the executable computer program(s)
listed in Schedule "A" attached hereto; the Software Maintenance and Support
Services and; the Professional Services outlined herein. The computer program(s)
will be referred to in this Agreement as "Licensed Standard Software".
2. DEFINITIONS
In this Agreement,
(1) "Affiliate" means, with respect to any entity, any person or other entity
which directly or indirectly controls or is controlled by or is under direct or
indirect common control with such first mentioned entity or any entity which is
directly or indirectly controlled by an entity which controls the first
mentioned entity;
(2) "Support Commencement Date" means the date 90 days after the installation
date;
(3) "Confidential Information" has the meaning set out in Section 13(1);
(4) "Designated Hardware" has the meaning set out in Schedule A:
(5) "Designated Location" has the meaning set out in the attached Schedule A;
(6) "Documentation" means any and all information provided to Customer by Necho
describing the Licensed Standard Software, its operation and matters related to
its use in written material, on magnetic media or communicated by electronic
means;
(7) "Installation Date" means the date specified in Schedule A that the License
Standard Software is scheduled to be delivered to Customer 's designated
location;
(8) "Licensed Standard Software" has the meaning set out in Section 1;
(9) "Maintenance Schedule" has the meaning ascribed to it under Section 10
below;
(10) "Services" means all professional services including, but not limited to,
analysis, design, programming, testing, conversion, implementation, technical
writing, maintenance, support and consulting training services provided by Necho
pursuant to this Agreement;
(11) "Support Fee" means the fee specified in the attached Schedule A;
(12) "Initial Support Term" means the period commencing 90 days from the
Installation date and ending at midnight on the last day of the month of the
12th month thereafter;
(13) "Support Renewal Periods" means the annual 12 month periods for which this
Agreement is renewable, after the Initial Support term;
(14) "Support Services" means the software support services specified in Section
7.
3. LICENSE TO CUSTOMER
(1) Necho hereby grants to Customer a perpetual, non-exclusive and
non-assignable (except as permitted in Sections 18 and 19) license to do each of
the following:
(a) copy the Licensed Standard Software onto memory storage facility
incorporated in the Designated Hardware;
(b) copy onto and use the Licensed Standard Software on any of the central
processing units comprising any part of the Designated Hardware provided that
all portions of the Designated Hardware are located within the geographic
boundaries listed in Schedule A (the "Designated Location") and further provided
that, except by users of devices specifically included in Designated Hardware
and by Clients as provided in Section 19, the Designated Hardware is not capable
of being operated other than through the input devices each of which is directly
connected to the Designated Hardware and is located in the Designated Location;
and
(c) make one copy of the Licensed Standard Software for archival purposes
provided that in so doing no legend, trademark, trade name, or copyright notice
contained in the Licensed Standard Software is deleted.
(2) Customer shall not copy (except as permitted by Section 3(1)), modify,
alter, disassemble, decompile, translate or convert into human readable form, or
reverse engineer, all or any part of the Licensed Standard Software and shall
not use the Licensed Standard Software, or Documentation to develop any
derivative works or any functionally compatible or competitive software.
Customer shall not have the right, and agrees not to copy or reproduce the
Documentation.
(3) The license granted pursuant to this Agreement is restricted to the
Designated Hardware as long as it is located
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in the Designated Location. If the Designated Hardware becomes inoperative,
another item of hardware may be substituted thereof on a temporary basis
provided that Customer gives notice to Necho, as soon as practicable after the
substitution, indicating the identity of the substituted hardware and the date
of the substitution, and the other conditions set out in Section 3(1)(b) are
satisfied; the extension of the license to the substituted hardware shall cease
10 days after the date of substitution unless Necho consents in writing to a
permanent substitution. Necho agrees not to unreasonably withhold or delay such
consent and agrees that such consent shall be without additional fees for
comparable equipment. Necho reserves the right to receive an additional license
fee in conjunction with its consent to a substitution.
(4) Customer may:
(a) offer, for a fee or free of charge, services consisting of the processing of
data through the use of the Licensed Standard Software for the benefit of any
third party;
(b) use the Licensed Standard Software for commercial time sharing, rental or
service bureau use.
(5) Customer may not:
(a) sell, lease, rent, license, sub-license, transfer, market, distribute,
redistribute, or otherwise part with the Licensed Standard Software or
Documentation or any copies of the forgoing, in any manner or in any form not
expressly permitted by this Agreement; or
4. LICENSE FEE AND ACCEPTANCE
(1) Customer shall pay the license fees, as set out in Schedule A. Customer
shall have the right to test the Licensed Standard Software for a period of 5
days after the date on which the media containing the Licensed Standard Software
is delivered to Customer . Prior to the expiry of such 5 day period, Customer
may, by notice to Necho, terminate this Agreement in compliance with Section
14(3)(c).
(2) The fees referred to in this Section 4 do not include any taxes. If Necho is
required to pay sales, use, property, value added, goods and services or other
federal or provincial or local taxes based on or as a result of the license
granted pursuant to this Agreement, or Customer 's use of the Licensed Standard
Software, then such taxes shall be billed to and paid by Customer , but this
provision shall not apply to taxes based on Necho 's net income.
(3) Customer may from time to time subsequent to the Effective Date of this
agreement license additional software modules from Necho at the then current
license fees in effect as set out in superseding Schedule(s) A signed by both
parties.
(4) The Schedules to this agreement together with any Statement of Work(s) shall
set forth the detail of any deliverables including submission, review, and
acceptance thereof or if not so specified, Customer shall within thirty (30)
days of the installation and/or receipt of such deliverables, advise Necho of
Customer 's acceptance or rejection of such deliverables. Any rejection shall
specify the nature and scope of the deficiencies in such deliverable. Necho
shall, upon receipt of such a notice of rejection, act diligently to correct
such deficiencies. The failure of Customer to provide such a notice of rejection
within such period shall constitute acceptance by Customer of said deliverable.
5. TITLE TO THE NECHO SOFTWARE
Customer acknowledges that its rights pursuant to this Agreement do not extend
beyond the license granted pursuant to Section 3(1) and that it will not acquire
any intellectual property rights including patent, copyright or rights to trade
secrets in the Licensed Standard Software and Documentation. Customer agrees
that it will not, at any time during or after the termination of this Agreement,
contest or challenge Necho 's exclusive ownership of, or interest in the
intellectual property rights in the Licensed Standard Software, or
Documentation. Title to the medium containing the Licensed Standard Software
delivered to Customer shall remain with Necho.
6. SUPPORT CHARGES AND TERMS OF PAYMENT
(1) Customer agrees to pay annually the Support Fee set out in the attached
Schedule A. Customer may from time to time, subsequent to the effective date of
this agreement license additional modules with corresponding respective annual
support Fees then in effect as set out in superseding Schedule(s) A. signed by
both parties. Necho has the right to increase or decrease Support Fees for
Support Renewal Periods by giving notice to Customer thirty (30) days before the
end of the Initial Support Term or any Support Renewal Period.
(2) The Support Fee for the Initial Support Term is due and payable by Customer
to Necho on or before the Support Commencement Date. Thereafter, the Support Fee
for each Support Renewal Period is due thirty (30) days after receipt of invoice
by Customer or on or before the commencement of the respective Support Renewal
Period whichever is the later as long as this Agreement remains in force.
7. SUPPORT SERVICES
(1) Necho shall provide Software Support for the purpose of correcting errors or
defects in the Licensed Standard Software as originally delivered to Customer
and as subsequently modified by Necho or as updated by Necho . "Errors or
defects" in the software shall mean failure of the Licensed Standard Software to
operate in substantial conformity and function in accordance with the applicable
Documentation and/or Specifications.
(2) Customer shall report any errors or defects to the Necho designated facility
staff at Necho 's designated facility during Necho 's regular business hours
defined herein.
(3) Necho shall respond to Customer 's reported errors or defects within
twenty-four (24) hours and seek to identify the cause of the reported error or
defect and, if the reported error or defect is determined by Necho to result
from an error or defect in the software, Necho shall use commercially reasonable
efforts to correct such reported errors or defects by implementing valid
programming changes or providing valid operational instructions to Customer
within thirty (30) days of Customer 's report. If Necho is unable to resolve the
reported error or defect in accordance with the above, then Customer may, at
Customer's sole option, i) allow Necho to immediately consult with Customer to
formulate a mutually agreeable strategy and schedule to correct the error or
defect or ii) terminate the Support Services provided by this section 7 upon
written notice to Necho. If Customer elects to terminate the Support Services,
Necho shall immediately refund to Customer any unused portion of Support Fees
paid pursuant to Section 6.
(4) The Support Services to be provided under this Agreement
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shall be performed during regular business hours and shall consist exclusively
of the Hot Line support, correction of critical programming errors and provision
of the maintenance releases described in Section 10. Regular business hours are
8:30 a.m. to 5:00 p.m. (local time), Monday through Friday, but do not include
statutory holidays, notwithstanding the fact that Customer may not observe such
holidays.
8. HOT LINE SUPPORT
(1) Necho will supply hot line telephone support ("Hot Line Support") from its
office to up to four (4) employees (two primary and two as backup) appointed by
Customer to request advice under this Section for the Licensed Standard
Software. Hot Line Support will be provided only in respect of the use of the
Licensed Standard Software at the Designated Location.
(2) Necho shall be under no obligation to provide Hot Line Support in respect of
the use of the Licensed Standard Software at any location other than the
Designated Location even if the Agreement permits use of the Licensed Standard
Software for the designated server at such location.
(3) Hot Line Support will consist in Necho (i) using reasonable efforts to
explain functions and features of the Licensed Standard Software, (ii)
clarifying any Support Materials relating to the Licensed Standard Software, and
(iii) guiding Customer in the operation of the Licensed Standard Software. Hot
Line Support is to be used by Customer only for resolving problems with the
Licensed Standard Software experienced by Customer , and not for educating or
training Customer 's employees in the general use of the Licensed Standard
Software.
9. CORRECTION OF CRITICAL PROGRAMMING & OPERATING ERRORS
Necho will use reasonable efforts to correct programming errors in the Licensed
Standard Software that materially and adversely affect the operation of the
Licensed Standard Software on the condition that (i) the programming error
occurs with the proper use of Licensed Standard Software by Customer in
accordance with Documentation provided to Customer by Necho , (ii) Customer
notifies Necho of the programming errors and describes with specificity the
nature of the suspected errors and the circumstances in which they occur, (iii)
Customer has not committed a substantial breach which is continuing of any of
the material terms of this Agreement, (iv) neither Customer nor any third person
has made changes, additions to, or modified the Licensed Standard Software
unless approved by Necho, and (v) neither Customer nor any third person has
updated associated database tables other than through Necho supplied software
solutions.
10. MAINTENANCE RELEASES
Necho may from time to time ("Maintenance Schedule") release updated versions
("Maintenance Releases") of the Licensed Standard Software which may correct
program and logic errors, and may from time to time release a revised revision
("New Release") which contains operational improvements and/or enhancements to
the functional capabilities of the Licensed Standard Software. As part of the
services delivered pursuant to this Agreement, Necho will make available to
Customer each Maintenance Release. Necho shall not be obligated to install any
Release on the Designated Hardware. Delivery of a Release to Customer shall be
deemed to have occurred if one copy of the Release is sent by mail or courier,
or is hand delivered to a Designated Location even if Customer is licensed to
use the Licensed Standard Software at more than one Designated Location. Major
new functionality taking the form of separately licensed new modules made
available as part of a New Release will be made available to Customer on terms
and at additional license fees generally applicable to sales made by Necho to
third parties in the same or similar circumstances. Necho may in its absolute
discretion classify new functionality as separately licensed new module(s)
without regard for the extent to which any associated Release contains
corrections of programming errors and other minor enhancements.
Each Maintenance Release and any New Release (collectively a "Release") will
replace or supersede the versions of the Licensed Standard Software then being
used by the Licensee. For a period of six (6) months following the date, in the
case of a Maintenance Release, on which it is delivered to Customer and, in the
case of a New Release, on which it becomes publicly available, Necho agrees to
provide maintenance services pursuant to this Agreement in respect of the
Release, as well as the two (2) next most recent previous versions. Thereafter,
Necho will provide maintenance services only to the Release and the next most
previous version. For greater certainty, if Necho 's obligations for support are
extinguished through the operation of this Section 10, Customer shall not be
entitled to a refund of any fees for the unexpired portion of any period
referred to in Section 6.
11. EXCLUSIONS
For greater certainty, the Support Services do not include any of the following
(i) modifications or enhancements to the Licensed Standard Software other than
those made under Section 10 or otherwise by Necho, (ii) user education and
training, (iii) implementation or installation assistance, (iv) consultation for
new programs, third party software, or equipment, (v) correction of problems,
and assistance regarding problems caused by operator errors (such as entering of
incorrect data, not following recommended procedures and keeping inadequate
backup copies), (vi) hardware problems with the Designated Hardware, (vii)
correction of errors attributable to software other than the Licensed Standard
Software, and (viii) any custom application to application interface software
developed for Customer.
12. PERSONAL ATTENDANCE
Necho shall determine, in its sole discretion, whether it is necessary for its
staff to attend personally at the Designated Location to perform any of the
Support Services. If Customer requests that Necho's staff attend personally at
the Designated Location and Necho does so attend, Customer shall pay Necho's
hourly rates and related out-of-pocket costs then in effect for this service.
Customer shall provide Necho with full access to the Designated Location to
enable it to perform Support Services.
13. CONFIDENTIAL OBLIGATIONS OF CUSTOMER
(1) Customer acknowledges that the Licensed Standard Software and the
Documentation and all information relating to the Licensed Standard Software and
the Documentation, including, without limitation, the financial terms of this
Agreement, constitute valuable confidential information of Necho. Necho
acknowledges that Necho will have access to
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information and materials about the business, products, programming techniques,
experimental work, customers, clients and suppliers of Customer, and that all
such knowledge, information and materials acquired by Necho under this Agreement
are and will be the confidential and proprietary information of Customer. (All
such information in this Section 13 collectively the "Confidential
Information"). Necho and Customer therefore:
(a) will take reasonable steps (including those steps that Necho and Customer
each takes to protect its own information that it regards as confidential) to
keep the Confidential Information confidential;
(b) will not disclose or otherwise make available the Confidential Information
to any third party except to such directors, officers, employees, contractors,
agents and Clients (as defined in Section 19) of Necho and Customer who have a
need to have access to the Confidential Information to perform their obligations
to the other, as applicable; and
(c) will provide instructions to Necho's and Customer's directors, officers,
employees, contractors, agents and Clients having access to Confidential
Information requiring them to comply with Necho's and Customer 's obligations
referred to in (a) and (b) of this Section 13 (1), and to use the Confidential
Information only in conjunction with the uses expressly permitted in this
Agreement. Any failure on the part of any of them to comply with such
instructions will be deemed to be a breach of this Section 13 by Necho or
Customer, as applicable.
(2) This Section will not apply to Confidential Information that:
(a) is in the public domain other than as a consequence of a breach of the
obligations contained in this Agreement to maintain the confidentiality of such
Confidential Information;
(b) is known by Customer prior to its disclosure by Necho or is independently
developed by Customer without breach of the obligations contained in this
Agreement; or
(c) has been received by Customer from a third party who is not subject to
obligations similar to the obligations contained in this Agreement.
(3) Customer may make disclosure of Confidential Information in conjunction with
a bona fide proposal to make an assignment pursuant to Section 17 provided that
the proposed assignee meets the requirements of Section 17(1)(d) and has entered
into an agreement referred to in Section 17(1)(c).
(4) In the event that any of Customer or any other person referred to in Section
13(1)(b) to whom the Confidential Information is provided as permitted by this
Agreement receives notice indicating that it may or will be legally compelled to
disclose any of the Confidential Information, it will provide Necho with prompt
notice so that Necho may at Necho's sole discretion seek a protective order or
other appropriate remedy and/or waive compliance with the provisions of this
Agreement.
(5)The foregoing agreements and covenants set forth in this Section 13 will be
construed as being an agreement independent of any other provisions in this
Agreement. The existence of any claim or cause of action of Customer against
Necho , whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Necho of any of the covenants and agreements of
this Section 13. Customer acknowledges that its failure to comply with the
provisions of this Section 13 will cause irreparable harm to Necho which cannot
be adequately compensated for in damages, and accordingly acknowledges that
Necho will may be entitled, in addition to any other remedies available to it,
to interlocutory and permanent injunction relief to restrain any anticipated,
present or continuing breach of this Agreement or any proprietary rights in the
Licensed Standard Software or the Documentation.
14. TERM AND TERMINATION
(1) Subject to the provisions of this Section 14, the term of this Agreement
shall commence on the Effective date above written and will continue until
terminated pursuant to Section 4 or this Section 14.
(2) Necho may terminate this Agreement by notice in writing to Customer if:
(a) Customer 's use of the Licensed Standard Software exceeds the scope of the
license conferred by Section 3;
(b) Customer or any of its Affiliates commences to or carries on a business
which includes the development of computer systems or software, whether or not
developed by it, which is capable of use in the expense reporting automation
industry.
(3) Necho or Customer may terminate this Agreement by notice in writing to the
other party if the other party:
(a) breaches any material term of this Agreement;
(b) makes any attempt to assign, sub-license, or otherwise transfer any of its
rights under this Agreement other than as permitted by Section 18; or
(4) Upon the termination of this Agreement:
(a) Necho's and Customer 's obligations under Section 13 shall survive the
termination;
(b) Customer 's rights under Section 3(1) shall immediately cease,
(c) Customer shall:
(i) return to Necho all copies of and media bearing the Licensed Standard
Software and Documentation;
(ii) erase any copy of the Licensed Standard Software copied onto the Designated
Computer for installation purposes;
(iii) erase all backup and archival copies of the Licensed Standard Software;
and
(iv) certify in writing to Necho within thirty (30) days of the termination of
this Agreement that all copies of the Licensed Standard Software and
Documentation have been returned to Necho or have been erased.
(d) Termination of this Agreement shall not limit either party from pursuing any
other remedies available to it, including injunctive relief, nor shall such
termination relieve Customer from its obligation to pay fees accrued prior to
the termination.
15. REPRESENTATIONS AND WARRANTIES OF NECHO
(1) LICENSED STANDARD SOFTWARE - NECHO WARRANTS THE LICENSED STANDARD SOFTWARE,
DURING THE WARRANTY PERIOD, AGAINST DEFECTS IN WORKMANSHIP AND AGAINST FAILURE
OF OPERATION FROM ORDINARY USE. IN ADDITION, NECHO WARRANTS THAT THE LICENSED
STANDARD SOFTWARE WILL BE IN FULL CONFORMITY AND FUNCTION IN ACCORDANCE WITH ALL
ASSOCIATED DOCUMENTATION RELATED THERETO. IF DURING THE WARRANTY PERIOD, THE
LICENSED STANDARD SOFTWARE DOES NOT PERFORM AS WARRANTED, NECHO SHALL UNDERTAKE
TO CORRECT THE LICENSED STANDARD SOFTWARE OR REPLACE SUCH LICENSED STANDARD
SOFTWARE FREE OF CHARGE TO CUSTOMER , OR IF NEITHER OF THE FOREGOING IS
COMMERCIALLY PRACTICABLE, TERMINATE THIS AGREEMENT AND REFUND TO
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CUSTOMER THE LICENSE FEE.
(2) NECHO MAKES NO WARRANTIES WHATSOEVER, BEYOND THAT NOTED ABOVE, EXPRESS OR
IMPLIED, WITH RESPECT TO THE LICENSED STANDARD SOFTWARE AND THE DOCUMENTATION.
NECHO DISCLAIMS ANY WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO THE LICENSED STANDARD SOFTWARE AND THE
DOCUMENTATION.
(3) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN OTHER SECTIONS OF THIS AGREEMENT
OUTSIDE THIS SECTION 15 OR ANY STATUTE OR RULE OF LAW TO THE CONTRARY, SUBJECT
TO SECTION 14(4), NECHO'S CUMULATIVE LIABILITY, FOR ALL CLAIMS ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT, WHETHER DIRECTLY OR INDIRECTLY, INCLUDING,
WITHOUT LIMITATION, FROM OR IN CONNECTION WITH THE LICENSE, USE OR IMPROPER
FUNCTIONING OF THE LICENSED STANDARD SOFTWARE SHALL NOT EXCEED THE AGGREGATE
AMOUNT OF THE FEES PAID BY CUSTOMER PURSUANT TO SECTION 4 OF THIS AGREEMENT.
LIMITATIONS IN THIS SECTION 15 TO NECHO'S LIABILITY SHALL NOT APPLY TO MATTERS
INVOLVING PERSONAL INJURY, PROPERTY DAMAGE, GROSS NEGLIGENCE, OR WILLFUL
MISCONDUCT BY OR ON BEHALF OF NECHO OR TO MATTERS COVERED IN SECTION 16.
(4) NECHO WILL NOT BE LIABLE FOR ANY INDIRECT, CONSEQUENTIAL OR SPECIAL DAMAGES
OF CUSTOMER OR OF ANY THIRD PARTY CLAIMED AGAINST CUSTOMER, INCLUDING, WITHOUT
LIMITATION, DAMAGES FOR LOSS OF PROFITS OR REVENUE, OR FAILURE TO REALIZE
EXPECTED SAVINGS, HOWEVER DERIVED.
(5) CUSTOMER WILL INDEMNIFY NECHO AND HOLD NECHO HARMLESS FOR AND AGAINST ANY
AND ALL CLAIMS WHICH A THIRD PARTY MAY ASSERT AGAINST NECHO BY REASON OF OR AS A
CONSEQUENCE OF CUSTOMER 'S USE OF THE LICENSED STANDARD SOFTWARE AND/OR THE
DOCUMENTATION.
(6) THIS SECTION 15 APPLIES REGARDLESS OF THE BASIS ON WHICH CUSTOMER IS
ENTITLED TO CLAIM, INCLUDING BUT NOT LIMITED TO BREACH OF CONTRACT OR TORT, EVEN
IF THE DAMAGES ARE CAUSED BY BREACH OF CONTRACT (INCLUDING, WITHOUT LIMITATION,
FUNDAMENTAL BREACH), OR BY THE NEGLIGENCE, GROSS NEGLIGENCE, NEGLIGENT
MISREPRESENTATION OR OTHER FAULT OF NECHO, AND EVEN IF NECHO HAS BEEN ADVISED OF
THE POSSIBILITY OF THESE DAMAGES.
16. YEAR 2000 COMPLIANCE
Necho represents and warrants that the Software is and shall remain Year 2000
performance compliant and thus is designed to and shall be able to accurately
process date data (including but not limited to, calculating, comparing and
sequencing) from, into and between the twentieth and twenty-first centuries,
including leap year calculations and (i) shall properly calculate, display,
enter, store, manipulate and otherwise include symbols, numbers and words that
represent dates, including dates prior to, during and after the year 2000, in
all computations, reports and displays involving dates; (ii) shall resolve any
ambiguities as to century date data in input and output without experiencing an
abnormal execution or endless loop, generating incorrect values or invalid
results, or otherwise fail to perform those functions set forth in the
Documentation; and (iii) all date-related user and data interface
functionalities, and all date-related data fields, generated by or embodied in
the Software shall include an indication of century. Necho shall promptly
correct, at its sole expense, any failures under this Year 2000 Warranty and in
the event of such failure, at Customer's written request, Necho shall assist
Customer in testing the Software's compliance with the Year 2000 Warranty.
Notwithstanding anything to the contrary herein, this Year 2000 Warranty shall
become null and void in the event the Software is changed or altered in any way
pertaining to the functions that are covered by this Year 2000 Warranty by
anyone other than Necho.
17. PROPRIETARY RIGHT INFRINGEMENT
(1) Necho will indemnify Customer and Customer's directors, officers, employees,
contractors and agents and save them harmless for and against any and all costs,
losses, damages, legal costs and expenses, liability, claims and demands
incurred by or made against Customer alleging that the use of the Licensed
Standard Software by Customer in accordance with the terms of this Agreement
infringes or otherwise breaches the copyright, trade secret, or other
intellectual property, of any third party, provided that Customer gives Necho
prompt notice of, and reasonable assistance in defending, any claim to which
this Section applies, and provided further that Necho will have sole authority
to defend and contest or settle any claim to which this Section applies. Necho
will have no liability under this Section for, and Customer will indemnify and
save Necho harmless for and against any and all costs, losses, damages, legal
costs and expenses, liability, claims and demands incurred by or made against
Necho in connection with, any such claim and any claim for breach of patent
rights which is based upon Customer's use of the Licensed Standard Software (i)
in connection with any other than Designated Hardware and substitutions thereof,
software or services not provided by Necho, or (ii) in any manner which is not
authorized by this Agreement. If any of the Licensed Standard Software becomes,
or in Necho's judgment is likely to become, the subject of a claim that
infringes a proprietary right or if Necho settles a claim of infringement, Necho
may at its sole option, discretion and expense:
(a) obtain for Customer the right to continue using the Licensed Standard
Software; or
(b) replace or modify the Licensed Standard Software to make it non-infringing
so long as the replacement or modification is substantially similar to the
Licensed Standard Software; or
(c) terminate the Agreement and refund to Customer the License Fee paid pursuant
to Section 4 and any unused portion of the Support Fees paid pursuant to Section
6.
(2) This Section states the entire liability of Necho and the exclusive remedy
of Customer with respect to any claim of infringement, including, copyright or
trade secret infringement.
18. ASSIGNMENT
(1) Subject to the following, neither party may assign its rights or delegate
its obligations under this Agreement without the prior written consent of the
other party, and such consent shall not be unreasonably withheld, except
however, either party may assign its rights and obligations under this Agreement
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to a parent, subsidiary or entity under common ownership with that party, or in
the event of merger or sale of a business unit or a majority stock ownership,
without consent of the other party; provided that:
(a) the assuming party agrees in writing to assume the assigning party's
obligations under this Agreement; and
(b) the assigning party shall provide the other party with prompt written notice
of such assignment
(2) Any attempt or any purported act or attempted act to do any of the things
prohibited by this Section 18 shall be null and void.
(3) In no event shall there be an assignment to a competitor of Necho.
(4) This Agreement shall inure to the benefit of and be binding upon the
respective successors and permitted assigns of the parties hereto.
19. SUBLICENSE
(1) Subject to the following, Necho authorizes Customer to grant to its third
party customers ("Clients") a nonexclusive, nontransferable, limited sublicense
to install, access and use, in the Designated Location, the Licensed Standard
Software for each such Client's internal data processing use ("Sublicense").
Each Sublicense shall be for a specific number of log-in/User ID's which are
included in the total number of Users, as defined in Schedule A.
(a) The use of the Licensed Standard Software by Clients is subject to the same
restrictions imposed upon Customer by this Agreement. Customer and Client will
enter into an agreement containing terms consistent with Customer's
confidentiality obligations hereunder.
(b) Customer is responsible for providing all technical support, training and
consultation to its Clients.
(c) Customer shall use commercially reasonable efforts to prevent any
sublicensing of the Licensed Standard Software to a competitor of Necho.
20. HEADINGS
The inclusion of headings in this Agreement is for convenience of reference only
and shall not affect its construction or interpretation.
21. ENTIRE AGREEMENT
This Agreement and any related schedule(s), addendum (addenda), and/or
statement(s) of work signed by both parties and attached hereto constitute the
entire agreement between the parties pertaining to the subject matter hereof.
There are no warranties, conditions, or representations (including any that may
be implied by statute) and there are no agreements in connection with such
subject matter except as specifically set forth or referred to in this
Agreement. No reliance is placed on any warranty, representation, opinion,
advice or assertion of fact made by any party hereto or its directors, officers,
employees or agents, to any other party hereto or its directors, officers,
employees or agents, except to the extent that the same has been reduced to
writing and included as a term of this Agreement. Accordingly, there shall be no
liability, either in tort or in contract, assessed in relation to any such
warranty, representation, opinion, advice or assertion of fact, except to the
extent aforesaid.
22. WAIVER, AMENDMENT
Except as expressly provided in this Agreement, no amendment or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any provision of this Agreement shall constitute a waiver
of any other provision nor shall any waiver of any provision of this Agreement
constitute a continuing waiver unless otherwise expressly provided.
23. FORCE MAJEURE
(1) an event which is caused, directly or indirectly, by fire, flood,
earthquake, element of nature or acts of God; acts of war, terrorism, rebellions
or revolutions in Canada or the United States of America, riots, civil disorders
or disobedience, acts of vandalism or other unlawful acts; or any other similar
cause beyond the reasonable control of a party and for the purposes of this
definition "any other similar cause beyond the reasonable control of such party"
shall be interpreted ejusdem generis;
(2) if, by reason of Force Majeure, either party hereto (the "Frustrated Party")
is delayed or unable, in whole or in part, to perform or comply with any
obligation or condition of this Agreement, then it will be relieved of liability
and will suffer no prejudice for failing to perform or comply or for delaying
such performance or compliance during the continuance and the extent of the
inability so caused from and after the happening of the event of Force Majeure,
provided that it gives to the other party prompt notice of such inability and
reasonably full particulars of the cause thereof. If notice is not promptly
given, then the Frustrated Party will only be relieved from performance or
compliance from and after the giving of such notice. The Frustrated Party will
use its best efforts to remedy the situation and remove, so far as possible with
reasonable dispatch, the cause of its inability to perform or comply, provided,
however, that settlement of strikes, lockouts and other industrial disputes
shall be within the discretion of the Frustrated Party. The Frustrated Party
will give prompt notice of the cessation of Force Majeure.
24. CUSTOMER RESPONSIBILITIES
Necho's obligations pursuant to this Agreement are subject to Customer 's
obligation to:
(1) Notify Necho promptly of Licensed Standard Software problems.
(2) Allow Necho reasonable access to all Designated Location and communication
facilities under control of Customer and provide Necho reasonable work space and
storage and other normal and customary facilities.
(3) Provide the same standard of care for Licensed Standard Software and/or
Documentation that it applies to its own products or data of like value to its
business and, at Customer's sole option, either return any defective Licensed
Standard Software and/or Documentation or attest in writing to the destruction
of same.
25. RELOCATION OF DESIGNATED HARDWARE
Customer shall notify Necho in writing 30 days prior to moving the Designated
Hardware as to its intended new location outside the Designated Location. Necho
shall be under no obligation to provide any services under this Agreement during
or as a result of such relocation.
26. SEVERABILITY
If any provisions of this Agreement shall for any reason be held illegal or
unenforceable, such provision shall be deemed
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separable from the remaining provisions of this Agreement and shall in no way
affect or impair the validity or the enforceability of the remaining provisions
of this Agreement.
27. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
28. LANGUAGE
The parties have requested that this Agreement and all communications and
documents relating hereto be expressed in the English language. Les parties ont
exige que la presente convention ainsi que tous documents s'y rattachant soient
rediges dans la langue anglaise.
29. NOTICES
Any notice or other communication required or permitted to be given pursuant to
or in connection with this Agreement shall be in writing and shall be given by
hand-delivery, by commercial overnight delivery service, or by mail, postage
prepaid, for delivery as registered or certified mail addressed, return receipt
requested as hereinafter provided. Any such notice or other communication, shall
be deemed to have been received at the time it is delivered to the address noted
above for each of the respective parties to an individual at such address having
apparent authority to accept deliveries on behalf of the addressee or seven (7)
days following deposit in the United States or Canadian mail, whichever is first
to occur. Notice of change of address shall also be governed by this section.
30. TIME OF ESSENCE
Time is of the essence of this Agreement.
31. COUNTERPARTS
This Agreement may be signed in counterparts and each of such counterparts shall
constitute an original document and such counterparts, taken together, shall
constitute one and the same instrument.
IN WITNESS WHEREOF, Customer and Necho hereby have duly executed this Agreement
as of the date written below.
ACCEPTED BY: CUSTOMER ACCEPTED BY: NECHO
Authorized _________________________ Authorized _____________________________
Signature: _________________________ Signature: _____________________________
Name: ______________________________ Name: __________________________________
Title: _____________________________ Title: _________________________________
Date: ______________________________ Date: __________________________________
<PAGE> 8
NECHO FINANCIAL QUOTATION AND CONSIDERATIONS
SCHEDULE A - FINANCIAL TERMS AND CONDITIONS FOR RESOURCE PHOENIX
Necho is pleased to provide this quotation for the implementation of its
NAVIGATER solution at RESOURCE PHOENIX (RESOURCE PHOENIX). The NavigatER `Core'
Software and Recommended Optional Modules and Landing Pads listed on this
Schedule A collectively comprise the "Licensed Standard Software".
SOFTWARE LICENSE FEES FOR T&E PROCESSING - FOR UP TO 1000 USERS
Resource Phoenix will be able to add users in blocks of 1000 at an increasingly
discounted rate. Please refer to section A-2.
NAVIGATER `CORE' SOFTWARE LICENSE FEE
Please refer to Schedule A-2 for a description of NavigatER's Core
Software. $ *
o Core End-User functionality
o Application Administration module - AdministratER
LICENSE FEES FOR RECOMMENDED OPTIONAL MODULES AND LANDING PADS
Please refer to Schedule A-2 for a description of the following NavigatER
modules:
<TABLE>
<S> <C>
o Corporate Card Management Module $ *
o Off-line Module $ *
o Cash Advance Module $ *
o Shared Services Module $ *
o Payment Export Landing Pad $ *
o FMS (GL) Export Landing Pad $ *
o Paid Notification Export Landing Pad $ *
o T&E Charge Card Import Landing Pad $ *
o Financial Code Import Data Landing Pad $ *
o Advanced e-mail notification Export Landing Pad $ *
-----------
TOTAL STANDARD NAVIGATER LICENSE FEES $ *
INITIAL LICENSE DISCOUNTS
o Resource Phoenix will receive a 35% discount as
part of Necho's VAR program $(*)
-----------
DISCOUNTED SOFTWARE LICENSE FEE $ *
-----------
o Necho will initially assume 50% of the financial
risk. A portion of this revenue is recaptured in the
future license upgrade for additional users. Please
see "Software license Scope" $(*)
-----------
INITIAL SOFTWARE LICENSE FEE FOR RESOURCE PHOENIX $ *
===========
</TABLE>
o *% of this is due upon contract signature ($*). The remainder is
due in equal payments over the following 6 month period (6 payments @
$*).
OPTIONAL MODULES AND LANDING PADS NOT INITIALLY LICENSED
o FAR Module
o HR Import Landing Pad
o Approval Chain Import Landing Pad
ANNUAL SOFTWARE SUPPORT FEES
Services as outlined within SCHEDULE A-1 attached. First 90 *% of Standard
days after software installation included in license fees. License Fees
THIS REPRESENT A *% DISCOUNT FROM NECHO'S STANDARD SUPPORT
FEES AND ASSUMES RESOURCE PHOENIX WILL PROVIDE FRONT LINE
SUPPORT TO THEIR CLIENTS.
ESTIMATED IMPLEMENTATION SERVICE FEES
Please refer to the following page for a list of recommended ESTIMATED AT
implementation services. A detailed description of all $ *
services can be found in Schedule A-1.
*Confidential treatment requested.
- --------------------------------------------------------------------------------
Private and Confidential Page 1
<PAGE> 9
NECHO FINANCIAL QUOTATION AND CONSIDERATIONS
SCHEDULE A-2 (CONTINUED)
PROFESSIONAL SERVICES
Necho provides comprehensive support for the successful implementation of
NavigatER, including training and system set up guidance, such as: financial
coding set up; employee information capture; set-up system administration;
report customization and development; and system interface/integration.
ESTIMATED* INSTALLATION, SETUP, AND TRAINING REQUIREMENTS (see Schedule A-2)
- -------------------------------------------------------------------------------
For a complete list of Professional Services offered by Necho, please refer
to Schedule A-2. Based on the information provided to Necho, Resource
Phoenix's needs are ESTIMATED to be the following:
<TABLE>
<S> <C>
o TWO DAYS of on-site pre-installation planning and consulting $ *
o TWO DAYS of installation services $ *
o ONE Application Administrator training class (one day program for up to 5 people) $ *
o FIVE DAYS of on-site System Set Up/Implementation $ *
o TWO DAYS of off-site System Set Up/Implementation $ *
o ONE "TRAIN THE TRAINER" class (one day program for up to 10 people) $ *
o ONE DAY of NavigatER Ad hoc Information Reporting Guidance on Crystal Reports $ *
o NECHO'S STANDARD INFORMATION REPORTING PACKAGE $ *
o LANDING PAD MAPPING Please refer to section
A-2, II (Page 5)
------------------------------------------------------------------------------------------------------
TOTAL ESTIMATED IMPLEMENTATION FEES $ *
------------------------------------------------------------------------------------------------------
RESOURCE PHOENIX WILL RECEIVE A *% DISCOUNT ON NECHO PROFESSIONAL SERVICES RATES *
------------------------------------------------------------------------------------------------------
DISCOUNTED IMPLEMENTATION FEES $ *
</TABLE>
* Professional services quoted are estimates only and are invoiced based
on actual time spent for all consulting services provided on-site,
services provided remotely by telephone and preparation time. During
the course of providing services, Necho will discuss any expected
variances (from this estimate) in advance prior to proceeding with
additional work.
"Out-of-pocket" travel, lodging, and other out-of-pocket business
expenses incurred by Necho during the course of providing
Installation, Implementation and Professional Services are billed to
clients at cost.
SOFTWARE LICENSE SCOPE
The Software License is a license for Resource Phoenix for its operations
worldwide (the "Designated Location") for use on as many servers as
ReSource in its sole determination deems advisable ("Designated Hardware").
The license has been established based on information provided to Necho by
Resource Phoenix, identifying (a) the expected number of total "Users"
(individual log-in/User ID's within the NavigatER database) as less than or
equal to 1000 Users.
Additional users can be added in blocks of 1000 User ID's per the following
schedule. Use fees may be paid over a 12-month period to enable Resource
Phoenix to pre-sell each block
o Block 1 $ *
o Block 2 $ *
o All additional Blocks $ *
A deposit of ($*) is to be paid upon signing of the Software License,
Support, and Professional Services Agreement. The balance of License Fees
and First Year's Annual Software Support Fees are to be paid in equal
installments during the following six-month period. The first year of
maintenance covers the 12 months following the 3-month warranty period.
Installation, Set-up, and Training Fees are to be agreed with Resource
Phoenix in advance and billed monthly as incurred.
The fees and prices outlined in this quotation exclude sales taxes. Fees
quoted are quoted in US dollars. This pricing quotation is strictly
confidential and is subject to the confidentiality restrictions identified
on the cover of this proposal.
- --------------------------------------------------------------------------------
Private and Confidential Page 2
* Confidential treatment requested.
<PAGE> 10
NECHO FINANCIAL QUOTATION AND CONSIDERATIONS
SCHEDULE A-1 - SOFTWARE AND SERVICES DESCRIPTION
Necho's software solutions are unbundled by module to allow Resource Phoenix to
select only the functionality that benefits its unique environment.
NavigatER's `CORE' SOFTWARE LICENSE includes, but is not limited to, executable
software delivering the following functionality:
<TABLE>
<S> <C>
- SubmitER: to create, verify and submit expense - On-line travel policies
reports
- ApprovER: on-line approval of expense reports) - NavigatER database for reporting
- AdministratER: application administration tools - Receipt Tracking module
- Automated VAT and Foreign Exchange Management - On-line expense report event log/audit trail
- Audit Module
</TABLE>
NavigatER MODULES
- CORPORATE CARD MANAGEMENT MODULE: to verify, reconcile and easily
import Corporate Charge Card transactions into expense reports and
facilitate reconciliation. This module supports all forms of billing
and payment (i.e., individual cards, centrally paid; centrally billed
& paid, individually billed & paid; etc.). RESOURCE PHOENIX'S
Corporate Charge Card company must provide the electronic download of
credit card data and charges posted, but not billed, in RESOURCE
PHOENIX's REQUESTED FORMAT.
- OFF-LINE MODULE: to allow travelers to access NavigatER functionality
in a disconnected/off-line mode (on a plane for example) in addition
to the traditional on-line mode. NavigatER's off-line interface is
exactly the same interface as used on-line. In addition, NavigatER's
off-line supports full validation of expense transactions against
policies at the point of entry.
- SHARED SERVICES MODULE: to enter and submit expense reports on behalf
of other users. This allows Resource Phoenix to (1) quickly deploy
NavigatER and reap the benefits of automation, and (2) to capture
expense information even for users not directly using NavigatER, for
instance: senior management, infrequent travelers, users without PCs
or PC skills, etc.
- CASH ADVANCE MODULE: to enter and submit cash advance requests and
deduct cash advances received from expense reports.
- FAR (PER DIEM) MODULE: to meet the per diem requirements of Government
agencies and Government contractors.
- --------------------------------------------------------------------------------
Private and Confidential Page 3
<PAGE> 11
NECHO FINANCIAL QUOTATION AND CONSIDERATIONS
SCHEDULE A-1 (CONTINUED)
NAVIGATER'S IMPORT/EXPORT DATA LANDING PADS
The following Electronic Data Landing Pads accelerate and facilitate the
implementation of interfaces between NavigatER and RESOURCE PHOENIX
internal and external business systems.
o FMS G/L EXPORT DATA LANDING PAD: to post to the G/L system with any
level of detail.
o T&E CORPORATE CARD IMPORT LANDING PAD: to import Corporate Card
transactions.
o PAYMENT EXPORT DATA LANDING PAD: to electronically pass reimbursements
data to Resource Phoenix's direct bank deposit; payroll and/or
accounts payable systems.
o FINANCIAL CODE IMPORT DATA LANDING PAD: to electronically up-date
NavigatER for new/deleted codes.
o HR IMPORT DATA LANDING PAD: to electronically up-load HR system data.
o APPROVAL CHAIN IMPORT LANDING PAD
o PAID NOTIFICATION IMPORT LANDING PAD
o ADVANCED E-MAIL NOTIFICATION EXPORT LANDING PAD
INSTALLATION
Installation of the NavigatER application software is included on Resource
Phoenix's client/server hardware via one fixed client site and one nomadic
client site. Necho requires Resource Phoenix's server to be established
with the applicable database engine and operating system, network
connectivity and MAPI compliant e-mail gateway configured to support the
NavigatER software application.
TECHNICAL PLATFORM
Pricing included in this quotation is based on the NavigatER software
running on an Windows NT server using an Oracle database. Additional
pricing would apply for running another database package on other Operating
Systems.
WARRANTY
Necho provides a full 90 day warranty from the date of Software
installation included within the Software License, Support, and
Professional Services Agreement. During this period, Necho will rectify and
correct any deficiency from the functionality, representations and
commitments proposed to Resource Phoenix. All remedies and corrective
actions will utilize Necho's resources at its sole costs.
ANNUAL SOFTWARE MAINTENANCE AND RESOURCE PHOENIX SERVICE SUPPORT
Necho provides comprehensive Resource Phoenix service via the Software
License, Support, and Professional Services Agreement including the
following key elements:
o On-going warranty
o Resource Phoenix service technical Help Desk Hotline, providing
technical and application related assistance
o Documentation updates
o Software modifications updates and minor enhancements per scheduled
releases
o Ongoing availability of assigned Professional Services Consultant ( at
normal per diem rates then in effect )
Software Support fees commence 90 days after software installation, when
the initial 90-day product service warranty coverage is completed. Software
Support is provided at an annual rate of *% (* PERCENT) of the
Standard License fees before discounts and is paid annually in advance.
Please note that support of interface mapping routines is not covered under
this maintenance. Support from Necho of client specific mapping routines
continues on a time and materials basis.
- --------------------------------------------------------------------------------
Private and Confidential Page 4
<PAGE> 12
NECHO FINANCIAL QUOTATION AND CONSIDERATIONS
SCHEDULE A-2 - STANDARD IMPLEMENTATION AND PROFESSIONAL SERVICE RATE SCHEDULE
SMARTER LAUNCH PROGRAM
Comprehensive implementation services and support are available at hourly rates
for the successful implementation of Necho products and services including
system set up guidance (financial coding set up, employee information capture,
set-up system administration, etc.), report customization and development,
system interface/integration, and training.
Necho provides a Professional Services Team, lead by a Professional Services
Consultant. The Professional Services Team includes training, technical, and
programming personnel assigned and dedicated to each client, and available at
client premises as required. This team is supported by Necho's senior management
and comprehensive Service and Help Desk.
Please note that solid Project Management is key to the success of NavigatER's
implementation. Necho's experience shows that Project Management should be
performed by Resource Phoenix's staff or on-site consultants - either from
practices already contracted by Resource Phoenix, or from Necho's consulting
partners (Deloitte&Touche, KPMG, etc.).
I. SYSTEM SET-UP & CONSULTING * per hour
--------------------------
Advisory and support services facilitating the implementation of Necho
products and services can include several or all of the following:
a) Pre-installation consulting
b) Implementation coordination
c) Application Administration module set-up assistance/consulting
d) Financial code set up assistance/consulting
e) Systems staff operational and technical guidance
II. LANDING PAD MAPPING AND REFORMATTING
Necho has developed a "Data Landing Pad" technology Hourly Rate:
that reduces interfaces to programming and testing For 1 Interface: *
relatively simple mapping routines that reformat
generic landing pad record formats from and to For 2 Interfaces: *
standard sending and receiving formats of a
client's other applications and systems. This is For 3 Interfaces: *
far less work than alternative full-blown projects
to program, test, and implement end-to-end custom For 4 Interfaces: *
direct application-to-application interfaces.
However, interface integration is a major For 5 Interfaces or
implementation project. Resource Phoenix is more: *
encouraged to dialogue with Necho to understand
the scope of these projects as well as the amount
of resources and skill level needed by Resource
Phoenix's IT staff to successfully integrate
NavigatER to Resource Phoenix's business systems.
Interfaces great vary in complexity. Each interface
may require from 8 to up to 20 person days of Necho
Professional Services time - 14 Days on average. This
time is spent on three sequential activities -
typically over a 3 to 6 week period:
1. 2 to 4 person days for initial consulting associated with functional
and detailed specification preparation
2. 2 to 8 person days to program a mapping routine
3. 4 to 8 person days to install, test, provide remote support, and
monitor the first several cycles of operation.
Alternatively, Resource Phoenix's IT staff may program mapping and
reformatting routines to reduce outside costs. Necho Professional Services
time is typically still required to assist in the completion of items 1 and
3 above - even if Resource Phoenix's IT staff looks after programming
mapping routines.
Resource Phoenix's staff is responsible for providing input and output file
formats and additional business logic requirements (e.g. G/L transaction
consolidation rules). In addition, Resource Phoenix's IT staff is
responsible for file transfer mechanisms to and from other systems, and for
scheduling and running all data upload and download processes.
* Confidential Treatment Requested
- --------------------------------------------------------------------------------
Private and Confidential Page 5
<PAGE> 13
NECHO FINANCIAL QUOTATION AND CONSIDERATIONS
SCHEDULE A-2 - (CONTINUED)
Please note that support from Necho of client specific mapping routines
continues on a time and materials basis.
- --------------------------------------------------------------------------------
Private and Confidential Page 6
<PAGE> 14
NECHO FINANCIAL QUOTATION AND CONSIDERATIONS
SCHEDULE A-2 (CONTINUED)
III. TRAINING
Powerful on-line help, hard copy user documentation, $ * per day
GUI user friendliness, and optional custom computer
based training (CBT) module significantly reduce the
needs for user training. Available on-site one day
training classes are:
a) Application Administrator Training
b) Train the Trainer (for up to 10 students including generic training
materials)
c) End User Training (two 1/2 day classes per day for up to 20 students
each)
d) Technical and system operations training (for up to 5 individuals)
Optional Computer Based Training (CBT) Module Per quote
customized to the specific needs and to environment $ * to $ *
of each Resource Phoenix: i.e., specific categories,
costs centers, etc.
IV. INFORMATION REPORTING SET-UP/CONSULTING
o Report writing support to assist Resource Phoenix's $ * per hour
reporting tool specialists in building customized
and ad hoc reports - 3rd party Crystal Report
development licenses are available directly from
Seagate Software at approximately $400 per developer.
o Necho has developed 31 Standard Reports using Crystal $ *
Reports to form the initial platform of each Resource
Phoenix's information reporting.
V. BEST PRACTICES CONSULTING
Necho has developed a thorough understanding of all of $ * per day
the processes involved in and related to business (or by project)
expenses administration, accounting and payment
re-engineering. This experience allows us to provide
a sophisticated re-engineering and consulting service
to move clients to their definition of "Best Practice"
for or by project savings and benefits delivery. These
services are provided by Necho's own client consultants
and a comprehensive review program.
VI. SYSTEMS INTEGRATION
Necho offers a depth of technical resources already familiar with business
expense automation. Implementation time and costs are reduced compared to
other alternatives.
o Professional Services Consultant $ * per hour
o Integration Services Consultant $ * per hour
o Business Analyst $ * per hour
o Technical Services Consultant $ * per hour
o Technical Writer $ * per hour
o Senior Programmer/Analyst $ * per hour
o Intermediate Programmer Analyst
ALL PROFESSIONAL SERVICES WORK IS PERFORMED ON A TIME AND MATERIALS BASIS AND IS
INVOICED MONTHLY. TIME BILLED INCLUDES ON-SITE CONSULTING, TELEPHONE CONSULTING
SERVICES AND PREPARATION TIME. TRAVEL, LODGING, LONG DISTANCE TELEPHONE, COURIER
AND OTHER OUT-OF-POCKET BUSINESS EXPENSES INCURRED BY NECHO DURING THE COURSE OF
PROVIDING PROFESSIONAL SERVICES ARE BILLED TO CLIENTS AT COST. A MINIMUM OF 1
DAY/8 HOURS WILL BE BILLED FOR ON-SITE SERVICES.
- --------------------------------------------------------------------------------
Private and Confidential Page 7
*Confidential treatment requested.
<PAGE> 15
<TABLE>
<S> <C>
SCHEDULES SCHEDULES
A, AND A-1 THROUGH A-2 A, AND A-1 THROUGH A-2
ACCEPTED: RESOURCEPHOENIX.COM ACCEPTED: NECHO SYSTEMS CORP.
Authorized Authorized
Signature: ____________________________ Signature: ____________________________
Name: ____________________________ Name: ____________________________
Tittle: ____________________________ Title: ____________________________
Date: ____________________________ Date: ____________________________
</TABLE>
- --------------------------------------------------------------------------------
Private and Confidential Page 8
<PAGE> 1
EXHIBIT 10.15
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (this "Sublease") is entered into by and
between PEOPLESOFT USA, INC., a Delaware corporation ("Sublessor"), and
RESOURCE/PHOENIX, INC. a California corporation ("Sublessee"), as of August 31,
1999 (the "Effective Date"). Sublessor and Sublessee hereby agree as follows:
1. DEFINED TERMS. The following terms shall have the following
meanings:
Broker means collectively, Cushman Realty Corporation
and Sutherland Company.
Building means the office building located at 1301
Harbor Bay Parkway, Alameda, California.
Commencement Date means the Possession Date.
Expiration Date means the earlier of (i) the date the
Lease terminates, or (ii) December 31, 2002.
Landlord means Lincoln-RECP Empire OPCO, LLC, a Delaware
limited liability company, and its successors and
assigns.
Landlord's Address means 101 Lincoln Centre Drive,
Foster City, California 94404.
Lease means the following agreements between Empire
Parkway Centre, L.P. as Landlord and Intrepid Systems,
Inc, as Tenant: Empire Parkway Centre Office Lease dated
as of October, 1995 (the "Original Lease"), and First
Amendment to Lease dated as of January 15, 1997; the
following agreements between Lincoln-RECP Empire OPCO,
LLC as Landlord and Intrepid Systems, Inc. as Tenant:
Second Amendment to Lease Agreement dated as of July 17,
1997, Third Amendment to Lease Agreement dated as of
September 9, 1997, Fourth Amendment to Lease Agreement
dated as of December 18, 1997, Fifth Amendment to Lease
Agreement dated as of May 13, 1998; the following
agreement between Intrepid Systems, Inc. as Assignor and
People Soft, Inc. as Assignee: Assignment and Assumption
Agreement; and the following agreement between People
Soft, Inc. and People Soft USA: Assignment and
Assumption Agreement dated as of January 2, 1999
(collectively, the "Lease"). A copy of the all
agreements comprising the Lease are attached hereto as
Exhibit A.
<PAGE> 2
Minimum Rent means the following annual Minimum Rental
rates per square foot of rentable square feet:
<TABLE>
<CAPTION>
-------------------- ----------------------------------
PERIOD RENT
-------------------- ----------------------------------
<S> <C>
November 1, 1999 - $.70 per square foot per month
May 1, 2000 or $47,237.40 per month.
-------------------- ----------------------------------
June 1, 2000 - $1.53 per square foot per month
December 1, 2002 or $103,247.46
-------------------- ----------------------------------
</TABLE>
Permitted Uses means all uses permitted under the Lease.
2
<PAGE> 3
Possession Date means November 1, 1999.
Premises means 67,482 rentable square feet of space at
1301 Harbor Bay Parkway, Alameda, California.
Pro Rata Share means Sublessor's Percentage Shares for
the Building and the Complex as those terms are defined
in the Lease.
Rent Commencement Date means November 1, 1999.
Sublessee means ReSource/Phoenix, Inc. a California
corporation
Sublessee's Address means 2401 Kerner Boulevard, San
Rafael, CA 94901, Attn: General Counsel.
Sublessor means PeopleSoft USA, Inc., a Delaware
corporation.
Sublessor's Address means 4305 Hacienda Drive,
Pleasanton, California, 94588, Attn.: General Counsel,
with a copy to 4305 Hacienda Drive, Pleasanton,
California, 94588, Attn.: Vice President of Real Estate.
Term means the period of time beginning on the
Possession Date and ending on the Expiration Date.
1. SUBLEASE. Sublessor hereby subleases to Sublessee, and Sublessee
hereby subleases from Sublessor, the Premises for the Term, upon all of the
terms, covenants and conditions contained herein.
2. CONDITION OF PREMISES.
(a) Sublessee Use and Ownership of Furniture. Simultaneously
with the mutual execution of this Sublease, Sublessee shall deliver to Sublessor
a check in the amount of Seventy Five Thousand Dollars ($75,000) which shall
represent payment in full for all furniture systems owned by Sublessor that are
located at the Premises (the "Furniture Payment"). Upon such payment, Sublessor
shall issue to Sublessee a bill of sale evidencing the sale and shall have no
rights or obligations in connection with the furniture systems located at the
Premises.
(b) "As is" Condition of Premises. Except as set forth in
Section 3(a) above, Sublessee shall accept possession of the Premises in their
present "as is" condition, without representation or warranty as to their
condition or suitability for Sublessee's intended use, and with no obligation on
the part of Sublessor to make any alterations or modifications to the Premises
or any area outside the Premises for the benefit of Sublessee. Any alterations
or improvements desired by Sublessee or required by any and all applicable laws
to the Premises shall be made by Sublessee at its sole cost and expense and
pursuant to the terms of this Section 3(b) and Section 5(f) below. Plans and
specifications for Sublessee's alterations and improvements shall be subject to
the prior written approval of Landlord and Sublessor, which approval shall not
be unreasonably withheld. Subject to Section 7.4 of the Original Lease,
3
<PAGE> 4
Sublessee shall, at Sublessee's sole cost and expense, comply promptly with all
applicable statutes, ordinances, rules, regulations, orders, restrictions of
record, and requirements (collectively, "Requirements") in effect during the
Term or any part of the Term hereof regulating the particular use by Sublessee
of the Premises except that Sublessee shall not be liable for any instance of
non-compliance with any Requirements arising prior to the Commencement Date.
Upon termination of this Sublease, Sublessee and Sublessor shall each be
responsible for (i) the cost of removing any alterations which were installed
for or by each of them in the Premises, except that neither Sublessee nor
Sublessor shall not be required to remove any alterations if under the
applicable provisions of the Original Lease such alterations may remain in the
Premises upon the termination of the Lease and (ii) any claims arising from the
condition of the Premises in excess of ordinary wear and tear attributable to
their respective tenancies.
3. CONDITIONS.
(a) This Sublease is conditioned upon the delivery to Sublessor
of a fully executed original of this Sublease, a check in the amount of Two
Hundred Twenty-Two Thousand, Two Hundred and Thirty Seven Dollars and Forty
Cents ($222,237.40) payable to Sublessor, and the receipt of Landlord's written
consent to this Sublease not later than thirty (30) days following delivery to
Landlord of a copy hereof executed by Sublessee and Sublessor, which consent
Landlord may give or withhold pursuant to Section 18.1 of the Original Lease.
This payment represents Sublessee's required Furniture Payment, the First
Installment (hereinafter defined) and the Deposit (hereinafter defined) to
Sublessor pursuant to Sections 3(a), 5(g), and 6(a), respectively.
(b) In the event the condition expressed above in this Section 4
is not timely satisfied, upon three (3) business days prior written notice,
Sublessor or Sublessee may terminate this Sublease by giving written notice of
termination to the other party at any time prior to the satisfaction of such
condition. In the event this Sublease is terminated due to the nonsatisfaction
of the foregoing condition, neither Sublessor nor Sublessee shall have any
further rights or obligations hereunder and Sublessor shall return to Sublessee
the Furniture Payment, the First Installment and the Deposit, Sublessee and
Sublessor each agrees to supply information and/or execute and acknowledge
further documents in connection with this Sublease which are reasonably required
by Landlord in connection with Landlord's review of this Sublease and the
satisfaction of the condition expressed in this Section 4.
4. PROVISIONS CONSTITUTING SUBLEASE.
(a) Relationship Between Sublessee and Landlord. This Sublease
is subject to all of the terms and conditions of the Original Lease. To the best
knowledge of Sublessor, Sublessor hereby represents and warrants that the
documents attached hereto as Exhibit A constitute all of the agreements
comprising the Lease. Sublessee hereby assumes and agrees to perform the
obligations of Sublessor as Tenant under the Original Lease to the extent such
terms and conditions are applicable to the Premises subleased pursuant to this
Sublease. Notwithstanding the foregoing, Sublessor shall pay directly to
Landlord rent and any other
4
<PAGE> 5
amounts required to be paid under the Lease as and when such amounts become due.
Sublessee shall not commit or permit to be committed on the Premises any act or
omission which shall violate any term, covenant or condition of the Original
Lease. Sublessor shall not voluntarily terminate the Lease or voluntarily (as a
result of an act by Sublessor) permit the Lease to be terminated so long as the
Sublease has not been terminated as a result of Sublessee's default.
(b) Relationship Between Sublessee and Sublessor. Except as
otherwise provided herein, all of the terms and conditions contained in the
Original Lease are incorporated herein as terms and conditions of this Sublease
with each reference therein to "Landlord," "Tenant," the "Lease," the
"Commencement Date" and the "Leased Premises," being deemed to refer to
Sublessor, Sublessee, this Sublease, the Commencement Date and the Premises,
respectively), except for the following provisions of the Original Lease which
are not incorporated into this Sublease: Sections 3.2, 4.2, 4.3, 6 (only to the
extent it relates to Sublessor), 11.3, 21.29 and 21.30. As between Sublessor and
Sublessee, in the event of any conflict between the terms of this Sublease and
the terms of any provision of the Original Lease which is incorporated herein,
the terms of this Sublease shall control.
(c) Notices. All notices or demands of any kind required or
desired to be given by Sublessor or Sublessee to the other hereunder shall be in
writing and shall be deemed delivered upon receipt if sent by United States
mail, certified postage prepaid, return receipt requested, of by facsimile
transmission with a following copy by first class mail, or by Federal Express,
addressed to the Sublessor or Sublessee respectively at the addresses set forth
in Section 1, or at such other addresses as the parties may specify by notice in
accordance with this section. All rent and other payments due under this
Sublease shall be made by Sublessee to Sublessor at the same address. Sublessor
and Sublessee shall each immediately deliver to the other a copy of every notice
received from Landlord affecting or relating to the Premises, or affecting or
relating to the rights and/or obligations hereunder or under the Lease.
(d) Services. Notwithstanding anything to the contrary contained
in this Sublease, including, but not limited to, Section 5(b) hereof, Sublessor
shall have no obligation to provide any of the services to be provided by
Landlord under the Original Lease or perform any of the obligations, including,
but not limited to, any maintenance obligations, or any other services, and
Sublessor's sole obligation with respect thereto shall be to use its best
efforts to obtain Landlord's compliance with the Original Lease upon Sublessee's
written request. Sublessor specifically agrees to cooperate with Sublessee in
requesting from Landlord that Sublessee be listed on the occupant directory in
the lobby of the Building. To the extent permitted by law and by Landlord,
Sublessee shall have the right to request all services directly from Landlord at
Sublessee's sole cost and expense. Sublessee shall promptly notify Sublessor in
writing of all such requests for services.
(e) Consents. In any circumstance where the Original Lease
requires that Landlord's approval or consent be obtained, Sublessee shall be
required to obtain the written approval or consent of Sublessor as well. Except
as otherwise provided in this Sublease, where the Original Lease specifies that
Landlord shall not unreasonably withhold its approval or consent, Sublessor
shall not unreasonably withhold its approval or consent as well.
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(f) Alterations. Sublessee shall have the rights concerning
alterations provided to Sublessor under Section 11.1 of the Original Lease.
(f) Signage. Sublessee shall have the rights concerning signage
provided to Sublessor under Section 21.28 of the Original Lease.
(g) Security Deposit. Simultaneously with the mutual execution
of this Sublease, Sublessee shall deliver to Sublessor the sum of One Hundred
Thousand Dollars ($100,000) as a security deposit (the "Deposit") insuring
Sublessee's faithful performance of all of the terms, conditions and covenants
of this Sublease to be performed or observed by Sublessee. Except as provided in
this Section 5(g), the terms and conditions of Section 6 of the Original Lease
shall apply to Sublessee's Deposit.
5. RENT.
(a) Minimum Rent. The Minimum Rent for the first full month of
the Term in the amount of Forty-Seven Thousand Two Hundred Thirty Seven Dollars
and Forty Cents ($47,237.40) (the "First Installment") shall be paid by
Sublessee simultaneously with the mutual execution of this Sublease. The First
Installment will be applied to Sublessee's Minimum Rent payment for the first
month of the Term. Commencing on December 1, 1999, Sublessee shall pay Minimum
Rent to Sublessor as rent for the Premises, in monthly installments in advance,
and thereafter on the first day of each calendar month of the Term, without
deduction, offset, prior notice or demand, in lawful money of the United States.
If the first day for which the monthly installment of Minimum Rent is payable is
not the first day of a calendar month, or if the last day of the Term is not the
last day of a calendar month, the monthly installment of Minimum Rent shall be
prorated for the fractional month(s). In the case of a proration at the
beginning of the Term, Sublessee shall pay the proration for such partial month
upon the due date for Minimum Rent for the second month of the Term. Sublessee
shall pay the proration for the last month of the Term when Minimum Rent for
such month is due.
(b) Additional Rent. Sublessee acknowledges that Sublessor is
obligated to pay to Landlord all amounts provided for in Section 5 of the
Original Lease, as amended ("Additional Rent"), provided that Sublessee's
Operating Expense Base Year shall be calendar year 2000. Sublessor shall be
responsible for Additional Rent attributable to the 1999 Operating Expense Base
Year and for any prior years. Subject to the foregoing and beginning on the
Commencement Date, Sublessee agrees to pay to Sublessor as Additional Rent
hereunder (i) its Pro Rata Share of all such Additional Rent under the Original
Lease, (ii) any and all other costs and expenses Sublessor incurs, as a result
of Sublessee's use of Building services that are in excess of those services
provided to Sublessor by Landlord under the Original Lease, and (iii) any other
costs and expenses incurred by Sublessor under the Original Lease, as a result
of or arising out of Sublessee's use and occupancy of the Premises, regardless
of whether such excess costs arise under the Original Lease or otherwise.
Without in any way limiting the generality of the foregoing, Sublessee and
Sublessor acknowledge and agree that such excess costs may result from, but may
not be limited to, after-hours HVAC usage and additional HVAC
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or electric equipment. Sublessee shall pay such Additional Rent within ten (10)
days of Sublessor's demand therefore.
(c) Late Charge. The parties hereby expressly agree that in the
event Sublessee shall fail to make payment of any installment of Minimum Rent or
any other sums due hereunder within five (5) days of the date that such amounts
are due, the provisions of Section 19 of the Original Lease shall apply.
6. USE OF PREMISES. Sublessee shall use the Premises for the Permitted
Uses and for no other purpose without the prior written consent of Sublessor
and, if required by the Original Lease, Landlord. Notwithstanding any other
provision hereof, and subject to any limitations in the Original Lease,
Sublessee shall have access to the Premises on a seven day a week, twenty four
hour a day basis.
7. TERM.
(a) Term. The Term of this Sublease shall be for a period
commencing on the Commencement Date and ending on the Expiration Date, unless
terminated sooner by termination of the Lease for any reason or otherwise
pursuant to this Sublease. Notwithstanding the foregoing, from and after thirty
(30) days from the Effective Date Sublessee shall have the right to enter onto
the Premises solely for the purposes of making approved Alterations and
installing its furniture, fixtures and equipment (the "Early Entry"). In the
event of Early Entry, all terms and conditions of this Sublease shall be in full
force and effect except for Sublessee's obligation to pay Minimum Rent.
(b) Delay in Delivery. In the event Sublessor is unable to
deliver possession of the Premises on the Possession Date, Sublessor shall not
be subject to any liability for any loss or damage to Sublessee, nor shall such
failure affect the validity of this Sublease or Sublessee's obligations
hereunder or extend the Term hereof, but in such case, the Rent Commencement
Date shall be extended on a day-for-day basis for each day delivery of
possession is delayed.
8. DAMAGE AND DESTRUCTION. In the event of damage or destruction to the
Premises or the Building, each party agrees to forward to the other, within
twenty-four (24) hours of receipt, a copy of each notice received from, or given
to, Landlord in connection therewith. Sublesse shall have the rights provided to
Sublessor under Section 13.2 of the Original Lease.
9. EMINENT DOMAIN. If, due to any taking or appropriation of all or a
part of the Premises or the Building, Landlord exercises its right to terminate
the Lease, this Sublease shall terminate. If part of the Premises shall be so
taken or appropriated and this Sublease shall not be terminated as provided
herein, then the rent thereafter to be paid hereunder shall be equitably
reduced, as provided in the Original Lease. Sublessee shall have the rights
provided to Sublessor in Section 13 of the Original Lease.
10. ENTRY BY SUBLESSOR. Sublessor reserves and shall at any and all
times (within ordinary business hours, except in the case of emergency) have the
right to enter the Premises to inspect the same, to post notices of
nonresponsibility, or to show the Premises to prospective
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subtenants (but only during the last six months of the Term), or in the event of
Sublessee's default with respect thereto, to perform any obligation of Sublessor
as Tenant under the Lease relating to the use, maintenance or repair of the
Premises. In the event that Sublessee shall not provide Sublessor with a key to
the Premises, Sublessee waives any claims for damages resulting directly from
Sublessor's use of force to enter the Premises in the event of an emergency.
Sublessee waives any claim for damages for any injury or inconvenience to or
interference with Sublessee's business, any loss of occupancy or quiet enjoyment
of the Premises, and any other loss occasioned by such entry, except to the
extent caused by the negligence of Sublessor, its agents or employees, provided
that the entrance to the Premises shall not be blocked thereby and further
provided that the business of Sublessee shall not be interfered with
unreasonably. Except in the case of emergency, Sublessor shall give Sublessee
reasonable prior notice of any intended entry of the Premises by Sublessor, and
shall obtain the permission of an officer of Sublessee (which permission shall
not be unreasonably withheld). Any entry to the Premises by Sublessor pursuant
to this Section 11 shall not under any circumstances be construed or deemed to
be a forcible or unlawful entry into or a detainer of the Premises or an
eviction of Sublessee from the Premises or any portion thereof.
11. INDEMNIFICATION.
(a) Sublessee shall hold Sublessor, and its subsidiaries,
affiliates, directors, officers, agents, contractors, servants, employees and
licensees (hereinafter "indemnitees") harmless from and shall indemnify and
defend indemnitees against any and all damages, claims or liability (i) arising
after the Commencement Date due to any breach or default in the performance of
any obligation of Sublessee hereunder, and (ii) for any injury or damage to any
person or property occurring in, on or about the Complex, Common Areas and
Premises or any part thereof, when such injury or damage shall be caused by the
act, neglect, default, or ommission of any duty with respect to the same by
Sublessee, its agents, employees or invitees, except to the extent such
liability arises from the negligence or willful misconduct of indemnitees; and
from and against all costs, counsel fees, expenses and liabilities incurred in
or in connection with any such claim or any action or proceeding brought
thereon.
(b) Sublessor shall hold Sublessee, and its subsidiaries,
affiliates, directors, officers, agents, contractors, servants, employees and
licensees (hereinafter "indemnitees") harmless from and shall indemnify and
defend indemnitees against any and all damages, claims or liability (i) arising
from and after the Commencement Date due to any breach or default in the
performance of any obligation of Sublessor hereunder, (ii) arising both before
and after the Commencement Date from a failure to perform an obligation under
the Lease except to the extent that Sublessee is required to perform such
obligation pursuant to this Sublease, (iii) both before and after the
Commencement Date, for any injury or damage to any person or property occurring
in, on or about the Building, the Premises or any part thereof, when such injury
or damage shall be caused by the act, neglect, default, or omission of any duty
with respect to the same by Sublessor, its agents, employees or invitees, except
to the extent such liability arises from the negligence or willful misconduct of
indemnitees; and from and against all costs, counsel fees, expenses and
liabilities incurred in or in connection with any such claim or any action or
proceeding brought thereon.
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12. BROKERS. Sublessor and Sublessee each represents to the other that
it has dealt with no brokers in connection with this Sublease other than the
Broker. Each of Sublessor and Sublessee shall indemnify, defend, and hold the
other harmless from and against any costs, expenses, liability, loss or damage
arising out of or relating to the falsity of the foregoing representation.
Sublessor agrees to pay all brokerage fees and commissions payable to Broker
with respect to this Sublease in accordance with the provisions of a separate
commission contract.
13. MISCELLANEOUS.
(a) Entire Agreement. This Sublease, together with its Exhibits,
constitutes the entire agreement of Sublessor and Sublessee with respect to the
matters described herein, and shall supersede all prior correspondence,
agreements and understandings concerning such matters, whether oral or written.
No addition to, or amendment or modification of, any term or provision of this
Sublease shall be effective unless set forth in writing and signed by Sublessor
and Sublessee.
(b) Authority. Each individual executing this Sublease on behalf
of either party represents and warrants that he or she is duly authorized to
execute and deliver this Sublease on behalf of such party.
(c) Attorneys' Fees. If either party commences an action against
the other party arising out of or in connection with this Sublease, or for
interpretation of any of its provisions, the prevailing party shall be entitled
to recover its costs and expenses, including reasonable attorneys' fees and
court costs, from the other party. In addition, if either Sublessor or Sublessee
becomes a party to any action concerning this Sublease or the Premises solely by
reason of the neglect or omission of any duty by the other party, the party
subjected to such action without fault shall be entitled to reimbursement for
any and all reasonable attorneys' fees and costs.
(d) Captions. All captions and headings in this Sublease are for
the purposes of reference and convenience and shall not limit or expand the
provisions of this Sublease.
(e) Counterparts. This Sublease may be executed in one or more
counterparts, each of which shall constitute an original, and all of which shall
constitute a single agreement.
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this
Sublease on the dates set out below.
SUBLESSOR: SUBLESSEE:
PEOPLESOFT USA, INC. RESOURCE/PHOENIX, INC.,
a Delaware corporation a California corporation
By:
-------------------------------
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By:
-------------------------------
Title: Title:
---------------------------- ----------------------------
Date: Date:
----------------------------- -----------------------------
By:
-------------------------------
Title:
----------------------------
Date:
-----------------------------
We consent to the foregoing.
LANDLORD:
LINCOLN RECP EMPIRE OPCO, LLC,
a Delaware limited liability company
By: Lincoln Property Company Management
Services, Inc.,
as agent for LINCOLN-RECP EMPIRE
OPCO, LLC
By:
----------------------------
Title:
-------------------------
Date:
--------------------------
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EXHIBIT A
LEASE
<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.
/s/ Arthur Anderson LLP
September 14, 1999
San Francisco, CA
<PAGE> 1
Exhibit 24.2
POWER OF ATTORNEY
I hereby constitute and appoint Gus Constantin, Bryant Tong and David Brunton,
and each of them, as attorneys-in-fact, each with the power of substitution, for
me in any and all capacities, to sign any amendment to the Registration
Statement filed by ReSourcePhoenix.com, Inc. (File No. 333-84589) 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 I 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.
September 9, 1999 /s/ JAMES BARRINGTON
-----------------------------------------
James Barrington
<PAGE> 1
Exhibit 24.3
POWER OF ATTORNEY
I hereby constitute and appoint Gus Constantin, Bryant Tong and David Brunton,
and each of them, as attorneys-in-fact, each with the power of substitution, for
me in any and all capacities, to sign any amendment to the Registration
Statement filed by ReSourcePhoenix.com, Inc. (File No. 333-84589) 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 I 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.
September 8, 1999 /s/ GLENN MCLAUGHLIN
-----------------------------------------
Glenn McLaughlin
