<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 16, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------------
EXACTIS.COM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8900 84-1359618
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
---------------------
707 - 17TH STREET, SUITE 2850
DENVER, CO 80202
(303) 675-2300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
E. THOMAS DETMER, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EXACTIS.COM, INC.
707 - 17TH STREET, SUITE 2850
DENVER, CO 80202
(303) 675-2300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C>
JAMES C.T. LINFIELD, ESQ. NORA L. GIBSON, ESQ.
LAURA M. MEDINA, ESQ. LAURA M. DE PETRA, ESQ.
JOHN W. BENDER, ESQ. ANGELA C. HILT, ESQ.
COOLEY GODWARD LLP BROBECK, PHLEGER & HARRISON LLP
2595 CANYON BOULEVARD, SUITE 250 SPEAR STREET TOWER, ONE MARKET
BOULDER, CO 80302-6737 SAN FRANCISCO, CA 94105
(303) 546-4000 (415) 442-0900
</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>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF SECURITIES AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED PRICE(1)(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value................................ $57,500,000.00 $15,985.00
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes shares that the underwriters have the option to purchase solely to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
The information in this prospectus is not complete and may be changed. These
securities may not be sold nor may offers to buy be accepted prior to the time
this prospectus is delivered in final form. This prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 16, 1999
PROSPECTUS
[EXACTIS.COM LOGO]
Shares
Common Stock
- --------------------------------------------------------------------------------
This is an initial public offering of shares of common stock of Exactis.com,
Inc. We are offering shares in this offering. No public market currently
exists for our common stock. We anticipate that the initial public offering
price will be between $ and $ per share.
We have applied to have our common stock approved for quotation on the Nasdaq
National Market under the symbol "XACT."
- --------------------------------------------------------------------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE SEE "RISK
FACTORS" STARTING ON PAGE 5 TO READ ABOUT RISKS THAT YOU SHOULD CONSIDER
CAREFULLY BEFORE BUYING SHARES OF OUR COMMON STOCK.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price $ $
Underwriting discounts and commissions $ $
Proceeds to us $ $
</TABLE>
The underwriters have an option to purchase additional shares of
common stock from us at the initial public offering price to cover any
over-allotments of shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
- --------------------------------------------------------------------------------
THOMAS WEISEL PARTNERS LLC
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
WIT CAPITAL CORPORATION
Prospectus dated , 1999
<PAGE> 3
FRONT COVER
Company logo and tagline
INSIDER FRONT COVER
Company logo and tagline, followed by:
Our mission is to deliver a comprehensive suite of scalable Email Marketing
Solutions to empower our clients to acquire, retain and strengthen profitable
customer relationships.
GATEFOLD LEFT
In the background, a graphic of a large yellow and black exclamation
point -- this is part of the Exactis.com logo.
At the bottom of the page in blue, is the first half of a timeline. The
timeline's title is The evolution of direct marketing channels. There are three
graphics on this half of the timeline: a vacuum cleaner, an envelope and
telephones. The graphics titles are door-to-door, mail and telephone.
The upper four-fifths of the left side of the page contains the following text:
WHY EMAIL?
Email brings a new channel to personal communications. With many new and unique
characteristics, email meets businesses needs for direct marketing and
communications.
Benefits of email campaigns:
- - PRICE - email costs pennies on the dollar compared to postal mail
- - PERSONALIZATION - relevant user-oriented content
- - SPEED - improved campaign frequency and response times
- - ELECTRONIC NATURE - feature-rich (graphics, audio and video) and
interactive
- - LINKS - email is a gateway to the Web
GATEFOLD RIGHT
At the bottom of this page in blue is the second half of the timeline. There are
three graphics on this half of the timeline: a radio, a television and a globe
connected to three PC's. The graphics titles are radio, television and the
email revolution.
The upper four-fifths of the page contains a large table or chart. The chart's
title is Exactis.com Email Marketing Solutions(SM) matrix. The x-axis of the
chart is labeled Markets. The y-axis is labeled Solutions. The markets from left
to right are Publishing, Financial Services and Ecommerce. The Solutions from
top to bottom are Communicate news and information, Deliver event-triggered
communications and create and manage targeted email marketing campaigns.
In the chart at the intersections of Publishing and Communicate news and
information, Financial Services and Deliver event-triggered communications, and
Ecommerce and create and manage targeted email marketing campaigns (currently in
beta testing) are cascading PC screen shots of email samples. Respectively,
these are titled:
- - Email newsletter from InfoBeat,
- - Email sample of trade confirmation and
- - Email sample of customized catalog (currently in beta testing).
At all other intersections, the word yes appears.
INSIDE BACK COVER
At the bottom of this page there is a one-and-one-half-inch blue border
identical to the blue background behind the timeline appearing on the gatefold
pages. There are no graphics, text or lines. The company logo and tagline is at
the bottom right in this blue border.
The upper four-fifths of the page contains logos for the following Exactis.com
clients:
- - MSNBC
- - Forbes.com
- - Sony Music
- - CMP.net
- - USATODAY.com
- - Tribune Media Services
- - TheStreet.com
- - The Economist
The title of the page at upper left is Our clients include...
The upper four-fifths of the page also contains background shading. Drawing a
diagonal from upper right to lower left to diagonally cut the page in half, the
lower right diagonal half of the page is shaded in yellow color similar to the
yellow of the Exactis.com logo exclamation point.
BACK COVER
Company logo and tagline: Email Marketing Solutions(SM)
<PAGE> 4
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR TO
WHICH WE HAVE REFERRED YOU. NEITHER WE NOR ANY UNDERWRITER HAS AUTHORIZED ANYONE
TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN
OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, EVEN IF
THIS PROSPECTUS IS DELIVERED TO YOU AFTER THE PROSPECTUS DATE, OR YOU BUY OUR
COMMON STOCK AFTER THE PROSPECTUS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 5
Forward-Looking Statements; Market Data..................... 17
Conventions which Apply to this Prospectus.................. 17
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Dilution.................................................... 19
Capitalization.............................................. 20
Selected Financial Data..................................... 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 24
Business.................................................... 32
Management.................................................. 46
Certain Relationships and Related Transactions.............. 54
Principal Stockholders...................................... 56
Description of Securities................................... 58
Shares Eligible for Future Sale............................. 62
Underwriting................................................ 63
Legal Matters............................................... 65
Experts..................................................... 65
Where You Can Find Additional Information................... 65
Index to Financial Statements............................... F-1
</TABLE>
---------------------
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
SELLING SHARES OF OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights some of the information found in greater detail
elsewhere in this prospectus. In addition to this summary, we urge you to read
the entire prospectus carefully, especially the risks of investing in our common
stock discussed under "Risk Factors" and the financial statements before you
decide to buy our common stock.
OUR COMPANY
We are a leading provider of permission-based outsourced email marketing
and communications solutions. We provide a comprehensive and scalable, or
expandable, suite of email services which enable our clients to deliver large
numbers of custom email messages in an efficient, timely and cost-effective
manner. Our primary services consist of the distribution of email newsletters
and information bulletins, as well as the delivery of personalized order and
trade confirmation messages which are triggered by specific transactions or
events. We also serve targeted banner advertisements within the email
communications that we deliver to over two million subscribers of Sony Music's
daily email newsletters. In addition, we are continuing to develop a wide
variety of targeted messaging capabilities to allow our clients to conduct
personalized one-to-one email marketing campaigns.
We help our clients create, maintain and analyze their customer
relationships. Our email solutions help establish new revenue opportunities for
our clients while reducing their costs of communicating with large numbers of
customers. Our advanced, proprietary technology allows us to deliver a large
volume of email messages for our clients. In the second quarter of 1999, we
delivered over 400 million email messages for 48 companies, primarily in the
media, ecommerce and financial services industries. Our clients include American
Express, Charles Schwab & Co., The Economist, Egreetings Network, First Union,
Forbes, Last Minute Network, MSNBC Interactive News, News Corp., Sony Music,
Slate Magazine, TheStreet.com and USAToday.com. As email continues to gain
widespread acceptance as a marketing and communications channel, we anticipate
that businesses will grow increasingly reliant on outsourced email marketing and
communications services.
OUR STRATEGY
Our objective is to be a world leader in the delivery of permission-based
email marketing and communications services. To achieve this objective, our
strategy includes the following key elements:
- extending our industry leading technology infrastructure to increase our
email capacity, system reliability and security;
- broadening our suite of email services to continue to offer our clients a
full line of feature-rich email services to meet their email needs across
a variety of applications;
- continuing to develop and leverage strategic relationships, particularly
in the areas of joint product development and marketing;
- increasing direct and indirect sales efforts to become experts within
specific vertical markets and expand internationally; and
- acquiring businesses, products, services and technologies that are
complementary to our existing business.
CORPORATE INFORMATION
We were incorporated in Colorado in January 1996 under the name Mercury
Mail, Inc. We reincorporated into Delaware in July 1996. In August 1997, we
changed our name to InfoBeat Inc., and in January 1999, we changed our name to
Exactis.com, Inc. Our principal executive office is located at 707 -- 17th
Street, Suite 2850, Denver, Colorado 80202 and our telephone number is (303)
675-2300. The information contained on our Web site, www.exactis.com, does not
constitute part of this prospectus.
1
<PAGE> 6
THE OFFERING
Common stock offered by
us......................... shares
Common stock outstanding
after this offering........ shares
Use of proceeds............ For working capital and other general corporate
purposes. Please see "Use of Proceeds" for more
information regarding our planned use of the
proceeds from this offering.
Proposed Nasdaq National
Market Symbol............ XACT
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of June 30, 1999. It also
reflects our sale of 1,357,284 shares of Series E preferred stock in July and
August 1999 and the automatic conversion of all outstanding series of preferred
stock into common stock upon completion of this offering. In addition to the
shares of common stock to be outstanding after this offering, there are:
- 1,424,423 shares that could be issued upon the exercise of options
outstanding as of June 30, 1999 at a weighted average exercise price of
$2.57 per share;
- 1,357,583 shares that could be issued upon the exercise of warrants
outstanding and contingently issuable as of June 30, 1999 at a weighted
average exercise price of $5.48 per share;
- 203,586 shares that could be issued upon the exercise of warrants issued
after June 30, 1999 at a weighted average exercise price of $8.00 per
share;
- 1,400,000 shares that could be issued under our 1999 equity incentive
plan; and
- 500,000 shares that could be issued to our employees who elect to buy
stock in the future under our employee stock purchase plan.
---------------------
Unless we tell you otherwise, "Exactis.com," "we," "us" and "our" in this
prospectus refer to Exactis.com, Inc.
2
<PAGE> 7
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 30,
1996
(INCEPTION) TO YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
DECEMBER 31, ------------------------- -------------------------
1996 1997 1998 1998 1999
-------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.......................... $ -- $ 359 $ 821 $ 154 $ 3,574
Gross profit..................... -- 227 565 61 3,176
Loss from continuing
operations..................... -- (3,983) (5,540) (2,457) (3,869)
Gain on sale and loss from
discontinued operations........ (3,392) (3,716) 1,066 (926) --
Net loss......................... (3,392) (7,699) (4,474) (3,383) (3,869)
Net loss attributable to common
stockholders................... $ (3,395) $ (7,752) $ (4,577) $ (3,433) $ (3,921)
Basic and diluted net loss per
share:......................... $ (3.40) $ (7.75) $ (4.56) $ (3.42) $ (3.89)
Shares used in computing net loss
per share -- basic and
diluted........................ 1,000,000 1,000,255 1,004,461 1,002,468 1,009,053
Pro forma basic and diluted net
loss per share (unaudited)..... $ (0.68) $ (0.56)
Shares used in computing pro
forma net loss per
share -- basic and diluted
(unaudited).................... 6,748,964 6,948,920
</TABLE>
In 1998, we sold our publishing line of business to Sony Music, a Group of
Sony Music Entertainment Inc., and simultaneously entered into a service
agreement with Sony Music. The historical activity of the publishing business
sold to Sony Music has been separately stated as discontinued operations in the
financial statements and other financial information contained in this
prospectus. The revenue from Sony Music constituted $2.2 million of our total
revenue for the six months ended June 30, 1999 and is not reflected in our
results of continuing operations in any prior historical period. As a result, we
believe period-to-period comparisons of our revenue and operating results are
not meaningful. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and related
notes appearing elsewhere in this prospectus for a description of the accounting
treatment of the discontinued operations.
We have not paid any dividends on our common stock since inception.
Net loss attributable to common holders includes the effect of the
accretion on the redeemable convertible preferred stock which increases net loss
attributable to common holders for the related periods. This accretion will not
be recognized after the conversion of all outstanding series of preferred stock
into common stock upon completion of this offering.
Pro forma basic and diluted net loss per share is computed using the
weighted average number of common shares outstanding, including the pro forma
effects of the automatic conversion of all outstanding series of preferred stock
into common stock upon completion of this offering as if the conversion occurred
on January 1, 1998, or at the date the preferred stock was actually issued, if
later. Pro forma basic and diluted net loss per share does not give effect to
the issuance of Series E preferred stock issued in July and August 1999.
3
<PAGE> 8
<TABLE>
<CAPTION>
JUNE 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 557 $ 9,381 $
Working capital (deficit)................................. (453) 8,371
Total assets.............................................. 6,793 15,617
Long-term debt and capital lease obligations, net of
current portions and discount.......................... 300 300
Redeemable convertible preferred stock and warrants....... 18,725 27,549
Total stockholders' equity (deficit)...................... (17,791) (17,791)
</TABLE>
The pro forma column gives effect to the receipt of net proceeds of $8.8
million from our sale of 1,357,284 shares of Series E preferred stock at a price
of $6.50 per share and warrants to purchase 203,586 shares of Series E preferred
stock at an exercise price of $8.00 per share in July and August 1999.
The pro forma as adjusted column gives effect to:
- the automatic conversion of all outstanding series of preferred stock
into common stock upon completion of this offering; and
- our receipt of the estimated net proceeds from the sale of the
shares of common stock we are selling in this offering at an assumed
initial public offering price of $ per share, after deducting
estimated underwriting discounts and commissions and offering expenses.
4
<PAGE> 9
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the following information about these risks, together
with the other information contained in this prospectus, before you decide
whether to buy our common stock. If any of the events described in the following
risks actually occurs, the market price of our common stock could decline, and
you may lose all or part of the money you paid to buy our common stock.
Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also impair our business, results of operations
and financial condition.
RISKS ASSOCIATED WITH OUR BUSINESS
WE HAVE A HISTORY OF LOSSES, WE EXPECT CONTINUING LOSSES AND WE MAY NEVER
ACHIEVE PROFITABILITY.
We have not generated enough revenue to cover the substantial amounts we
have spent to create, launch and enhance our services. Our operating costs have
exceeded our revenue in all quarters since our inception. We incurred net losses
of approximately $3.4 million from January 30, 1996 (inception) through December
31, 1996, $7.7 million in 1997, $4.5 million in 1998 and $3.9 million for the
six months ended June 30, 1999. We had an accumulated deficit of $19.6 million
at June 30, 1999. We expect to incur net losses and negative cash flow for the
foreseeable future. If our revenue does not increase substantially, we may never
become profitable. Even if we do achieve profitability, we may not sustain or
increase profitability on a quarterly or annual basis in the future. This may,
in turn, cause our stock price to decline. In addition, if we do not achieve or
sustain profitability in the future, we may be unable to continue our
operations.
We have invested heavily in technology and infrastructure development. We
expect to continue to invest substantial financial and other resources to
develop and introduce new services and expand our sales and marketing
organizations, strategic relationships and operating infrastructure. We expect
that our cost of revenue, sales and marketing expenses, general and
administrative expenses, research development and engineering expenses,
operations and customer support expenses, and depreciation and amortization
expenses will continue to increase in absolute dollars and may increase as a
percent of revenue. If our revenue does not correspondingly increase, our
business, financial condition and operating results will be harmed.
IT IS DIFFICULT TO EVALUATE OUR BUSINESS AND PROSPECTS BECAUSE WE HAVE A
LIMITED OPERATING HISTORY.
We operate in the rapidly evolving Internet market. We have only a limited
operating history upon which you can evaluate our business and prospects. As a
young company, we face risks and uncertainties relating to our ability to
successfully implement our business plan. You should consider the risks,
expenses and difficulties that we may encounter when making your investment
decision. These risks include our ability to:
- expand our customer base and retain key clients;
- introduce new services;
- compete in a highly competitive market;
- upgrade our systems and infrastructure to handle any increases in
messaging traffic or other technical requirements of our clients;
- expand our sales and marketing activities;
- create and maintain strategic relationships;
- manage growing operations;
- reduce service interruptions;
- recruit and retain key personnel; and
5
<PAGE> 10
- acquire businesses and technologies.
We may not successfully address all of the risks we face or accomplish our
business strategies. We may not become profitable even if we do successfully
address these risks and accomplish our business strategies.
OUR BUSINESS WILL SUFFER IF THE MARKET FOR OUTSOURCED EMAIL MARKETING AND
COMMUNICATIONS SOLUTIONS FAILS TO GROW.
The market for outsourced email marketing and communications solutions is
new and rapidly evolving. Market acceptance of our existing and planned services
will depend on the acceptance and use of outsourced email marketing and
communications solutions. Our current and planned services are very different
from the traditional advertising and direct mail methods that our clients have
historically used to attract new customers and maintain customer relationships.
Businesses that have already invested substantial resources in traditional or
other methods of marketing and communications may be reluctant to adopt new
marketing strategies and methods. Consumers may also be reluctant to alter
established patterns of purchasing goods and services. Moreover, the sales cycle
for the new targeted messaging services that we are developing may be longer
than for existing services. If sufficient demand for our services does not
develop, our business, financial condition and operating results will be harmed.
DUE TO THE EMERGING NATURE OF THE EMAIL SERVICES MARKET, OUR FUTURE REVENUE
IS UNPREDICTABLE AND OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE.
Our limited operating history and the emerging nature of the Internet-based
email services market make it very difficult for us to accurately forecast our
revenue. Our revenues could fall short of our expectations if we experience
delays or cancellations of even a small number of contracts. Our operating
results are likely to fluctuate for many reasons, including the following:
- continued growth of the Internet in general and of email usage in
particular;
- demand for our services;
- our ability to attract and retain clients and maintain client
satisfaction;
- our ability to upgrade, develop and maintain our systems and
infrastructure;
- the amount and timing of operating costs and capital expenditures
relating to expansion of our business and infrastructure;
- technical difficulties or system outages;
- the announcement or introduction of new or enhanced services by our
competitors;
- pricing policies of our competitors;
- our ability to attract and retain qualified personnel with Internet and
direct marketing industry expertise, particularly technology, sales and
marketing personnel; and
- governmental regulation regarding the Internet, email and direct
marketing.
In addition, our operating results will be affected by non-cash charges
associated with stock-based arrangements with employees and strategic partners.
In May 1999, we issued 658,000 stock options with an exercise price below fair
market value. This grant resulted in a total non-cash compensation expense of
$1.9 million that we are recognizing over the three-year vesting period of the
options.
In addition, we have issued warrants to Sony Music and American Express
Travel Related Services Company, Inc. that include vesting provisions tied to
their achievement of performance milestones. We recognized expenses of $46,000
for the year ended December 31, 1997, $118,000 for the year ended December 31,
1998 and $24,000 for the six month period ended June 30, 1999 in connection with
the American Express warrant. Should American Express achieve one or both
remaining milestones, then we
6
<PAGE> 11
expect to record additional non-cash charges of up to approximately $250,000 in
the period in which one or both of these milestones is achieved. To date, Sony
Music has not achieved any of the performance goals set forth in their warrant.
If Sony Music achieves any of the performance goals set forth in their warrant,
we will recognize non-cash charges which we cannot currently estimate and which
may be substantial. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."
Due to lead times required to purchase, install and test equipment, we
typically need to purchase equipment well in advance of the receipt of any
expected revenues. Delays in obtaining this equipment could result in unexpected
revenue shortfalls. Small variations in the timing of the recognition of
specific revenues could cause significant variations in operating results from
quarter to quarter.
Period-to-period comparisons of our operating results are not a good
indication of our future performance. It is likely that our operating results in
some quarters will be below market expectations. In this event, the price of our
common stock is likely to decline.
ONE OF OUR CLIENTS ACCOUNTED FOR A MAJORITY OF OUR REVENUE IN A RECENT
PERIOD AND A SMALL NUMBER OF CLIENTS ACCOUNT FOR A HIGH PERCENTAGE OF OUR
REVENUE; THEREFORE, THE LOSS OF A MAJOR CLIENT COULD HARM OUR BUSINESS.
A small number of clients accounts for most of our revenue. In the first
six months of 1999, Sony Music accounted for approximately 62% of our revenue.
In 1998, five clients accounted for approximately 48% of our revenue, of which
MSNBC Interactive News, L.L.C. accounted for approximately 18% and E-Greetings
Network accounted for approximately 11%. We expect that a small number of
clients will continue to account for a high percentage of our revenue for at
least the foreseeable future. This could cause our revenue and earnings to
fluctuate from quarter to quarter based on the timing of contracts. The loss of
a major client could harm our business. Other than as specified in our agreement
with Sony Music, none of our clients has any obligation to purchase additional
services from us. If we lose existing clients and do not replace them with new
clients, our business, financial condition and operating results will be harmed.
DELAYS IN THE INTRODUCTION OF NEW SERVICES MAY HARM OUR BUSINESS.
We may experience delays in the development and launch of new services. We
are currently developing new services which are designed to provide our clients
with a wide variety of targeted marketing capabilities, which we expect to
release in the fourth quarter of 1999. Several factors may delay the development
and launch of this new service, including delays or difficulties in integrating
third-party software with our email engine. Because this targeted marketing
capability is designed to appeal to on-line retailers who experience their peak
season in the fourth quarter of each year, any delay would likely result in a
significant reduction in the number of initial clients for our new service. We
cannot assure you that we will not experience development delays with respect to
this new service or other new services that we may develop in the future.
Additionally, actual service offerings and benefits could differ materially from
those currently planned for many reasons, some or all of which may be out of our
control, which could result in a loss of clients. Any delays or differences
could harm our business, financial condition and operating results.
WE DEPEND ON KEY STRATEGIC RELATIONSHIPS TO GENERATE REVENUE AND OUR
BUSINESS COULD SUFFER IF ANY OF THESE RELATIONSHIPS ARE TERMINATED.
We are highly dependent on our strategic relationships with Sony Music and
E.piphany, Inc. Our relationship with Sony Music accounted for approximately 62%
of our revenue in the first six months of 1999. Our relationship with E.piphany
is critical to our ability to complete our targeted messaging capabilities. Our
agreement with Sony Music terminates in December 2001 and certain terms of our
agreement with E.piphany related to pricing terminate in March 2001. These
agreements, as well as others covering future strategic relationships, may not
be renewed at the end of their respective terms or may be
7
<PAGE> 12
terminated early in certain circumstances. If these relationships are terminated
early, it would harm our business, financial condition and operating results. We
may also be unable to effectively reallocate personnel, equipment and other
resources that were allocated to those relationships.
OUR FAILURE TO MANAGE OUR PLANNED RAPID GROWTH COULD CAUSE OUR BUSINESS TO
SUFFER.
We plan to expand our operations rapidly and to significantly augment our
infrastructure. We must effectively manage our operational, customer service and
financial systems, procedures and controls to manage this future growth. This
expansion is expected to place a significant strain on our managerial,
operational and financial resources. Our failure to manage our growth
effectively could harm our business, financial condition and operating results.
INTENSE COMPETITION EXISTS IN THE EMAIL SERVICES MARKET AND WE EXPECT
COMPETITION TO CONTINUE TO INTENSIFY.
Competition in the email services market is intense. We may not be able to
compete successfully against our current or future competitors which include the
in-house email capabilities of many businesses. An increasing number of
companies are entering our market. Many of our competitors have greater brand
recognition, longer operating histories, larger customer bases and greater
financial, marketing and other resources than we have. These factors may place
us at a disadvantage when we respond to our competitors' pricing strategies,
technological advances and other initiatives. Additionally, our competitors may
develop or provide services that are superior to ours or that achieve greater
market acceptance. We expect competition to persist and intensify. Barriers to
entry may be insubstantial and we may face substantial and growing competitive
pressures from companies both in the United States and abroad. If we do not
respond successfully to competitive pressures, our business, financial condition
and operating results would be harmed. See "Business -- Competition" for a list
of our current and potential competitors.
IF WE DO NOT SUCCESSFULLY ADDRESS THE RISKS INHERENT IN EXPANDING OUR
INTERNATIONAL OPERATIONS, OUR BUSINESS COULD SUFFER.
We intend to expand into international markets and to spend significant
financial and managerial resources to do so. If our revenue from international
operations does not exceed the expense of establishing and maintaining these
operations, our business, financial condition and operating results will suffer.
We have limited experience in international operations and may not be able to
compete effectively in international markets. We face certain risks inherent in
conducting business internationally, such as:
- complying with regulatory requirements which could change in unexpected
ways;
- difficulties and costs of staffing and managing international operations;
- varying technology standards from country to country;
- uncertainties regarding protection of intellectual property rights in
certain countries;
- difficulties in collecting accounts receivable;
- political and economic instability;
- fluctuations in currency exchange rates;
- imposition of currency exchange controls; and
- potentially adverse tax consequences.
Any of these factors could adversely affect our international operations
and, consequently, our business and operating results.
8
<PAGE> 13
WE MAY ENGAGE IN FUTURE ACQUISITIONS THAT DILUTE OUR STOCKHOLDERS, CAUSE US
TO INCUR DEBT OR ASSUME CONTINGENT LIABILITIES.
We expect to review acquisition or investment prospects that would
complement our current services, enhance our technical capabilities or offer
growth opportunities. If we pursue these opportunities, we could:
- issue equity securities which would dilute our stockholders;
- incur debt; or
- assume unknown or contingent liabilities.
These actions by us could harm our operating results and the price of our
common stock. Acquisitions could also entail numerous risks, including:
- difficulties in integrating acquired operations, technologies or
services;
- unanticipated costs associated with the acquisitions that harm our
operating results;
- negative effects on our reported results of operations from
acquisition-related charges and of amortization of acquired technology
and other intangibles;
- diversion of management's attention from other business concerns; and
- risks of entering markets in which we have no or limited prior
experience.
Any of these risks could harm our business, operating results and financial
condition.
WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL CAPITAL TO FUND OUR OPERATIONS WHEN
NEEDED.
We believe that our existing capital resources, including the anticipated
proceeds of this offering, will enable us to maintain our current and planned
operations at least through the end of 2000. However, if our capital
requirements or revenue vary materially from our current plans or if unforeseen
circumstances occur, we may require additional financing sooner than we
anticipate. This financing may not be available on a timely basis, in sufficient
amounts or on terms acceptable to us. The financing may also dilute existing
stockholders.
If we cannot obtain adequate funds on acceptable terms, we may be unable
to:
- fund our capital requirements;
- take advantage of strategic opportunities;
- respond to competitive pressures; and
- develop or enhance our services.
Any of these failures could harm our business, financial condition and
operating results.
WE MAY NOT BE ABLE TO ENTER INTO NEW STRATEGIC RELATIONSHIPS BECAUSE WE MAY
COMPETE WITH EXISTING OR FUTURE RELATIONSHIPS.
Our existing and future strategic relationships may limit our ability to
enter into other strategic relationships or sell our services to similar
businesses. For example, our agreements with Sony Music prevent us from entering
into a relationship that is competitive with the editorial publishing services
that we provide to Sony Music. We may also enter into similar non-competition
arrangements in connection with future strategic relationships. Any restriction
in developing strategic relationships could limit our ability to compete
effectively, which could harm our business.
9
<PAGE> 14
WE MAY NOT BE ABLE TO SUCCESSFULLY OPERATE OUR BUSINESS IF WE LOSE KEY
PERSONNEL OR IF OUR NEWLY FORMED MANAGEMENT TEAM DOES NOT WORK EFFECTIVELY
TOGETHER.
We believe that our success will depend on the continued services of our
key senior management personnel, especially E. Thomas Detmer, Jr., our President
and Chief Executive Officer. None of the persons currently in senior management
are bound by an employment agreement. The loss of any member of our senior
management team could negatively affect our future operating results.
The majority of our executive officers, including E. Thomas Detmer, Jr.,
our President and Chief Executive Officer, Kenneth W. Edwards, Jr., our Chief
Financial Officer, and Cynthia L. Brown, our Vice President of Engineering, have
joined us within the past several months. Accordingly, our management team has
had a limited time to work together. We cannot assure you that they will be able
to work together effectively. If our management team is unable to work together
effectively, our business could be harmed.
OUR BUSINESS WILL SUFFER IF WE DO NOT ATTRACT AND RETAIN ADDITIONAL HIGHLY
SKILLED PERSONNEL.
In order for us to succeed, we must identify, attract, retain and motivate
highly skilled technical, managerial, sales and marketing personnel. We plan to
significantly expand our operations and we will need to hire additional
personnel as our business grows. Competition for qualified personnel is intense.
In particular, we have experienced difficulties in hiring highly skilled
technical personnel and in retaining employees due to significant competition
for experienced personnel in our market. Failure to retain and attract necessary
personnel could harm our business, financial condition and operating results.
RISKS ASSOCIATED WITH OUR TECHNOLOGY
WE NEED TO UPGRADE OUR SYSTEMS AND INFRASTRUCTURE TO ACCOMMODATE INCREASES
IN EMAIL TRAFFIC.
We must continue to expand and adapt our network infrastructure as the
number of clients and the volume and complexity of information they wish to
transmit increases and as their requirements change. If we do not add sufficient
capacity to handle a growing volume and complexity of messages that our systems
process, we could suffer slower response times or system failures which could
result in a loss of clients. We have made and intend to continue to make
substantial investments to increase our capacity by adding new hardware and
upgrading our software. We cannot assure you, however, that our services will be
able to handle growing message volume and complexity. The expansion of our
network infrastructure will also require substantial financial, operational and
managerial resources.
In addition, we may not be able to accurately project the rate or timing of
email traffic increases or upgrade our systems and infrastructure to accommodate
future traffic levels. As we upgrade our network infrastructure to increase
capacity available to our clients, we may encounter equipment or software
incompatibility which may cause delays in implementation. We may not be able to
expand or adapt our network infrastructure to meet additional demand or our
clients' changing requirements in a timely manner or at all. If we fail to do
so, our business, financial condition and operating results could suffer.
OUR SYSTEMS ARE NOT CURRENTLY PREPARED TO ADDRESS "YEAR 2000" ISSUES; IF WE
DO NOT ADEQUATELY ADDRESS "YEAR 2000" ISSUES, WE MAY INCUR SIGNIFICANT COSTS AND
OUR BUSINESS COULD SUFFER.
Our systems are not currently Year 2000 compliant. Although our hardware
systems are certified Year 2000 compliant, we need to upgrade some of our
operating systems to Year 2000 compliant versions. Additionally, we must
complete upgrades and Year 2000 certification testing of our proprietary and
third party software. We also need to develop contingency plans for each of our
third-party data sources.
Failure of our internal computer systems, third-party hardware or software,
systems maintained by third parties, or electronic data that we receive to
operate properly with regard to Year 2000 and thereafter could cause systems
interruptions or loss of data or could require us to incur significant
unanticipated expenses to remedy any problems. Presently, we are unable to
reasonably estimate the duration and extent of any interruption caused by Year
2000 issues, or to quantify the effect it may have on our future
10
<PAGE> 15
revenue. We have not yet developed a comprehensive contingency plan to address
these issues. We are prepared to develop a contingency plan if our ongoing
assessment indicates areas of significant exposure.
If our present efforts to address the Year 2000 compliance issues are not
successful, or if third party vendors, licensors and providers of hardware,
software and services with which we conduct business do not successfully address
these issues, our business, operating results and financial condition would be
harmed. Please refer to our discussion in "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Year 2000."
WE MAY NOT COMPETE SUCCESSFULLY AND THE VALUE OF YOUR INVESTMENT MAY
DECLINE IF WE FAIL TO KEEP PACE WITH RAPIDLY CHANGING TECHNOLOGY AND MARKET
CONDITIONS.
Our industry is characterized by rapid technological change, frequent new
service introductions, changing client demands and the emergence of new industry
standards and practices that could render our existing services, proprietary
technology and systems obsolete. We must continually improve the performance,
features and reliability of our services, particularly in response to
competitive offerings. Our success depends, in part, on our ability to enhance
our existing services and to develop new services, functionality and technology
that address the increasingly sophisticated and varied needs of our prospective
clients. The development of proprietary technology and necessary service
enhancements entail significant technical and business risks and require
substantial expenditures and lead-time. We may not be able to keep pace with the
latest technological developments or adapt our services to client requirements
or emerging industry standards. If we do not successfully respond to new
developments or do not respond in a cost-effective manner, our business,
financial condition and operating results will be harmed.
IF WE ENCOUNTER SYSTEM FAILURE, WE MAY NOT BE ABLE TO PROVIDE ADEQUATE
SERVICE AND OUR BUSINESS AND REPUTATION COULD BE DAMAGED.
Our ability to successfully receive and send email messages and provide
acceptable levels of customer service largely depends on the efficient and
uninterrupted operation of our computer and communications hardware and network
systems. All of our communications systems are located in Denver, Colorado. As a
result, if there were to be a natural disaster affecting the Denver area, our
communications systems could be disrupted and our business would be harmed. We
may not be able to relocate quickly under those circumstances.
Our clients have experienced some interruptions in our email service in the
past due to network outages and internal system failures. Similar interruptions
may occur from time to time in the future. Our revenues depend on the number of
end users who use our email services. Our business will suffer if we experience
frequent or long system interruptions that result in the unavailability or
reduced performance of our systems or networks or reduce our abilities to
provide email services. Our systems and operations are also vulnerable to damage
or interruption from fire, flood, earthquake, power loss, telecommunications
failure, physical break-ins and similar events. If any of these events occur, we
could fail to meet our minimum performance standards and incur monetary
penalties under our contracts.
We have entered into service agreements with some of our clients that
require certain minimum performance standards. If we fail to meet these
standards, our clients could terminate their relationships with us and we could
be subject to contractual monetary penalties. Any unplanned interruption of
services may adversely affect our ability to attract and retain clients and
could harm our business and operating results and damage our reputation.
IF WE DO NOT SUCCESSFULLY RELOCATE OUR DATA CENTER TO A FACILITY WITH
APPROPRIATE BACK-UP POWER AND COOLING CAPABILITIES, WE MAY EXPERIENCE AN OUTAGE
AND OUR CURRENT SYSTEMS MAY TEMPORARILY CEASE OPERATING.
Due to insufficient access to back-up power and cooling capabilities in our
current data center, we may experience a system interruption. We plan to
relocate our offices and data center in late 1999 to a facility with more
extensive back-up power and cooling capabilities. We have identified a site for
the
11
<PAGE> 16
relocation but have not yet executed a lease. If we are unable to promptly enter
into an acceptable lease for the site we have identified, and if we are unable
to rapidly identify an alternative site, we will continue to be subject to the
risk of a power outage that interrupts our operations. Any failure of our
systems would materially harm our business. Moreover, our relocation to a new
site requires that we rebuild and enhance our system. Although we plan to
continue operating in our current site until our new site is fully operational,
any defects or delays in building our system at the new site could harm our
business.
SERVICE INTERRUPTIONS FROM OUR THIRD PARTY INTERNET AND TELECOMMUNICATIONS
PROVIDERS COULD HARM OUR BUSINESS.
We depend heavily on our third party providers of Internet and related
telecommunications services. In the past, we have experienced disruptions and
delays in our email service due to service disruption from those providers. We
cannot assure you that these companies will continue to provide services to us
without disruptions, at the current cost, or at all. Although we believe that we
could obtain these services from other sources if necessary, the costs
associated with a transition to a new service provider would be substantial. We
would have to reroute our computer systems and telecommunications infrastructure
to accommodate a new service provider. This process would be both expensive and
time consuming. Any interruption by our service providers would also likely
disrupt the operation of the messaging platform, causing a loss of revenue and a
potential loss of clients. These losses could harm our business, financial
condition and results of operations.
UNKNOWN SOFTWARE DEFECTS COULD DISRUPT OUR SERVICES, WHICH COULD HARM OUR
BUSINESS AND REPUTATION.
Our service offerings depend on complex software, both internally developed
and licensed from third parties. Complex software often contains defects,
particularly when first introduced or when new versions are released. Although
we test our software, we may not discover software defects that affect current
or planned services or enhancements until after they are deployed. These defects
could cause service interruptions, which could damage our reputation, increase
our service costs, cause us to lose revenue, delay market acceptance and divert
our development resources, any of which could cause our business to suffer.
IF OUR SECURITY SYSTEM IS BREACHED, OUR BUSINESS AND REPUTATION COULD
SUFFER.
We must securely receive and transmit confidential information over public
networks and maintain that information on internal systems. Our failure to
prevent security breaches could damage our reputation, expose us to risk of loss
or liability or otherwise harm our business, operating results and financial
condition. Although we have implemented network security measures, our servers
are vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions, which could lead to interruptions, delays or loss of data. We may
be required to expend significant capital and other resources to license
encryption technology and additional technologies to protect against security
breaches or to alleviate problems caused by any breach. Our failure to prevent
security breaches may harm our business and operating results.
OUR LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY MAY ADVERSELY
AFFECT OUR COMPETITIVE POSITION.
Trademarks, service marks, trade secrets, copyrights, patents and other
proprietary rights are important to our success and competitive position. Our
efforts to protect our proprietary rights may be inadequate and may not prevent
others from claiming violations by us of their proprietary rights. Existing
trade secret, copyright and trademark laws offer only limited protection.
Further, effective trademark, copyright and trade secret protection may not be
available in every country in which our services are made available and policing
unauthorized use of our proprietary information is difficult.
In addition, the status of United States patent protection in the software
industry is not well defined and will evolve as the U.S. Patent and Trademark
Office grants additional patents. We have obtained one patent and we have two
patents pending in the United States. We may seek additional patents in the
12
<PAGE> 17
future. We do not know if our pending patent applications or any future patent
applications will be issued with the scope of the claims we seek, if at all, or
whether the patent we own or any patents we receive will be challenged or
invalidated. Furthermore, we may not be successful in obtaining registration of
several pending trademark applications in the United States and in other
countries.
The unauthorized misappropriation of our proprietary rights could harm our
business, financial condition and operating results. If we resort to legal
proceedings to enforce our proprietary rights, the proceedings could be
burdensome and expensive and the outcome could be uncertain.
WE ARE SUBJECT TO CLAIMS ALLEGING INTELLECTUAL PROPERTY INFRINGEMENT.
We are subject to claims alleging that we have infringed third party
proprietary rights and might be subject to additional claims. If we were to
discover that we have infringed third party rights, we may not be able to obtain
permission to use those rights on commercially reasonable terms. If we resort to
legal proceedings to enforce our proprietary rights or defend against alleged
infringements, the proceedings could be burdensome and expensive and could
involve a high degree of risk. Any of these events could harm our business,
financial condition and operating results.
We are currently involved in litigation with MessageMedia, Inc., one of our
competitors. We filed an infringement claim against eMail Publishing, Inc.,
which was acquired by MessageMedia in December 1998. In response, MessageMedia
has asserted that we are infringing one of its patents. If we are unable to
settle these proceedings in a satisfactory manner, the legal proceedings may be
time-consuming and expensive and the outcome may be adverse to us. If we were
found to be infringing a patent held by MessageMedia, our business may be
harmed.
WE MAY NEED TO LICENSE THIRD PARTY TECHNOLOGIES AND WE FACE RISKS IN DOING
SO.
We intend to continue to license technology from third parties. We are
highly dependent on the technology we license from SendMail, which enables us to
send email through the Internet, and E.piphany, Inc., which will allow us to
offer a variety of targeted marketing capabilities. The market is evolving and
we may need to license additional technologies to remain competitive. We may not
be able to license these technologies on commercially reasonable terms or at
all. Our inability to obtain any of these licenses could delay the development
of our services until equivalent technology can be identified, licensed and
integrated. Any delays could cause our business and operating results to suffer.
In addition, we may not be able to integrate any licensed technology into our
services. These third party licenses may expose us to increased risks, including
risks related to the integration of new technology, the diversion of resources
from the development of our own proprietary technology and our inability to
generate revenue from new technology sufficient to offset associated acquisition
and maintenance costs.
RISKS ASSOCIATED WITH THE INTERNET
OUR BUSINESS WILL SUFFER AND THE VALUE OF YOUR INVESTMENT WILL DECLINE IF
THE INTERNET DOES NOT ACHIEVE CONTINUING, WIDESPREAD ACCEPTANCE AS A MARKETING
AND COMMUNICATIONS MEDIUM.
Our future success will depend substantially upon the widespread adoption
of the Internet as an attractive platform for marketing and communications
applications and the use of outsourcing to solve businesses' email marketing and
communications needs. Most businesses and consumers have only limited experience
with the Internet as a marketing and communications medium. Our business,
financial condition and operating results will be harmed if the Internet does
not achieve continuing, widespread acceptance as a marketing and communications
medium.
13
<PAGE> 18
WE WILL NOT BE ABLE TO GROW OUR BUSINESS UNLESS CONSUMERS AND BUSINESSES
INCREASE THEIR USE OF THE INTERNET AND THE INTERNET IS ABLE TO SUPPORT THE
DEMANDS OF THIS GROWTH.
Our success depends on increasing use of the Internet by consumers and
businesses. Consumers and businesses might not increase their use of the
Internet for a number of reasons, such as:
- high Internet access costs;
- perceived security risks;
- legal and regulatory issues;
- inconsistent service quality; and
- unavailability of cost-effective, high-speed service.
Even if consumers and businesses increase their use of the Internet, the
Internet infrastructure may not be able to support demands of this growth. The
Internet infrastructure must be continually improved and expanded in order to
alleviate overloading and congestion. Failure to do so will degrade the
Internet's performance and reliability. Internet users may experience service
interruptions as a result of outages and other delays occurring throughout the
Internet. Frequent outages or delays may cause consumers and businesses to slow
or stop their use of the Internet as a communications medium. If use of the
Internet as a medium for consumer and business communications does not continue
to increase, our business, financial condition and operating results may be
harmed.
WE MAY HAVE LIABILITY FOR INTERNET CONTENT AND WE MAY NOT HAVE ADEQUATE
LIABILITY INSURANCE.
As a provider of email services, we face potential liability for
defamation, negligence, copyright, patent or trademark infringement and other
claims based on the nature and content of the materials transmitted via email.
We do not and cannot screen all of the content generated by our users, and we
could be exposed to liability with respect to this content. Furthermore, some
foreign governments have enforced laws and regulations related to content
distributed over the Internet that are stricter than those currently in place in
the United States.
Although we carry general liability and umbrella liability insurance, our
insurance may not cover claims of these types or may not be adequate to
indemnify us for all liability that may be imposed. There is a risk that a
single claim or multiple claims, if successfully asserted against us, could
exceed the total of our coverage limits or may not qualify for coverage under
our insurance policies as a result of coverage exclusions that are contained
within these policies. In this case, we may need to use capital contributed by
our stockholders to settle claims. Any imposition of liability, particularly
liability that is not covered by insurance or is in excess of insurance
coverage, could harm our reputation and our business and operating results or
could result in the imposition of criminal penalties.
WE MAY LOSE CLIENTS AND OUR REPUTATION MAY SUFFER BECAUSE OF "SPAM."
If we fail in our attempts to prevent the distribution of unsolicited bulk
email, or "spam," our business and reputation may be harmed. Spam-blocking
efforts by others may also result in the blocking of our clients' legitimate
messages. Additionally, spam may contain false email addresses or be generated
by the use of false email addresses. Our reputation may be harmed if email
addresses with our domain names are used in this manner. Any of these events may
cause clients to become dissatisfied with our service and terminate their use of
our services, which could harm our business, financial condition and operating
results.
14
<PAGE> 19
INCREASED GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES MAY IMPAIR THE
GROWTH OF THE INTERNET AND DECREASE DEMAND FOR OUR SERVICES OR INCREASE OUR COST
OF DOING BUSINESS.
Government regulation may impose additional burdens on our business.
Although there are currently few laws and regulations directly applicable to the
Internet and commercial email services, a number of laws have been proposed
involving the Internet, including laws addressing:
- user privacy;
- pricing;
- content;
- copyrights;
- characteristics and quality of services; and
- consumer protection.
In particular, a number of states have already passed statutes prohibiting
unsolicited commercial email. A number of statutes have been introduced in
Congress and state legislatures to impose penalties for sending unsolicited
emails which, if passed, could impose additional restrictions on our business.
In addition, a California court recently held that unsolicited email
distribution is actionable as an illegal trespass for which the sender could be
subject for monetary damages.
Further, the growth and development of the market for online email may
prompt calls for more stringent consumer protection laws that may impose
additional burdens on those companies conducting business online. The adoption
of any additional laws or regulations may impair the growth of the Internet
which could decrease the demand for our services and increase our cost of doing
business. Moreover, if we were alleged to have violated federal, state or
foreign, civil or criminal law, even if we could successfully defend these
claims, it could harm our business and reputation.
CHANGES IN TELECOMMUNICATIONS REGULATIONS COULD CAUSE REDUCED DEMAND FOR
OUR SERVICES.
Several telecommunications carriers are advocating that the Federal
Communications Commission regulate the Internet in the same manner as other
telecommunications services by imposing access fees on Internet service
providers. These regulations could substantially increase the costs of
communicating on the Internet. This, in turn, could slow the growth in Internet
use and thereby decrease the demand for our services or otherwise harm our
business, financial condition and operating results.
RISKS ASSOCIATED WITH THIS OFFERING
CONTROL BY EXISTING STOCKHOLDERS MAY LIMIT YOUR ABILITY TO INFLUENCE THE
OUTCOME OF DIRECTOR ELECTIONS AND OTHER MATTERS REQUIRING STOCKHOLDER APPROVAL.
Following the offering, our executive officers, directors and our
stockholders who currently own over five percent of our common stock will, in
the aggregate, beneficially own approximately % of our outstanding common
stock. These stockholders, if they vote together, will be able to significantly
influence matters that we require our stockholders to approve, including
electing directors and approving significant corporate transactions. This
concentration of ownership may also have the effect of delaying or preventing a
change in control of us, which could result in a lower stock price.
FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET COULD CAUSE OUR STOCK
PRICE TO FALL AND DECREASE THE VALUE OF YOUR INVESTMENT.
The market price of our common stock could fall if our stockholders sell
substantial amounts of common stock, including shares issued upon the exercise
of outstanding options and warrants, in the public market following this
offering. These sales might also make it more difficult for us to sell equity
securities in the future at a time and price that we deem appropriate.
Restrictions under the securities laws and lock-up agreements limit the number
of shares of common stock that may be sold in the public market.
15
<PAGE> 20
However, Thomas Weisel Partners LLC may, in its sole discretion, release all or
some portion of the securities subject to lock-up agreements. Some stock and
warrant holders are entitled to certain registration rights. The exercise of
these rights could adversely affect the market price of our common stock.
CERTAIN PROVISIONS IN OUR CORPORATE DOCUMENTS MAY DISCOURAGE OUR
ACQUISITION BY OTHERS AND THUS DEPRESS OUR STOCK PRICE.
Our corporate documents and Delaware law could make it more difficult for a
third party to acquire us, even if a change in control would be beneficial to
our stockholders. These and other provisions might discourage, delay or prevent
a change in control of us or a change in our management. These provisions could
also limit the price that investors might be willing to pay in the future for
shares of common stock.
16
<PAGE> 21
FORWARD-LOOKING STATEMENTS; MARKET DATA
This prospectus may contain forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
These forward-looking statements involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of factors more fully described in the "Risk Factors"
section and elsewhere in this prospectus. We are not obligated to update or
revise these forward-looking statements to reflect new events or circumstances.
This prospectus contains market data related to us and our industry. This
data has been included in the studies published by the Internet market research
firms, Jupiter Communications and Forrester Research. These market research
firms assume that certain events, trends and activities will occur and they
project information on those assumptions. Some of these assumptions are that:
- no catastrophic failure of the Internet will occur;
- the number of people online and the total number of hours spent online
will increase significantly over the next few years; and
- Internet security and privacy concerns will be adequately addressed.
If the market research firms are wrong about any of their assumptions, then
their projections may also be wrong. For example, the Internet-related markets
may not grow over the next few years at the rates Jupiter Communications and
Forrester Research project, or at all. If these markets do now grow at these
projected rates, it may harm our business, financial condition and operating
results.
CONVENTIONS WHICH APPLY TO THIS PROSPECTUS
This offering is for shares; however, the underwriters have a
30-day option to purchase up to additional shares from us to cover
over-allotments. Some of the disclosures in this prospectus would be different
if the underwriters exercise the option. Unless we tell you otherwise, the
information in this prospectus assumes that the underwriters will not exercise
the option.
Unless we tell you otherwise:
- all information in this prospectus relating to our capitalization
presented on a pro forma basis gives effect to the receipt of net
proceeds of $8.8 million from our sale of 1,357,284 shares of Series E
preferred stock at a price of $6.50 per share and warrants to purchase
203,586 shares of Series E preferred stock at an exercise price of $8.00
per share in July and August 1999; and
- all information in this prospectus relating to our capitalization
presented on a pro forma as adjusted basis gives effect to:
- the automatic conversion of all outstanding series of preferred stock
into common stock upon completion of this offering;
- our receipt of the estimated net proceeds from the sale of the
shares of common stock we are selling in this offering at
an assumed initial public offering price of $ per share,
after deducting estimated underwriting discounts and commissions and
offering expenses; and
- an increase in our authorized common stock to 35,000,000 shares and an
increase in our undesignated preferred stock to 3,500,000 shares
effective immediately prior to the closing of this offering.
Our trademarks include "Exactis" and "Email Marketing Solutions." We have
applied for federal registration of our "Exactis" trademark. Each other
trademark, trade name or service mark appearing in this prospectus belongs to
its holder.
17
<PAGE> 22
USE OF PROCEEDS
We estimate that the net proceeds from the sale of shares
offered by us will be approximately $ million, assuming an initial
public offering price of $ per share, after deducting estimated
underwriting discounts and commissions and offering expenses. If the
underwriters' over-allotment option is exercised in full, we estimate that we
will receive approximately $ million in net proceeds from this offering.
The principal reasons for this offering are to raise funds for working
capital and other general corporate purposes. We have not identified specific
uses for the net proceeds from this offering. The amounts we actually expend in
these areas may vary significantly and will depend on a number of factors,
including our future revenues. Accordingly, management will retain broad
discretion in the allocation of the net proceeds of this offering. You will not
have the opportunity to evaluate the economic, financial or other information on
which we base our decisions on how to use the proceeds. A portion of the net
proceeds may also be used to acquire or invest in complementary businesses,
technologies, services or products. We have no current plans, agreements or
commitments with respect to any acquisition or investment, and we are not
currently engaged in any negotiations with respect to any such transaction.
Pending these uses, the estimated net proceeds of this offering will be
invested in short term, interest bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain future earnings, if any, to finance the growth and
development of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future. Any future determination to pay cash
dividends will be at the discretion of our board of directors and will be
dependent on our financial condition, operating results, capital requirements
and such other factors as the board of directors deems relevant.
18
<PAGE> 23
DILUTION
Our pro forma net tangible book value as of June 30, 1999, which includes
the sale of 1,357,284 shares of Series E preferred stock at a price of $6.50 per
share and warrants to purchase 203,586 shares of Series E preferred stock at an
exercise price of $8.00 per share in July and August 1999, was $9.5 million, or
approximately $1.15 per share of common stock. Pro forma net tangible book value
per share represents the amount of total tangible assets less total liabilities,
divided by the number of shares of common stock outstanding, including the sale
of 1,357,284 shares of Series E preferred stock and conversion of all
outstanding series of preferred stock into common stock. Without taking into
account any other changes in the net tangible book value after June 30, 1999,
other than to give effect to our receipt of the net proceeds from the sale of
the shares of common stock in this offering at an assumed initial public
offering price of $ per share, our pro forma as adjusted net tangible book
value as of June 30, 1999 would have been approximately $ , or $
per share of common stock. This represents an immediate increase in net tangible
book value of $ per share to existing stockholders and an immediate dilution
of $ per share to new investors. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share before this
offering............................................... $ 1.15
Increase per share attributable to new investors..........
--------
Pro forma as adjusted net tangible book value per share
after this offering.......................................
--------
Pro forma as adjusted dilution per share to new investors... $
========
</TABLE>
The following table summarizes, on a pro forma as adjusted basis as of June
30, 1999, the total number of shares of common stock purchased from us, the
total consideration paid to us and the average price per share paid by existing
stockholders and by new investors purchasing shares of common stock in this
offering. The information presented is based upon an assumed initial public
offering price of $ per share, before deducting estimated underwriting
discounts and commissions and offering expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................... 8,306,204 % $27,257,138 % $3.28
New investors...........................
--------- ----- ----------- -----
Total......................... 100.0% $ 100.0%
========= ===== =========== =====
</TABLE>
The foregoing table assumes no exercise of the underwriters' over-allotment
option or of any outstanding stock options or warrants after June 30, 1999. As
of June 30, 1999, there were outstanding options to purchase 1,424,423 shares of
common stock at a weighted average exercise price of $2.57 per share and
warrants to purchase 1,357,583 shares at a weighted average exercise price of
$5.48 per share. There will be further dilution to the extent any of our options
or warrants are exercised. Please see "Management -- Stock Plans" for a
discussion of our employee benefit plans and "Description of Securities" for a
discussion of our outstanding warrants.
19
<PAGE> 24
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
capitalization as of June 30, 1999. This table should be read together with the
"Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition" and the financial statements and notes to those statements appearing
elsewhere in this prospectus. This information is presented:
- on an actual basis;
- on a pro forma basis to give effect to the receipt of net proceeds of
$8.8 million from our sale of 1,357,284 shares of Series E preferred
stock at a price of $6.50 per share and warrants to purchase 203,586
shares of Series E preferred stock at an exercise price of $8.00 per
share in July and August 1999; and
- on a pro forma as adjusted basis to give effect to:
- the automatic conversion of all outstanding series of preferred stock
into common stock upon completion of this offering;
- our receipt of the estimated net proceeds from the sale of the
shares of common stock we are selling in this offering at an assumed
initial public offering price of $ per share, after deducting
estimated underwriting discounts and commissions and offering expenses;
and
- an increase in our authorized common stock to 35,000,000 shares and an
increase in our undesignated preferred stock to 3,500,000 shares
effective immediately prior to the closing of this offering.
<TABLE>
<CAPTION>
JUNE 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 557 $ 9,381 $
======== ======== =======
Long-term debt and capital lease obligations, net of current
portions and discount..................................... 300 300
-------- -------- -------
Redeemable preferred stock:
Preferred Stock (Series B, C and D), par value $.01 per
share; 7,420,000 shares authorized actual and pro forma;
none authorized pro forma as adjusted; 5,059,867 shares
outstanding actual and pro forma; none outstanding pro
forma as adjusted....................................... 18,077 18,077
Series E Preferred Stock, par value $.01 per share; none
authorized actual and pro forma as adjusted; 2,500,000
shares authorized pro forma; none outstanding actual and
pro forma as adjusted; 1,357,284 outstanding pro
forma................................................... -- 8,012
Warrants for the purchase of shares of redeemable
preferred stock; 1,357,583 outstanding and contingently
issuable actual; 1,561,169 outstanding and contingently
issuable pro forma...................................... 648 1,460
-------- -------- -------
18,725 27,549
-------- -------- -------
Stockholders' equity (deficit):
Undesignated preferred stock, par value $.01 per share;
none authorized actual; 200,000 shares authorized pro
forma; 3,500,000 shares authorized pro forma as
adjusted................................................ -- --
Series A preferred stock, par value $.01 per share;
880,000 shares authorized and outstanding actual and pro
forma; none authorized and outstanding pro forma as
adjusted................................................ 1,094 1,094
Common stock, par value $.01 per share; 13,500,000 shares
authorized actual; 15,000,000 shares authorized pro
forma; 35,000,000 shares authorized pro forma as
adjusted; 1,009,053 shares outstanding actual and pro
forma; shares outstanding pro forma as
adjusted................................................ 10 10
Additional paid-in capital................................ 751 751
Accumulated deficit....................................... (19,646) (19,646)
-------- -------- -------
Total stockholders' equity (deficit)............... (17,791) (17,791)
-------- -------- -------
Total capitalization............................... $ 1,234 $ 10,058 $
======== ======== =======
</TABLE>
20
<PAGE> 25
The number of shares of common stock is based on the number of shares
outstanding as of June 30, 1999 and does not include the following:
- 1,424,423 shares that could be issued upon the exercise of options
outstanding as of June 30, 1999 at a weighted average exercise price of
$2.57 per share;
- 1,357,583 shares that could be issued upon the exercise of warrants
outstanding and contingently issuable as of June 30, 1999 at a weighted
average exercise price of $5.48 per share;
- 203,586 shares that could be issued upon the exercise of warrants issued
after June 30, 1999 at a weighted average exercise price of $8.00 per
share;
- 1,400,000 shares that could be issued under our 1999 equity incentive
plan; and
- 500,000 shares that could be issued to our employees who elect to buy
stock in the future under our employee stock purchase plan.
21
<PAGE> 26
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the financial statements and the notes to such statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The statement of operations data for the
period from inception to December 31, 1996 and for the years ended December 31,
1997 and 1998, and the balance sheet data at December 31, 1997 and 1998 are
derived from our financial statements which have been audited by KPMG LLP,
independent auditors, and are included elsewhere in this prospectus. The
statement of operations data for the six months ended June 30, 1998 and 1999 and
the balance sheet data at June 30, 1999 have been derived from the unaudited
financial statements included elsewhere in this prospectus that have been
prepared on the same basis as the audited financial statements and, in our
opinion, contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial position and
results of operations for these periods. Historical results are not necessarily
indicative of the results to be expected in the future and results for interim
periods are not necessarily indicative of results for the entire year.
In 1998, we sold our publishing line of business to Sony Music and
simultaneously entered into a service agreement with Sony Music. The historical
activity of the publishing business sold to Sony Music has been separately
stated as discontinued operations in the financial statements and other
financial information contained in this prospectus. The revenue from Sony Music
constituted $2.2 million of our total revenue for the six months ended June 30,
1999 and is not reflected in our results of continuing operations in any prior
historical period. As a result, we believe period-to-period comparisons of our
revenue and operating results are not meaningful. Earnings from discontinued
operations per share for the year ended December 31, 1998 include a gain on the
sale of discontinued operations of $3.3 million. Please see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes appearing elsewhere in this
prospectus for a description of the accounting treatment of the discontinued
operations.
We have not paid any dividends on our common stock since inception.
Net loss attributable to common stockholders includes the effect of the
accretion on the redeemable convertible preferred stock which increases net loss
attributable to common stockholders for the related periods. This accretion will
not be recognized after the conversion of all outstanding series of preferred
stock into common stock upon completion of this offering.
Pro forma basic and diluted net loss per share is computed using the
weighted average number of common shares outstanding, including the pro forma
effects of the automatic conversion of all outstanding series of preferred stock
into common stock upon completion of this offering as if the conversion occurred
on January 1, 1998, or at the date the preferred stock was actually issued, if
later. Pro forma basic and diluted net loss per share does not give effect to
the issuance of Series E preferred stock issued in July and August 1999.
22
<PAGE> 27
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 30,
1996
(INCEPTION) TO YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
DECEMBER 31, ------------------------- -------------------------
1996 1997 1998 1998 1999
-------------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................... $ -- $ 359 $ 821 $ 154 $ 3,574
Cost of revenue....................... -- 132 256 93 398
---------- ---------- ---------- ---------- ----------
Gross profit........................ -- 227 565 61 3,176
---------- ---------- ---------- ---------- ----------
Operating expenses:
Marketing and sales................. -- 1,034 1,621 595 1,275
Research, development and
engineering....................... -- 701 1,807 733 3,134
General and administrative.......... -- 1,821 1,846 823 1,928
Depreciation and amortization....... -- 581 730 337 690
---------- ---------- ---------- ---------- ----------
Total operating expenses..... -- 4,137 6,004 2,488 7,027
---------- ---------- ---------- ---------- ----------
Loss from operations.... -- (3,910) (5,439) (2,427) (3,851)
Interest expense, net................. -- (73) (101) (30) (18)
---------- ---------- ---------- ---------- ----------
Loss from continuing operations..... -- (3,983) (5,540) (2,457) (3,869)
---------- ---------- ---------- ---------- ----------
Discontinued operations:
Loss from discontinued operations... (3,392) (3,716) (2,282) (926) --
Gain on sale of discontinued
operations........................ -- -- 3,348 -- --
---------- ---------- ---------- ---------- ----------
Gain on sale and loss from
discontinued operations.... (3,392) (3,716) 1,066 (926) --
---------- ---------- ---------- ---------- ----------
Net loss................ (3,392) (7,699) (4,474) (3,383) (3,869)
Accretion of preferred stock to
liquidation value................... (3) (53) (103) (50) (52)
---------- ---------- ---------- ---------- ----------
Net loss attributable to common
stockholders................... $ (3,395) $ (7,752) $ (4,577) $ (3,433) $ (3,921)
========== ========== ========== ========== ==========
Basic and diluted net loss per share:
Loss from continuing operations..... $ -- $ (4.04) $ (5.62) $ (2.50) $ (3.89)
Earnings (loss) from discontinued
operations........................ (3.40) (3.71) 1.06 (0.92) --
---------- ---------- ---------- ---------- ----------
Net loss..................... $ (3.40) $ (7.75) $ (4.56) $ (3.42) $ (3.89)
========== ========== ========== ========== ==========
Shares used in computing net loss per
share -- basic and diluted.......... 1,000,000 1,000,255 1,004,461 1,002,468 1,009,053
Pro forma basic and diluted net loss
per share (unaudited):
Loss from continuing operations..... $ (0.84) $ (0.56)
Earnings from discontinued
operations........................ 0.16 --
---------- ----------
Net loss..................... $ (0.68) $ (0.56)
========== ==========
Shares used in computing net loss
per share -- basic and diluted.... 6,748,964 6,948,920
</TABLE>
The following table is a summary of our balance sheet data. The pro forma
column gives effect to the receipt of net proceeds of $8.8 million from our sale
of 1,357,284 shares of Series E preferred stock at a price of $6.50 per share
and warrants to purchase 203,586 shares of Series E preferred stock at an
exercise price of $8.00 per share in July and August 1999.
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1999
---------------------------- --------------------
1996 1997 1998 ACTUAL PRO FORMA
------ -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $3,798 $ 3,747 $ 6,383 $ 557 $ 9,381
Working capital (deficit).................... 3,420 3,863 4,352 (453) 8,371
Total assets................................. 5,791 7,065 10,806 6,793 15,617
Long-term debt and capital lease obligations,
net of current portions and discount....... 30 824 610 300 300
Redeemable convertible preferred stock and
warrants................................... 7,540 15,349 18,673 18,725 27,549
Total stockholders' deficit.................. (2,288) (10,039) (14,577) (17,791) (17,791)
</TABLE>
23
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction with
"Selected Financial Data" and the financial statements and notes attached to
those statements included elsewhere in this prospectus. This discussion contains
certain forward-looking statements that involve risks and uncertainties. Please
see "Risk Factors" and "Forward-Looking Statements; Market Data" elsewhere in
this prospectus.
OVERVIEW
We are a leading provider of permission-based outsourced email marketing
and communications solutions primarily to companies in the media, ecommerce and
financial services industries. We were founded in January 1996 under the name
Mercury Mail, Inc. In August 1997, we changed our name to InfoBeat Inc. and in
January 1999 we changed our name to Exactis.com, Inc. Our initial business was
the publication of a suite of advertising supported newsletters delivered daily
to subscribers via email, which we refer to as the "InfoBeat publishing
business." In 1997, we began using the email technologies we developed for the
InfoBeat publishing business to deliver email newsletters for another company.
In early 1998, we launched our outsourced email marketing and communications
services, which we refer to as our "email services business."
In December 1998, we sold the InfoBeat publishing business to Sony Music
and simultaneously entered into a service agreement to manage the production and
delivery of the InfoBeat products for Sony Music. Sony Music agreed to pay us an
aggregate of at least $14.8 million, of which $6.5 million was payable under a
purchase agreement and a minimum of $8.3 million was payable under a service
agreement. Under the purchase agreement, Sony Music paid us $5.0 million in 1998
and $1.5 million in July 1999. Under the service agreement, Sony Music agreed to
make minimum payments totaling $8.3 million over three years, of which $2.5
million, $2.8 million and $3.0 million has been paid, or will be paid, for
services rendered or to be rendered in 1999, 2000 and 2001, respectively.
Generally, a significant portion of the cash payable to us under the service
agreement is received prior to the time services are rendered, resulting in
deferred revenue. This revenue is recognized in the period in which services are
performed. For financial reporting purposes, we have treated the results of our
InfoBeat publishing business as discontinued operations for periods prior to
January 1, 1999.
Based on management's projections of pricing and costs for delivery of
similar services, we estimated the fair value of the services to be provided to
Sony Music under the service agreement to be $11.5 million. The excess of the
aggregate of $14.8 million payable by Sony Music over the estimated $11.5
million fair value of the services to be provided was recorded as a $3.3 million
gain on the sale of discontinued operations in 1998. The difference between the
estimated $11.5 million fair value of the services to be provided and the $8.3
million payable by Sony Music under the service agreement, or $3.2 million, has
been recorded as deferred revenue that will be amortized over the term of the
service agreement. The revenue from the service agreement with Sony Music
constituted $2.2 million, or 62%, of our total revenue for the six months ended
June 30, 1999. Approximately $800,000 of the $2.2 million consists of
amortization of the $3.2 million of deferred revenue. For more information about
the InfoBeat publishing business, please refer to note 2 in the financial
statements.
Since January 1999, we have focused exclusively on providing outsourced
email marketing and communications solutions to a wide range of clients
primarily in the media, ecommerce and financial services industries. We generate
revenue based on a fee per email message sent and charges for related services,
such as list setup and custom engineering development work. The actual per
message fees are related to each client's monthly email message volume and
decline as a client's volume increases. The majority of our clients execute a
12-month contract with guaranteed monthly minimum charges based upon their
expected volume of messages. Revenue is recognized in the period in which
services are provided. We record deferred revenue for payments received in
advance of services provided.
Cost of revenue consists primarily of sales commissions and network
connectivity charges to our Internet service providers. Internet service
providers charge us for network connectivity based on monthly
24
<PAGE> 29
minimum charges up to a certain level of usage and incrementally for usage above
that level. Sales commissions are paid monthly based on a percentage of revenue
recognized during the month.
Our average cost to deliver an email message is significantly influenced by
the volume of email messages processed by our systems. As we continue to add new
clients, and as our existing clients increase both the size of their email lists
as well as their overall usage of our services, we expect our average cost to
deliver an email message to decline over the long term. In addition, a portion
of our research, development and engineering efforts are devoted to improving
the performance and efficiency of our systems.
In May 1999, we granted options to an executive to purchase 658,000 shares
of common stock at an exercise price of $1.50 per share. This grant resulted in
a total non-cash compensation expense of $1.9 million that we are recognizing in
general and administrative expense over the three-year vesting period of the
options. For the six months ended June 30, 1999, we recognized non-cash
compensation expense of $707,000 with respect to these options.
In December 1998, we issued to Sony Music a warrant to purchase 600,000
shares of Series D preferred stock at a purchase price of $6.00 per share. The
warrant expires on December 30, 2003. The vesting of this warrant is contingent
upon the achievement by Sony Music of certain performance milestones. See
"Description of Securities -- Warrants." We will recognize the fair value of the
vested portion of the warrant, as calculated using the Black-Scholes option
pricing model, as marketing and sales expense at the time, if ever, each
performance milestone is achieved. The fair value and volatility of our common
stock are critical components of the Black-Scholes option pricing model and we
cannot predict what those components might be on the date each performance
milestone is achieved. If Sony Music achieves any of the performance milestones,
we will incur non-cash charges, which may be substantial. As of June 30, 1999,
none of the performance milestones had been achieved.
In July 1997, we issued to American Express a warrant to purchase 425,000
shares of Series C preferred stock at a purchase price of $6.00 per share. The
warrant expires in July 2000. The vesting of this warrant is contingent upon the
achievement by American Express of certain performance milestones. In accordance
with accounting standards in effect at the time of the issuance of this warrant,
the estimated fair value of the warrant, using the Black-Scholes option pricing
model, was calculated at the time awarded and is being amortized over the life
of the warrant. We estimate the number of warrant shares that will ultimately
vest under the warrant at the end of each reporting period and, based upon these
estimates, may recognize additional non-cash charges both currently and over the
remaining life of the warrant. We recognized non-cash charges of $46,000 in
1997, $118,000 in 1998 and $24,000 for the six months ended June 30, 1999
related to the American Express warrant and, based on estimates as of June 30,
1999 as to the ultimate vesting of the warrant, we plan to recognize an
additional $6,000 of non-cash charges over the next 12 months. Should American
Express achieve one or both remaining milestones, then we expect to record
additional non-cash charges of up to approximately $250,000 in the period in
which one or both of these milestones is achieved.
We incurred losses from continuing operations of $4.0 million in 1997, $5.5
million in 1998 and $3.9 million for the six months ended June 30, 1999. All
activity related to the period from inception through December 1996 has been
reported as discontinued operations in the financial statements. Net losses
including discontinued operations were $3.4 million in 1996, $7.7 million in
1997 and $4.5 million in 1998. We expect to increase spending on marketing and
sales as we expand our sales force and increase promotional and advertising
expenditures. We also expect substantially higher general and administrative and
research, development and engineering expenses as we expand our infrastructure
to support expected growth and as we broaden our suite of email services. As a
result of these increases, we expect to continue to incur significant net losses
on a quarterly basis through at least 2000.
In view of the rapidly evolving nature of our business, our limited
operating history and our recent focus on providing outsourced email marketing
and communications solutions, we believe that period-to-period comparisons of
our revenue and operating results, including our operating expenses as a
percentage
25
<PAGE> 30
of total revenue, are not meaningful and should not be relied upon as an
indication of future performance. In addition, we do not believe that our
historical growth rates are indicative of future results.
RESULTS OF CONTINUING OPERATIONS
The expenses and number of employees discussed below are shown net of
direct and indirect costs allocated to the InfoBeat publishing business, which
has been accounted for as discontinued operations. In addition, all activity for
the period from inception through December 31, 1996 was related to the
discontinued operations. As a result, comparison of the period ended December
31, 1996 to the year ended December 31, 1997 has been omitted. For more
information about the InfoBeat publishing business, please refer to note 2 in
the financial statements.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998
REVENUE. Revenue consists of charges for providing email messaging services
and includes fees based on the volume of email messages sent and charges for
related services, such as list setup and custom engineering development work.
Revenue increased to $3.6 million in the first six months of 1999 from $154,000
in the first six months of 1998. Revenue from Sony Music for providing the
InfoBeat products under our contract which began on January 1, 1999 constituted
$2.2 million, or 62% of the 1999 revenue amount. Approximately $800,000 of this
amount reflects the recognition of deferred revenue related to Sony's purchase
of the InfoBeat publishing segment of our business. The balance of the growth is
attributable to increases in both our client base and the volume of email
messages sent. We sent approximately 175 million email messages for 52 clients
in the six months ended June 30, 1999 as compared to approximately 19 million
email messages for seven clients in the six months ended June 30, 1998. We also
sent approximately 625 million email messages for Sony Music in the 1999 period.
COST OF REVENUE. Cost of revenue consists primarily of sales commissions
and network connectivity charges from our Internet service providers. Cost of
revenue increased to $398,000 in the first six months of 1999 from $93,000 in
the first six months of 1998. Sales commissions increased $131,000 in the 1999
period as a result of our growing sales force and corresponding revenue growth.
Network connectivity charges increased $183,000 in the 1999 period due to higher
email message volume and the addition of a connection to a second Internet
service provider in order to achieve increased reliability.
MARKETING AND SALES. Marketing and sales costs consist primarily of
salaries and other personnel costs related to our sales, account management,
customer care and marketing employees, as well as travel, advertising and other
promotional costs. Marketing and sales costs increased to $1.3 million in the
first six months of 1999 from $595,000 in the first six months of 1998. Salaries
and other personnel costs accounted for $445,000 of the increase in the 1999
period as the number of marketing and sales employees increased to 32 as of June
30, 1999 from 11 at the beginning of 1998. We expect to significantly increase
the number of employees, as well as advertising and promotional spending in this
area in the future.
RESEARCH, DEVELOPMENT AND ENGINEERING. Research, development and
engineering costs consist primarily of salaries and other personnel costs
related to our operations and research and development groups, consultants and
outside contractor costs, and software and hardware maintenance expenses.
Research, development and engineering costs increased to $3.1 million in the
first six months of 1999 from $733,000 in the first six months of 1998. The cost
of outside contractors and consultants, who are utilized to speed development
efforts, represented $1.5 million of the increase in the 1999 period. In
addition, salaries and other personnel costs accounted for an additional
$783,000 of the increase in the 1999 period, as the number of research,
development and engineering employees increased to 41 as of June 30, 1999 from
14 at the beginning of 1998. We are continuing to invest substantially in this
area to develop the new features and services required to meet the needs of
current and potential clients, and plan to maintain or increase the dollar
amount we spend on research, development and engineering activities in the
future.
GENERAL AND ADMINISTRATIVE. General and administrative costs consist
primarily of salaries and other personnel costs related to executive and
administrative personnel, occupancy and general office costs and professional
fees. General and administrative costs increased to $1.9 million in the first
six months of 1999
26
<PAGE> 31
from $823,000 in the first six months of 1998. Non-cash stock option
compensation expense related to options granted in May 1999 represented $707,000
of the increase in the 1999 period. Professional fees increased $201,000 in the
1999 period, primarily due to costs related to the patent infringement lawsuits
described in "Business-Legal Proceedings." Occupancy and general office costs
represented $134,000 of the increase in the 1999 period due to an increase in
the total number of our employees. Increased salaries and other personnel costs
accounted for $54,000 of the increase in the 1999 period, as the number of
general and administrative employees increased to 10 as of June 30, 1999 from
six at the beginning of 1998.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
consists primarily of depreciation of equipment, software and furniture and
amortization of leasehold improvements. Fixed assets are recorded at cost and
depreciated over the estimated useful lives of the assets which range from three
to five years. Depreciation and amortization expense increased to $690,000 in
the first six months of 1999 from $337,000 in the first six months of 1998.
Purchases of equipment and software necessary to deliver higher email message
volume, as well as for general corporate use, were responsible for this increase
in the 1999 period.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
REVENUE. Revenue increased to $821,000 in 1998 from $359,000 in 1997 as a
result of increases in our client base, email message volume and average price
per message sent. We sent approximately 115 million email messages for 25
clients in 1998 as compared to approximately 104 million email messages for one
client in 1997. We did not begin to make our outsourced email services generally
available until early 1998.
COST OF REVENUE. Cost of revenue increased to $256,000 in 1998 from
$132,000 in 1997. Sales commissions increased $76,000 in 1998 due to the
establishment of a sales force and the associated payment of sales commissions.
Network connectivity charges increased $48,000 in 1998 due to higher email
message volume.
MARKETING AND SALES. Marketing and sales costs increased to $1.6 million in
1998 from $1.0 million in 1997. Salaries and other personnel costs increased
$772,000 in 1998 due to the increase in the number of marketing and sales
employees to 28 as of December 31, 1998 from six at the beginning of 1997. This
increase in salaries and other personnel costs was partially offset by a decline
of $244,000 in advertising and other promotional costs in 1998.
RESEARCH, DEVELOPMENT AND ENGINEERING. Research, development and
engineering costs increased to $1.8 million in 1998 from $701,000 in 1997.
Salaries and other personnel costs increased $1.1 million in 1998, as the number
of research, development and engineering employees increased to 22 as of
December 31, 1998 from seven at the beginning of 1997.
GENERAL AND ADMINISTRATIVE. General and administrative costs remained
relatively unchanged at $1.8 million in both 1998 and 1997. Occupancy and
general office costs increased $168,000 in 1998 due to the total increase in the
number of our employees. This increase was partially offset by a $127,000
decline in salaries and other personnel costs in 1998.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased to $731,000 in 1998 from $581,000 in 1997. Purchases of equipment and
software necessary to deliver higher email message volume, as well as for
general corporate use, were responsible for this increase in 1998.
INCOME TAXES
As of December 31, 1998, a net operating loss carryforward for federal
income tax purposes of approximately $11.8 million was available to offset
future federal taxable income, if any, through 2018. No tax benefit for these
losses has been recorded by us in 1996, 1997, 1998 or to date in 1999 due to
uncertainties regarding the utilization of the loss carryforward. The
utilization of a portion of the net operating loss carryforwards will be limited
under Section 382 of the Internal Revenue Code due to changes in ownership
interests.
27
<PAGE> 32
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth our historical unaudited quarterly
information for our most recent six quarters. This quarterly information has
been prepared on a basis consistent with our audited financial statements and,
we believe, includes all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the information shown. Our
quarterly operating results have fluctuated and may continue to fluctuate
significantly as a result of a variety of factors and operating results for any
quarter are not necessarily indicative of results for a full fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1998 1999 1999
--------- -------- ------------- ------------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue........................... $ 52 $ 102 $ 295 $ 372 $ 1,542 $ 2,032
Cost of revenue................... 46 47 88 75 121 277
------- ------- ------- ------- ------- -------
Gross profit.................... 6 55 207 297 1,421 1,755
------- ------- ------- ------- ------- -------
Operating expenses:
Marketing and sales............. 220 375 543 483 612 663
Research, development and
engineering.................. 341 392 544 530 963 2,171
General and administrative...... 319 504 432 591 1,118 810
Depreciation and amortization... 169 168 194 199 310 380
------- ------- ------- ------- ------- -------
Total operating
expenses.............. 1,049 1,439 1,713 1,803 3,003 4,024
------- ------- ------- ------- ------- -------
Loss from
operations....... (1,043) (1,384) (1,506) (1,506) (1,582) (2,269)
Interest income (expense), net.... (9) (21) (15) (56) 3 (21)
------- ------- ------- ------- ------- -------
Loss from continuing
operations................... (1,052) (1,405) (1,521) (1,562) (1,579) (2,290)
------- ------- ------- ------- ------- -------
Discontinued operations:
Loss from discontinued
operations................... (487) (439) (597) (759) -- --
Gain on sale of discontinued
operations................... -- -- -- 3,348 -- --
------- ------- ------- ------- ------- -------
Gain on sale and loss
from discontinued
operations............ (487) (439) (597) 2,589 -- --
------- ------- ------- ------- ------- -------
Net income (loss)................. $(1,539) $(1,844) $(2,118) $ 1,027 $(1,579) $(2,290)
======= ======= ======= ======= ======= =======
</TABLE>
Our limited operating history and the emerging nature of the Internet-based
email services market make it very difficult for us to accurately forecast our
revenue. Our revenue could fall short of our expectations if we experience
delays or cancellations of even a small number of contracts. A number of factors
are likely to cause fluctuations in our operating results, including but not
limited to:
- continued growth of the Internet, in general, and of email usage, in
particular;
- demand for our services;
- our ability to attract and retain clients and maintain client
satisfaction;
- our ability to upgrade, develop and maintain our systems and
infrastructure;
- the amount and timing of operating costs and capital expenditures
relating to expansion of our business and infrastructure;
- technical difficulties or system outages;
- the announcement or introduction of new or enhanced services by our
competitors;
- pricing policies of our competitors;
28
<PAGE> 33
- our ability to attract and retain qualified personnel with Internet and
direct marketing industry expertise, particularly technology, sales and
marketing personnel; and
- governmental regulation regarding the Internet, email and direct
marketing.
In addition, our operating results may be affected by non-cash charges
associated with the warrants issued to Sony Music that may vest upon the
achievement of certain performance milestones. We cannot currently estimate
these non-cash charges, which may be substantial.
Please see "Risk Factors -- Due to the emerging nature of the email
services market, our future revenues are unpredictable and our quarterly
operating results may fluctuate" for more detailed information on factors that
could affect our operating results.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily from sales of
our preferred stock and, to a lesser extent, proceeds from bank loans. Net cash
used by operating activities, excluding discontinued operations, was $3.4
million in 1997, $1.7 million in 1998 and $3.9 million for the six months ended
June 30, 1999.
Net cash used by investing activities was $1.8 million in 1996, $1.0
million in 1997, $893,000 in 1998 (excluding a $3.3 million gain on the sale of
discontinued operations) and $1.6 million for the six months ended June 30,
1999. In each period, net cash used by investing activities was primarily the
result of capital expenditures for equipment and software used in our data
center from which we operate our email message platform.
Net cash provided by financing activities was $8.6 million in 1996, $7.9
million in 1997 and $3.8 million in 1998 and net cash used by financing
activities was $342,000 for the six months ended June 30, 1999. Proceeds from
the sale of preferred stock, net of payments for debt and capital lease
obligations, were the primary source of the net cash provided by financing
activities. In the year ended 1997, proceeds from notes payable of $3.5 million
were also a significant source of financing. Approximately $2.0 million of this
amount was converted into preferred stock in July 1997. The balance consists of
proceeds from bank loans.
At December 31, 1998 and June 30, 1999, we had $6.4 million and $557,000,
respectively, in cash and cash equivalents. In July 1999, we received a $1.5
million payment from Sony Music related to the sale of the InfoBeat publishing
business. In July and August 1999, we received net proceeds of $8.8 million from
the sale of Series E preferred stock and warrants. We plan to increase our
general level of spending in the future and plan to expend significant resources
on capital expenditures in 1999 and 2000 for equipment and software, furniture,
and leasehold improvements. We plan to relocate our existing data center and
corporate offices in late 1999, and we plan to open a second data center for
disaster recovery in the fourth quarter of 1999. We expect to incur operating
losses through at least the end of 2000.
We expect that existing cash resources and the net proceeds of this
offering will be sufficient to fund currently anticipated working capital and
capital expenditure needs at least through the end of 2000. Thereafter, we may
require additional funds to support our working capital requirements or for
other purposes. If we are not successful in raising capital when we need it and
on terms acceptable to us, it could harm our business, financial condition and
operating results.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At June 30, 1999, we had debt in the aggregate amount of $1.0 million and
we may incur additional debt in the future. A change in interest rates would not
affect our obligations related to debt existing as of June 30, 1999, as the
interest payments related to that debt are fixed over the term of the debt.
Increases in interest rates could, however, increase the interest expense
associated with future borrowings.
29
<PAGE> 34
We may invest a portion of the net proceeds from this offering and the
proceeds from our sale of Series E preferred stock in short-term investments.
The value of these investments may decline as the result of changes in equity
markets and interest rates.
YEAR 2000
Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. This could result in
system failures or miscalculations causing disruption of operations for any
company using such computer programs or hardware, including, among other things,
a temporary inability to process transactions, send or receive email messages,
send invoices or engage in normal business activities. As a result, many
companies' computer systems may need to be upgraded or replaced in order to
avoid "Year 2000" issues.
We have evaluated the Year 2000 readiness of all of the information
technology systems that we use, as well as our non-information technology
systems, such as our phone systems, power supplies and other systems. Our
systems are not yet Year 2000 compliant. As part of our Year 2000 readiness, we
are certifying whether all of our internal systems are Year 2000 compliant. Year
2000 compliance provides that we have confirmed that, under the conditions of
our internal testing, our information technology systems will perform as
follows: (i) date calculations will neither cause any abnormal termination of
performance nor generate inconsistent results and (ii) when sorting by date, all
records will be sorted in accurate sequence.
We are a comparatively new enterprise, and, accordingly, the majority of
software and hardware we use to operate and manage our business has all been
purchased or developed by us within the last three years. While this does not
uniformly protect us against Year 2000 exposure, we believe our exposure is
limited because the information technology we use to operate and manage our
business is not based upon legacy hardware and software systems. Generally,
hardware and software designed within the current decade and the past several
years in particular has given greater consideration to Year 2000 issues.
As part of our Year 2000 compliance program, we have a separate dedicated
Year 2000 team, consisting of three external Year 2000 technology experts, as
well as our own staff. We have installed a complete Year 2000 test system to
facilitate achieving Year 2000 compliance of our internal systems. In
implementing our Year 2000 compliance program, we have identified and
inventoried Year 2000 sensitive components in our internal systems and we are
working to achieve Year 2000 compliance of our components. We have also made
reasonable efforts to contact vendors and suppliers that provide us with Year
2000 sensitive components in order to determine the compliance of these
components. The majority of our vendors have certified to us that they are Year
2000 compliant. For vendors that have not provided this certification, we intend
to test their products for Year 2000 compliance as well as to develop
contingency plans to address any problems associated with noncompliance of their
products. It is the intent of our Year 2000 compliance program to either repair
or replace any components for our internal systems that are determined not to be
Year 2000 compliant. We have completed our evaluation of substantially all of
our hardware components and have received vendor certification that they are
Year 2000 compliant. We plan to complete our software Year 2000 compliance
program in November 1999.
Because we are unable to control other companies' products and software, we
are not able to certify that these products and software will not suffer any
errors or malfunctions related to Year 2000. In addition, although some Year
2000 sensitive components in our internal systems may have passed internal Year
2000 compliance testing by our suppliers or vendors, we do not certify that
these materials or components will perform as tested when used in circumstances
not reflected in the testing.
In addition, we rely on third party network infrastructure providers to
gain access to the Internet. If these providers experience business
interruptions as a result of their failure to achieve Year 2000 compliance, our
ability to provide email services could be impaired, which could harm our
business. In particular, one of our Internet service providers has informed us
that it will be unable to certify that it has attained Year 2000 compliance
prior to December 1999.
30
<PAGE> 35
To date, we have not incurred any significant expenses with respect to
attaining Year 2000 compliance, and we do not anticipate that any future cost
associated with our Year 2000 remediation will be material. However, if we, our
clients, our providers of hardware or software or our third party network
providers fail to remedy any Year 2000 issues, our service could be interrupted
and we could experience a material loss of revenue that could harm our business.
Presently, we are unable to estimate the duration and extent of any interruption
or quantify the effect it may have on our future revenues. We have not yet
developed a comprehensive contingency plan to address the effects of a failure.
We are prepared to develop a contingency plan if our ongoing assessment
indicates areas of significant exposure.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective, as amended, for all fiscal quarters
of fiscal years beginning after June 15, 2000. This statement establishes
accounting and reporting standards for derivative instruments, including some
derivative instruments embedded in other contracts, and for hedging securities.
To the extent we begin to enter into these transactions in the future, we will
adopt the statement's disclosure requirements in our financial statements for
the year ending December 31, 2000.
During 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise" and the American Institute of Certified Public
Accountants issued Statement of Position No. 98-5, Reporting on the Costs of
Start-up Activities. The adoption of these pronouncements is not expected to
impact us.
31
<PAGE> 36
BUSINESS
OVERVIEW
We are a leading provider of permission-based outsourced email marketing
and communications solutions. We provide a comprehensive and scalable suite of
email services which enable our clients to deliver large numbers of custom email
messages in an efficient, timely and cost-effective manner. Our primary services
consist of the distribution of email newsletters and information bulletins, as
well as the delivery of personalized order and trade confirmation messages which
are triggered by specific transactions or events. We also serve targeted banner
advertisements within the email communications that we deliver to over two
million subscribers of Sony Music's daily email newsletters. In addition, we are
continuing to develop a wide variety of targeted messaging capabilities to allow
our clients to conduct personalized one-to-one email marketing campaigns.
We help our clients create, maintain and analyze their customer
relationships. Our email solutions help establish new revenue opportunities for
our clients while reducing their costs of communicating with large numbers of
customers. Our advanced, proprietary technology allows us to deliver a large
volume of email messages for our clients. In the second quarter of 1999, we
delivered over 400 million email messages for 48 companies, primarily in the
media, ecommerce and financial services industries. Our clients include American
Express, Charles Schwab & Co., The Economist, Egreetings Network, First Union,
Forbes, Last Minute Network, MSNBC Interactive News, News Corp., Sony Music,
Slate Magazine, TheStreet.com and USAToday.com. As email continues to gain
widespread acceptance as a marketing and communications channel, we anticipate
that businesses will grow increasingly dependent on outsourced email marketing
and communications services.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET AND EMAIL
The Internet has emerged as a significant tool for global communications,
commerce and media. According to a December 1998 Jupiter Communications study,
there were over 77 million Web users in the United States at the end of 1998,
representing 28% of the United States population. This number is expected to
grow to over 131 million users by the end of 2002, representing 47% of the
United States population. The growth of the Internet is the result of a number
of factors, including the extensive and growing installed base of advanced
personal computers in the home and workplace, increasingly faster and cheaper
access to the Internet, improvements in network infrastructure and bandwidth,
development of Internet-based applications and increasingly useful content
available online. The proliferation of alternative access devices providing
Internet connectivity, including television set-top boxes, personal digital
assistants, pagers and Internet capable wireline and wireless phones, is also
contributing to the increasing use of the Internet.
Email is one of the most popular applications associated with the Internet.
Increased use of the Internet has resulted in the widespread adoption of email
as a regular and dependable communications medium. Initially developed for
people working on single mainframe computers or on small networks, email has
expanded rapidly to become a widely used medium for business and personal
communications worldwide. The ability to inexpensively communicate at any time
and from any location with Internet access has resulted in the rapid increase in
email use in recent years. Continued growth in the use of email is being driven
by its convenience, speed, low cost and the ability to send increasingly large
and complex files and attachments, including documents, spreadsheets and
multimedia.
Today, email is becoming increasingly critical to business-to-consumer and
business-to-business communications. Forrester Research estimates that three
billion solicited commercial emails were sent during 1997 and predicts that 250
billion commercial emails will be sent in 2002 for both consumer and business
email users. Because email provides an immediate, targeted and inexpensive
method to reach an expanding number of online consumers, businesses are facing
increasing competitive pressure to develop comprehensive Internet and email
communications strategies. These email strategies are driving a wide
32
<PAGE> 37
range of customer communications, including promotional messages, announcements,
confirmations, order acknowledgments, customer requested information and
one-to-one marketing initiatives.
GROWTH OF PERMISSION-BASED EMAIL MARKETING AND COMMUNICATIONS
Consumer marketing has traditionally been conducted through a variety of
media, including direct mail and telephone. The widespread adoption of the
Internet and email has enabled companies to create new direct marketing and
communications strategies to target and acquire new customers, as well as
enhance existing customer relationships. The Direct Marketing Association has
estimated that approximately $603 million was spent on direct marketing through
the Internet in 1998 and predicts that this number will grow to $5.3 billion by
2003.
Permission-based email marketing and communications strategies are gaining
acceptance among a wide variety of businesses. In a 1999, Forrester Research
study, 70% of online retail, manufacturing and media companies surveyed
indicated that email marketing is "important" or "very important" to their sales
and marketing strategy and that 66% of such companies are using email for
promotional activities. Permission-based email marketing and communications
strategies have several advantages over traditional direct marketing methods,
including the following:
- Cost-Effectiveness -- In a 1998 study, Jupiter Communications estimated
that each email costs $0.01 to $0.25, as compared to $1.00 to $2.00 per
piece for a marketing mailing done via postal mail.
- Instantaneous Communication -- As compared to many other traditional
marketing channels, email enables significantly faster communication with
a large audience. Jupiter Communications reports that 80% of all
responses to an email campaign occur within two days, as compared to six
to eight weeks for a marketing campaign done via mail.
- Higher Response Rates -- Jupiter Communications reports that response
rates for permission-based email campaigns are generally five percent to
15%, as compared to response rates of 0.5% to five percent for
traditional direct mail marketing methods.
CHALLENGES IN IMPLEMENTING EMAIL MARKETING AND COMMUNICATIONS SOLUTIONS
Companies seeking to successfully utilize email as a channel for marketing
and communications face several challenges. Many companies attempting to develop
and manage an in-house solution to expanding and increasingly sophisticated
email systems lack the resources and expertise required to cost-effectively
launch email marketing initiatives. Businesses often find it difficult and
costly to integrate state-of-the-art technology into their infrastructure,
resulting in email marketing efforts which are defined by a company's
technological capabilities, rather than the company's strategic marketing and
communications goals. Sophisticated email marketing initiatives require
technology solutions with the following capabilities:
- sufficient bandwidth to handle peak volumes of emails;
- email content integration with selected email lists;
- inbound message management, including bounces from undeliverable
addresses and responses from recipients;
- subscriber and recipient database management, including email addresses
and demographic, transactional and behavioral data;
- applications which enable campaign management, Web-based reporting and
targeting and predictive modeling; and
- safeguards to avoid distribution of unsolicited bulk mail, or "spam," and
to operate in accordance with existing governmental regulations.
33
<PAGE> 38
The demonstrated success of the Internet and permission-based email as a
marketing and communications channel, combined with the challenges of developing
and managing in-house solutions, has led many companies to seek email
outsourcing services that can rapidly deploy large-scale marketing and
communications programs.
OUR SOLUTION
We offer a comprehensive suite of end-to-end outsourced email marketing and
communications solutions. Our email services provide our clients with the
following benefits:
LEADING EDGE TECHNOLOGIES
Our advanced, proprietary technologies enable us to quickly distribute
large quantities of email messages for our clients. In addition, our
technologies allow us to deliver customized messages according to user-defined
preferences or client-defined message templates which are personalized through
our mail merge technology. Our Internet-based email solutions are designed to
afford our clients choice and flexibility. Our clients are able to:
- send email messages in both text and HyperText Markup Language ("HTML")
formats;
- define bounce rules for handling undeliverable emails;
- select the schedule for delivery of their email communications one month
in advance;
- generate report information based on a variety of menu options and dates;
and
- create the content in subscribe and unsubscribe confirmation messages and
provide users multiple ways to subscribe and unsubscribe.
We also serve targeted advertising banners in HTML email newsletters that
we deliver to over two million subscribers of Sony Music's InfoBeat newsletters,
enabling Sony Music to generate advertising revenue.
HIGHLY SCALABLE AND RELIABLE SOLUTION
Our email engine delivered an average of over 6.5 million email messages
per weekday in July 1999. We have the capacity to deliver up to 15 million email
messages per day without additional hardware or infrastructure improvements. Our
system can accommodate rapid growth in the volume and complexity of the
messaging needs of our clients and is designed to be highly reliable. We have
identified single points of failure and designed redundancy where appropriate.
We maintain two separate Internet connections and have separate routers
connected to one another in the event a router fails. We do not need to
interrupt our service during maintenance periods. Automated performance
monitoring allows us to intervene promptly if required.
BROAD SUITE OF INTEGRATED EMAIL APPLICATIONS
Our comprehensive suite of email marketing and communications solutions is
designed to address all aspects of our clients' email program needs. Currently,
we send and manage email news and information bulletins as well as deliver
personalized order and trade confirmation messages triggered by specific
transactions and events. Our end-to-end solution includes list administration,
subscription management, bounce and reply processing, logging and reporting,
customer service, content submission and a high level of account management with
availability 24 hours per day, seven days per week. In addition, we are
developing a wide variety of targeted marketing capabilities to allow our
clients to conduct one-to-one email marketing campaigns.
34
<PAGE> 39
COST-EFFECTIVE OUTSOURCED SOLUTIONS
Compared to internally-developed solutions, our outsourcing services allow
our clients to conduct cost-effective email marketing and communications
initiatives. We offer our clients a complete turnkey solution, from professional
implementation of all required systems to 24 hours per day, seven days per week
account service. By outsourcing their email programs to us, our clients can
focus on their core business competencies rather than managing a complex email
delivery system. This reduces our clients' need to invest in complex
infrastructure, bandwidth and technical professionals.
SECURE DATA CAPABILITIES
To ensure protection of client data, we have established strict security
measures including multiple firewalls to prevent unauthorized sending of email,
tampering or unauthorized access to files. Our clients' data and lists are kept
confidential and we do not sell their lists or data. All data and client
interfaces are password protected and our clients oversee the permission process
for sending and scheduling capabilities to appropriate parties. We have
procedures for regular on-site and off-site back-up of client information,
including subscriber databases, reports and logging and account information.
COMPREHENSIVE SPAM POLICY
We understand that if email is used improperly, it can cause significant
harm to our own and our clients' reputations and customer relationships. It is
our policy not to send unsolicited commercial email. We assist our clients in
conducting email programs that are anti-spam compliant. Our clients are required
to represent to us that their email addresses have been obtained using opt-in
methods.
We are members of the Direct Marketing Association and the Association for
Interactive Media (AIM) and we serve on AIM's Council for Responsible Email.
These associations provide us with updates of legislative activity around the
country that could affect our clients' email marketing initiatives and result in
changes to our spam policy.
STRATEGY
Our objective is to be a world leader in the delivery of permission-based
email marketing and communications services. We plan to achieve this objective
by pursuing the following strategies:
EXTEND INDUSTRY LEADING TECHNOLOGIES
We intend to further develop our technology infrastructure to increase our
email capacity, system reliability and security. Our goal is to increase our
capacity to 50 million email messages per day by the end of 1999. In addition to
expanding our capacity, we plan to continue to offer a high level of system
reliability and security by improving our redundancy and failsafe features in
our primary data center, as well as opening a second data center in another
location for disaster recovery and additional failsafe capabilities.
We are developing a unified software-based platform that will support our
entire range of services and offer our clients a consistent user interface and
single database. This will allow us to share new features and capabilities that
we develop among different products and clients. This new platform is being
designed to reduce product development and implementation time, allowing us
quicker time-to-market while spreading infrastructure costs across our various
service offerings.
BROADEN OUR SUITE OF EMAIL SERVICES
We intend to continue to offer our clients a full line of feature-rich
email marketing and communications services to meet their email needs across a
variety of applications. We are developing an advanced, targeted email marketing
solution which will allow clients to implement one-to-one email
35
<PAGE> 40
marketing programs directed at their most profitable customers. New features
that we plan to introduce over the next 12 months include:
- Targeting and Predictive Modeling -- to give clients the ability to
perform sophisticated analyses to target potential customers based on
their profiles and on a comparison model to current buyers.
- Enhanced Personalization -- to expand capabilities across our entire
product suite to enable clients to personalize various fields within the
body of an email.
- Web-Based Reporting and Analysis -- to allow clients to more effectively
analyze results of an email campaign to determine its success.
- Web-Based Campaign Management -- to allow clients to easily manage their
email campaigns, including complex scheduling, database querying and
testing.
- Targeted Ad-Serving Capabilities -- to enable all of our clients to
insert targeted banner advertisements within the body of an email.
We also plan to provide professional services that complement our email
service offerings. These professional services are intended to extend our
relationships with current clients, attract new clients and allow us to
differentiate ourselves in the outsourced email services market. These services
may consist of email list procurement, email program consulting and campaign
results analysis.
CONTINUE TO DEVELOP AND LEVERAGE STRATEGIC RELATIONSHIPS
In order to strengthen our market position and offer our clients additional
services, we plan to develop strategic relationships with companies that possess
complementary technical and marketing services. Through these strategic
relationships, we will undertake joint product development and marketing
efforts, such as integrating email with ecommerce applications and developing
relationships with permission-based email list partners. Potential strategic
partners include database design, ad-serving, ecommerce, secure email and
language translation companies, as well as technology service providers.
INCREASE DIRECT AND INDIRECT SALES EFFORTS
We intend to increase the size of our direct sales force substantially over
the next 12 to 18 months. As our sales force grows, we intend to move from our
current geographic focus to a vertical market focus, allowing our sales staff to
become experts within specific vertical markets and to offer more consultative
email marketing and communications solutions specifically tailored to each
client's individual needs. We also plan to increase our indirect sales efforts
by developing relationships with a network of partners that are in a position to
influence their clients' marketing strategies and tactics, including advertising
agencies, marketers and systems integrators. Additionally, we plan to expand
into international markets both through the addition of a direct sales force and
by developing alliances with international partners. We intend to launch our
international expansion in the United Kingdom.
ACQUIRE NEW BUSINESSES AND TECHNOLOGIES
We intend to pursue acquisitions of businesses, products, services and
technologies that are complementary to our existing business. These may include
acquisitions of secure email solutions, permission-based lists of email
addresses, statistical analysis and consulting services, inbound email
processing capabilities and Internet ad-serving solutions. We currently have no
agreements or current negotiations regarding acquisitions.
36
<PAGE> 41
SERVICES AND FEATURES
We provide a comprehensive suite of email services which enable our clients
to develop and send large numbers of custom email messages. Our services are
designed to offer clients a reliable, timely and cost-effective means of
communicating with their customers and prospects. Our clients can select from a
broad array of features and functions to develop email messaging solutions for a
wide range of business communication needs. We offer clients a complete turnkey
solution, from professional implementation of all required systems to 24 hours
per day, seven days per week account service. We generally charge clients on a
per message basis.
CURRENT SERVICES
We offer our comprehensive offering of email services to a variety of
clients, primarily in the media, ecommerce and financial services industries.
Our solutions include:
News and Information Distribution. Our services enable our clients to send
the same message to a large number of recipients or subscribers. A Web-based
interface allows our clients to input content, preview the message and approve
the message for sending. Typically, news and information distributions are sent
in response to consumer requests for information. Our clients utilize these
services to retain customers and drive traffic to their Web sites. Sample
messages under this service offering include newsletters, announcements and
welcome notices.
We currently offer a highly customized version of our news and information
distribution service to two clients, Sony Music for their InfoBeat products and
Tribune Media Services for their MovieQuest service. Our service allows Sony
Music's email subscribers to select preferences from a menu or list of options
and receive only the information they have requested, thereby customizing the
news, weather and financial, entertainment and other information that they
receive via email. The MovieQuest service allows Tribune Media's subscribers to
receive weekly updates of movie listings for theatres they have selected. We are
further developing our capabilities to offer a standard customized messaging
solution that can be used by all of our clients across a range of industries and
applications.
Event-Driven Customer Communications. This service allows our clients to
send large numbers of personalized email messages that are triggered by a
specific event or transaction, such as executing an online trade or making an
online purchase. These emails have a similar format but include content that is
unique and personalized to each recipient. We create, maintain and store a
customized template for each client and use mail merge technology to insert data
from the clients into the template to create a personalized message for each
customer. These messages may be archived in a manner that meets regulatory
requirements that apply to the financial services industry. This service is
faster and less expensive than traditional mailings.
Ad-Serving Capabilities. We currently serve targeted advertising banners in
HTML email newsletters to subscribers of Sony Music's InfoBeat newsletters. Our
ad-serving capabilities generate additional revenue opportunities for Sony
Music, which receives advertising revenue based upon clickthrough rates and
images served as a result of the banner ads embedded within the email messages.
We are currently serving banner advertisements to over two million subscribers
of Sony Music's daily email newsletters. This service is included in our per
message price to Sony Music and does not generate additional revenue for us.
However, we intend to further develop and offer our ad-serving services to other
clients.
37
<PAGE> 42
CURRENT FEATURES AND FUNCTIONS
Our current email services include a variety of standard and optional
features and functionality that can be flexibly implemented based upon the
client's preferences, including the following:
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
FEATURE/FUNCTION DESCRIPTION BENEFITS
- -----------------------------------------------------------------------------------------------------------
List Management - Manages and corrects invalid - Keeps subscriber lists
email addresses accurate
- Lowers costs
- -----------------------------------------------------------------------------------------------------------
Web Interface - Using a Web interface, client - Client controls approval
can submit content, approve - Client controls scheduling
email and schedule sending - User-friendly interface
time
- -----------------------------------------------------------------------------------------------------------
Online Reporting - Using a Web interface, client - Client generates timely
can request information about reports
email sends (messages deliv- - Client selects time periods
ered, bounces, click throughs to evaluate results
and mail opened)
- -----------------------------------------------------------------------------------------------------------
Bounce Management - Tracks undeliverable email - Keeps subscriber lists
addresses accurate
- Lowers costs
- -----------------------------------------------------------------------------------------------------------
Inbound Reply Processing - Handles reply emails on - Timely response to customer
client's behalf emails
- Less staff required by client
- -----------------------------------------------------------------------------------------------------------
Content Archiving - All content is stored at - Ability to recreate email
Exactis.com distributions
- Less storage space required
at client site
- -----------------------------------------------------------------------------------------------------------
Personalization - Ability to personalize email - Personalized to each customer
content using customer data - Higher response rates
and template
- -----------------------------------------------------------------------------------------------------------
Clickthrough Reporting - Ability to determine which - Tracking of customer response
customers clicked on specific
URLs in the email
- -----------------------------------------------------------------------------------------------------------
Open Mail Reporting - Ability to determine which - Tracking of customer response
customers opened the email
(HTML only)
- -----------------------------------------------------------------------------------------------------------
Attachments - Ability to send an attachment - Client can send more custom-
with the email ized information
- -----------------------------------------------------------------------------------------------------------
</TABLE>
PLANNED TARGETED MARKETING SERVICES
We are developing a system to enable targeted marketing initiatives across
a wide range of industries. Our system is designed to enable our clients to
communicate with their customers through targeted and personalized
communications based on selected demographics, purchase behavior or other
characteristics. Under this planned service, we would host the client's customer
database, perform database queries and evaluate the effectiveness of each email
marketing campaign. We also plan to offer clients access to a Web-based
interface to perform these querying and analysis activities on their own.
Targeted email uses templates and the client's database to merge customer
specific information with messages or content similar to a segmented direct mail
program, allowing us to send personalized messages based on the name, purchase
behavior, demographic profile or any other attribute of an individual customer.
We believe that our database querying and targeting capabilities will result in
more cost-effective direct marketing efforts due to improved customer response
rates, immediate feedback, reporting and measurability features and one-to-one
customer communication capabilities.
38
<PAGE> 43
PLANNED FEATURES AND FUNCTIONS
In addition to our planned targeted marketing capabilities, we are
developing a number of other standard and optional features, including the
following:
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
FEATURE/FUNCTION DESCRIPTION BENEFITS
- -----------------------------------------------------------------------------------------------------------
Format Identification - Ability to determine in which - HTML emails receive higher
format (HTML or text) an response rates, but not all
email should be sent browsers can read them
- -----------------------------------------------------------------------------------------------------------
Flexible Scheduling - Ability to send ad hoc, un- - Clients can react to market
scheduled email notices demands
- Database can be maintained by
client
- -----------------------------------------------------------------------------------------------------------
Alternate Content Submission - Client can send content via - Flexible for client
email, Web or user interface
- -----------------------------------------------------------------------------------------------------------
Enhanced Personalization - Ability to personalize email - More personalized messages
content based on demographics - Higher response rates
and response history
- -----------------------------------------------------------------------------------------------------------
Expanded Database - Ability to store demographic - Segmentation of customers for
and response information varying offers
about each customer
- -----------------------------------------------------------------------------------------------------------
Triggered Scheduling - Ability to schedule emails - Automates sending
based on factors such as capabilities
birthday or last purchase
date
- -----------------------------------------------------------------------------------------------------------
Database Synchronization - Ability to transport and syn- - Flexibility in database
chronize databases between management and hosting
Exactis.com and client
- -----------------------------------------------------------------------------------------------------------
Advanced Response Analysis and - Ability to analyze campaign - Tracking and analysis of cus-
Reporting results tomer response
- -----------------------------------------------------------------------------------------------------------
Customized Content - Customer can select from a - Content is more relevant to
menu of content/information customer who is then more
they wish to receive in one likely to read the message
email
- -----------------------------------------------------------------------------------------------------------
Secure Email - Ability to send encrypted - Clients can send confidential
email messages that can only or sensitive information to
be read by the intended their customers
recipient - Lowers cost by replacing
paper mail
- -----------------------------------------------------------------------------------------------------------
Ad Serving - Ability to insert banner ads - Generates revenue for client
within email messages
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The statements in this prospectus regarding planned service offerings and
anticipated features and functions of such planned service offerings are
forward-looking statements. Actual service offerings and benefits could differ
materially from those projected as a result of a variety of factors, some or all
of which may be out of our control. For a discussion of these factors, see "Risk
Factors."
39
<PAGE> 44
CUSTOMERS
To date, we have provided our services to clients primarily in the media,
ecommerce and financial services industries. We have focused on these market
segments as a result of their email volume potential, range of email needs and
acceptance of email marketing and communications solutions. The following is a
list of substantially all of our current clients:
4anything.com
Activision
Advance Internet Services
American Express Company
BBDO Worldwide
BigHand
CarParts.com
ChannelSeven.com
Charles Schwab & Co.
Client Logic
CMPnet
Consumer Net Marketplace
Covad Communications
Creative Planet
Digital Work
DoubleDay
The Economist Newspaper
Egreetings Network
First Source Bancorp.
First Union Corporation
Forbes, Inc.
Hewlett-Packard Company
IC Direct
KBKids.com
Last Minute Network Limited
Law News Network
London Financial Times
Microsoft Web events
Miller Freeman
MSNBC Interactive News
News Corp.
Network Publishing
Organic Media
Princessnet
Rokenbok Toy Company
Sage Online
Silicon Alley Reporter
Slate Magazine
Sony Music
Spinner.com
Sterling-Rice Group
Strong Funds
TheStreet.com
theWhiz.com
Tribune Media Services
United Media
USAToday.com
Wired
Worldly Investor
World Wrestling Federation
A small number of clients account for a significant portion of our revenue.
In the first six months of 1999, Sony Music accounted for approximately 62% of
our revenue. In 1998, five clients accounted for approximately 48% of our
revenue, of which MSNBC Interactive News accounted for approximately 18% and
Egreetings Network accounted for approximately 11%. We expect that a small
number of clients will continue to account for a high percentage of our revenue
for the foreseeable future.
MARKETING AND SALES
MARKETING STRATEGY
The key components of our marketing strategy are to:
- continue to develop our reputation as an industry leader;
- build brand awareness; and
- aggressively generate sales leads.
We employ a number of marketing methods to promote our brand and
reputation, as well as to generate leads for our sales organization. Our
marketing methods include media relations, press releases, magazine and
newspaper advertisements, speaking engagements and attendance at trade shows and
seminars. We also use our Web site to build our image and to provide information
about our services, technology and organization to potential clients. We are
scheduled to have a presence at more than ten
40
<PAGE> 45
national conferences and trade shows during 1999, including Jupiter Consumer
Online, @Travel and Online Retail, as well as Internet World in London. We are
implementing an aggressive lead generation program using direct marketing
campaigns to key decision makers within specific targeted markets, including
ecommerce, media and financial services companies.
SALES STRATEGY
Through our direct sales force, we have historically targeted the media,
ecommerce and financial services segments. Currently, our sales force is
geographically focused, with sales representatives covering a particular region.
As our sales force grows, we intend to move to a vertical market focus, allowing
our sales staff to become experts within specific vertical markets and to offer
more consultative email marketing and communications solutions specifically
tailored to each client's individual needs.
As of June 30, 1999, we had six sales professionals in our direct sales
force located in California, Colorado, Boston and New York. We plan to
significantly expand this group in the next 12 months and add an international
sales office in London, England. In addition to the sales professionals, as of
June 30, 1999, we had two sales engineers and one lead generation associate who
support potential clients and the sales process.
CUSTOMER SERVICE AND ACCOUNT MANAGEMENT
We offer a high level of customer service and account management to our
clients and to their customers. As of June 30, 1999, we employed seven customer
service representatives who handle all incoming responses via email. Typical
responses include subscribing, unsubscribing, format changes and report
requests. In many cases, we utilize an automated response tool to respond
without human intervention. Our customer service representatives attempt to
handle all responses within 24 hours of receipt.
In addition to our customer service representatives, as of June 30, 1999,
we employed seven account managers who oversee the day-to-day relationships with
our clients. Account managers are available 24 hours per day, seven days per
week. As the clients' primary point of contact, our account managers are
responsible for providing day-to-day operational support through regular client
interactions. Automated monitoring tools inform the account manager and
operations staff of the status of client mailings.
STRATEGIC RELATIONSHIPS
We seek to enter into strategic relationships to expand our services and
product offerings and to undertake joint product development and marketing
efforts. Our existing strategic relationships include Sony Music and E.piphany.
SONY MUSIC
In connection with the sale of our InfoBeat publishing business to Sony
Music Entertainment in December 1998, we entered into a long-term strategic
relationship under which we provide the editorial services, content and
technical operations for the InfoBeat product and deliver more than 4.5 million
InfoBeat newsletters per weekday. Subscribers can choose from a menu of
preferences to customize the news, weather, financial, entertainment and other
information that they receive via email. Additionally, we provide Sony Music
with customer support and database management services and host and maintain Web
sites on our servers related to the delivery of the services.
In early 1999, we worked with Sony Music to develop InfoBeat Entertainment,
which is comprised of the following services:
- InfoBeat Music -- a comprehensive source for music news, including
concert and album information and artist updates.
- InfoBeat Movies -- movie news and new video and movie releases.
41
<PAGE> 46
- TV News -- a behind-the-scenes look at television features, soap opera
updates and special television events.
- Entertainment Express -- entertainment news, Hollywood gossip, horoscopes
and lotteries.
Our service agreement with Sony Music has a three-year term and Sony Music
may, at its sole option, renew the agreement for up to two additional years. We
are entitled to receive a base fee of $2.5 million, $2.8 million and $3.0
million, subject to certain price reductions, during each of the first, second
and third year of the agreement, respectively. We are also entitled to receive
an additional monthly editorial fee and a variable per message fee for each
consumer news email we send in excess of a base amount.
E.PIPHANY
In March 1999, we entered into an agreement with E.piphany, a leader in
customer-centric, analytic and campaign management solutions, to offer E.piphany
E.4 analytic applications as part of the highly targeted email marketing
solution we are currently developing. Our agreement with E.piphany includes a
perpetual software license and specified pricing terms and conditions. Once
integrated with our email system, E.piphany's E.4 solutions will enable our
clients to develop and implement highly-targeted business-to-consumer
relationships via email. E.piphany's E.4 solutions assist clients to quickly
profile customers and design and execute customer-specific marketing campaigns,
measure results and refine future campaigns based on those results. We believe
that the combination of E.piphany's solutions with our technologies will enable
our clients to precisely target their marketing efforts to appropriate audiences
and deliver relevant, personalized information in each email message in a timely
and cost-effective manner.
TECHNOLOGY
ARCHITECTURE
Our technology infrastructure has been designed to achieve reliable,
scalable and secure operations. We currently process between six and ten million
messages per day and plan to expand our data center to support 50 million
messages per day by the end of 1999. Our technology is based on a distributed
architecture utilizing Sun Microsystems processor systems and servers, Intel
processor based servers, Cisco Systems routers and Oracle databases. Our system
is designed to enable parallel processing while providing redundancy at any
point of failure. Our current software environment is primarily UNIX and Linux
based.
Our distributed architecture manages outbound and inbound message flow
which enables us to scale rapidly by adding additional servers to perform any of
the feed, build, send, bog or inbound functions. All of the host functions can
be replicated, enabling the network to expand for additional functionality and
volume growth.
DATA CENTER AND NETWORK ACCESS
Our principal data facility is located in Denver, Colorado. Our data center
has a high-speed, local fiber loop connection to two Internet service providers
to allow high-bandwidth access to the Internet. We operate separate production,
test and development networks. The test and development networks have the same
hardware and software environment as our production network, which enables us to
develop and fully test our services prior to putting any upgrades, enhancements
or fixes into our production system.
We plan to relocate our data center operations to a new data center located
in Denver, Colorado in late 1999. The new data center will have two separate
local loop fiber providers to prevent a loss of connectivity in the event of a
local loop provider failure and will provide the environment necessary to
support our planned increase in messaging capacity. In addition, the new center
will feature redundant systems for power, cooling, fire protection and security
surveillance 24 hours per day, seven days per week by both personnel and video
monitors.
42
<PAGE> 47
NETWORK SECURITY
We seek to assure network security through multiple firewalls. External
firewalls operate at the network link layer and a second layer of firewalls
separates every public network from its companion private network.
OFFSITE DISASTER RECOVERY
We are in the process of establishing an offsite disaster recovery facility
which will be located in an existing data center in Sunnyvale, California. We
expect that this facility will be operational in November 1999. Initially, this
data center will act solely as a recovery site. It will receive continuous data
feeds from our principal facility and be able to convert to sending mode within
30 minutes of any service interruption which results in an outage in our
principal facility. Ultimately, we plan to expand this facility into a full
production center.
NEW SERVICE DEVELOPMENT
Our ability to design, develop, test and support new services, features and
functions on a timely basis is critical to our success. Our product managers
define new service and feature requirements by analyzing market trends, client
needs and competitive offerings. Under the supervision of the product manager, a
team creates a design and specifications document, development schedule and
ultimately a new service or feature.
We cannot assure you that we will be successful in developing and marketing
new services and enhancements that meet changing customer needs or which respond
to technology changes or evolving industry standards. Our current services are
compatible with widely-used and accepted standards. Current and future use of
our services will depend, in part, on industry acceptance of these standards and
practices as they apply to the Internet and ecommerce.
COMPETITION
The email marketing industry is intensely competitive. There are few
barriers to entry, as evidenced by the many new entrants to the market over the
last year, and we expect that established and new entities will continue to
enter the market. We cannot assure you that we will compete effectively with
current or future competitors or that competitive pressures will not harm our
business, operating results and financial condition.
We offer clients a combination of both scalability and functionality. Our
proprietary email engine allows us to send large volumes of email messages. Our
ability to compete depends upon our ability to offer:
- technical expertise;
- scalability;
- consistent and reliable service;
- features and functionality;
- full service solutions; and
- direct marketing expertise.
The majority of businesses today use their internal email systems to
provide solutions to manage and deliver outbound email campaigns. For companies
seeking outsourced solutions, we compete with email outsourcing companies that
offer services similar to ours, including email distribution, list management,
reporting and bounce processing. In addition, several of these competitors offer
email consulting and campaign analysis. Key competitors in this category include
Bigfoot International, Digital Impact, InterStep, L-Soft international, Lyris
Technologies, MarketHome, Media Synergy, MessageMedia, Post Communications and
Responsys.com. Many of these competitors, such as Lyris and L-Soft, also offer
customers the choice of purchasing or licensing software to internally handle
their own email marketing programs. Other email outsourcing companies that
specialize in corporate email management, including
43
<PAGE> 48
Critical Path, Mail.com and USA.Net, have the technical capabilities and
infrastructure to enter our market.
Several competitors maintain and rent opt-in email lists that identify
customers by certain interest categories or demographic areas. Clients pay the
list brokers a one-time use fee that includes sending the email to the customer
and tracking results. Competitors in this category include MatchLogic,
MyPoints.com, NetCreations and yesmail.com. Clients must currently use the email
sending service provided by the list broker to reach the end-customer.
There are several other potential competitors that could enter the email
marketing and communications industry, including direct marketing companies,
Internet service providers, Internet ad networks, advertising agencies and
others with large established Internet businesses. Potential competitors include
American Online, Acxiom, DoubleClick, Experian Information Solutions,
Harte-Hanks Communications, IBM, Microsoft and Netscape Communications. Large
Internet portals, such as Yahoo!, also have the financial resources and
technical capabilities to enter this market. Email communication offers Internet
portals a powerful tool to build customer loyalty while driving traffic to their
Web site. These potential competitors could enter the market by acquiring one of
our existing competitors or by forming strategic alliances with our competitors.
Either of these occurrences could harm our ability to compete effectively.
INTELLECTUAL PROPERTY
We regard our copyrights, service marks, trademarks, trade secrets and
similar intellectual property as critical to our success and rely on trademark
and copyright law, trade secret protection and confidentiality and/or license
agreements with our employees, customers, partners and others to protect our
proprietary rights. We have no service marks and only one registered trademark
to date; however, we have several applications currently pending. It may be
possible for unauthorized third parties to copy certain portions of our products
or reverse engineer to obtain and use information that we regard as proprietary.
Certain end-user license provisions protecting against unauthorized use may be
unenforceable under the laws of certain jurisdictions and foreign countries. We
have one patent that has been issued and two patents pending in the United
States. We do not know whether these pending patents will be issued or, if
issued, that the patents will not be challenged or invalidated. In addition, the
laws of some foreign countries do not protect proprietary rights to the same
extent as do the laws of the United States. We cannot assure you that our means
of protecting our proprietary rights in the United States or abroad will be
adequate or that competing companies will not independently develop similar
technology.
We also strategically license certain technology from third parties,
including E.piphany and the Accipter Ad-Manger product from Engage Technologies,
Inc. In the future, if we add certificate technology to our systems, we may
license additional technology from third-party vendors. We cannot be certain
that these third-party content licenses will be available to us on commercially
reasonable terms or at all or that we will be able to successfully integrate the
technology into our products and services. These third-party content licenses
may expose us to increased risks, including risks associated with the
assimilation of new technology, the diversion of resources from the development
of our own proprietary technology and our inability to generate revenues from
new technology sufficient to offset associated acquisition and maintenance
costs. The inability to obtain any of these licenses could result in delays in
product and service development until equivalent technology can be identified,
licensed and integrated. Any delays in services could cause our business,
financial condition and operating results to suffer.
We have also been subject, and may be subject in the future, to claims
alleging that we have infringed third party proprietary rights. If we were to
discover that any of our services infringed third party rights, we may not be
able to obtain permission to use those rights on commercially reasonable terms.
This may require us to expend significant resources to make our services
non-infringing or to discontinue the use of our services. We might incur
substantial costs defending against an infringement claim, even if the claim is
invalid. If we have to defend against an infringement claim, it could distract
our management from our business. Further, a party making a claim could secure a
judgment that requires us to pay substantial damages or that prevents us from
using or selling our products and services. Any of these events could harm our
business, financial condition and operating results. Our success depends
significantly
44
<PAGE> 49
on our proprietary technology. Please see "Legal Proceedings" for a more
detailed description of our current litigation.
GOVERNMENT REGULATION
As the Internet continues to evolve, we expect that federal, state or
foreign agencies will adopt regulations covering such issues as user privacy,
pricing, content and quality of products and services. A number of legislative
and regulatory proposals are currently under consideration by federal and state
lawmakers and regulatory bodies and may be adopted with respect to the Internet.
In particular, a number of states have already passed statutes prohibiting
unsolicited commercial email, or spam. A number of statutes have also been
introduced in Congress and state legislatures to impose penalties for sending
unsolicited emails which, if passed, could impose additional restrictions on our
business. In addition, a California court recently held that unsolicited email
distribution is actionable as an illegal trespass for which the sender could be
subject for monetary damages.
The adoption of any such laws or regulations may decrease the growth of the
Internet, which could in turn decrease the projected demand for email services
or increase our cost of doing business. The applicability to the Internet of
existing United States and international laws governing issues such as property
ownership, copyright, trade secret, libel, taxation and personal privacy is
uncertain and developing and may take years to resolve.
Any new legislation or regulation, or application or interpretation of
existing laws, could harm our business, operating results and financial
condition. Additionally, because we expect to expand our operations outside the
United States, the international regulatory environment relating to the Internet
could harm our business, operating results and financial condition.
EMPLOYEES
As of July 31, 1999, we employed 105 people, all of whom were full-time.
The 105 employees included ten in general and administrative functions, 16 in
operations, 30 in development and testing, 18 in sales and marketing, 14 in
customer service/account management, 15 editors and two Sony/InfoBeat sales
persons. Employees are not represented by a labor union or covered by any
collective bargaining agreements. We consider our employee relations to be good.
FACILITIES
Our principal executive offices are located in 20,281 square feet of space
in Denver, Colorado under a lease expiring on December 31, 2001. We also lease
4,653 square feet of additional space in Denver, Colorado on a month-to-month
basis. We plan to relocate our data center and principal executive offices in
late 1999. We have identified a site for our relocation but have not yet
executed a lease agreement for this space. Assuming that we are able to secure a
lease for the site we have identified, we believe that our facilities will be
adequate for our needs for at least the next 12 months. However, we may be
unable to lease the additional space that we require on commercially reasonable
terms or at all.
LEGAL PROCEEDINGS
From time to time, we are subject to legal proceedings arising out of our
operations. On October 19, 1998, we filed a claim in the United States District
Court for the District of Colorado against eMail Publishing, which was acquired
by MessageMedia, one of our competitors, in December 1998, claiming infringement
of our patent. The patent relates to a system and method for delivering
customized email. We have requested injunctive relief and unspecified damages.
On October 29, 1998, MessageMedia filed a claim in the United States
District Court for the Southern District of California seeking damages from us
for infringement of one of their patents. MessageMedia has requested injunctive
relief and unspecified damages. See "Risk Factors -- We may be subject to claims
alleging intellectual property infringement."
45
<PAGE> 50
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH US
- ---- --- ----------------
<S> <C> <C>
E. Thomas Detmer, Jr. .................... 45 Chief Executive Officer, President and
Director
Kenneth W. Edwards, Jr. .................. 39 Chief Financial Officer, Secretary and
Treasurer
Cynthia L. Brown.......................... 40 Vice President of Engineering
Michael J. Rosol.......................... 39 Vice President of Sales
Gregory B. Schneider...................... 38 Vice President of Marketing and Business
Development
Adam Goldman(1)........................... 38 Chairman of the Board of Directors
Pierric D. Beckert(2)..................... 32 Director
Linda Fayne Levinson(1)................... 57 Director
David D. Williams(2)...................... 51 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
E. Thomas Detmer, Jr. has served as our President and Chief Executive
Officer since January 1999 and as a Director since July 1996. From March 1998 to
January 1999, Mr. Detmer served as the President of BehaviorBank/Atlantes, a
division of Experian, Inc., a provider of consumer information solutions to
businesses. In September 1991, Mr. Detmer founded Atlantes Corporation, a
consumer database marketing company, which was acquired by Metromail Company in
July 1997. Metromail was acquired by Experian in March 1998. Prior to Atlantes,
Mr. Detmer founded and served as President of the publishing division of
Telelink Systems, Inc., a telemarketing company. Additionally, Mr. Detmer spent
ten years with National Demographics and Lifestyles, a consumer information
management and resale company. He holds a B.A. from Williams College and an
M.B.A. from the University of Denver.
Kenneth W. Edwards, Jr. has served as our Chief Financial Officer,
Secretary and Treasurer since March 1999. From March 1998 to March 1999, Mr.
Edwards served as Corporate Controller and Director of business operations for
Atlantes, a division of Experian, a provider of consumer information solutions
to businesses. In January 1994, Mr. Edwards joined Atlantes Corporation, a
consumer database marketing company, as Corporate Controller. Atlantes was
acquired by Metromail Company in July 1997, which was acquired by Experian in
1998. From March 1988 to September 1993, Mr. Edwards served as Controller for CT
Publications Corp., a privately-held magazine publishing company. He also
co-founded and served as a partner with Cordovano and Company, Certified Public
Accountants. Mr. Edwards holds a B.S. from Metropolitan State College of Denver.
Cynthia L. Brown has served as our Vice President of Engineering since June
1999. From September 1997 to May 1999, Ms. Brown served as a founding partner of
Anova Partners, a management consulting firm specializing in technology and
Internet-based companies. From June 1993 to August 1997, Ms. Brown was the
President and Chief Operating Officer of System One Technical Incorporated, a
software vendor company, prior to its merger with MC Health Care Holdings. From
June 1983 to May 1993, Ms. Brown held various positions with Tandem
Telecommunications, a subsidiary of Tandem Computers Inc. and Applied
Communications, Inc. From June 1981 to May 1983, Ms. Brown was employed by Data
General Corporation, a computer storage company, as a systems engineer. Ms.
Brown holds a B.A. from Park College in Kansas City, Missouri.
Michael J. Rosol has served as our vice president of sales since May 1998.
From August 1996 to May 1998, he served as Senior Account Executive for SCC
Communications Corp., a provider of 911 emergency services and
telecommunications technology systems. From September 1995 to July 1996, Mr.
Rosol served as the Vice President of Sales for Datasonix Corporation, a
portable storage device
46
<PAGE> 51
company. From March 1991 to September 1995, he was the Director of North
American Sales for XVT Software Inc, a manufacturer of cross-platform
development tools. Mr. Rosol holds a B.A. and a M.S. from the University of
Colorado, Boulder.
Gregory B. Schneider has served as our Vice President of Marketing and
Business Development since February 1997. From August 1989 to February 1997, he
held various marketing positions in product management, market development and
business planning with Hewlett-Packard Company. Mr. Schneider holds a B.A. from
Santa Clara University and an M.B.A. from the J.L. Kellogg Graduate School of
Management at Northwestern University.
Adam Goldman has served as a Director since March 1996 and as Chairman of
the Board since January 1999. Mr. Goldman is a general partner of Centennial
Fund IV, LP and Centennial Fund V, LP, and is a managing principal of Centennial
Fund VI, LLC. The Centennial Funds manage over $700 million in private equity
and specialize in communication, media and technology investments. Mr. Goldman
also serves as a Senior Vice President of Centennial Holdings, Inc., a venture
capital investment company, which he joined in 1992. Mr. Goldman received a B.A.
from Northwestern University and an M.M. from the J.L. Kellogg School of
Management at Northwestern University.
Pierric D. Beckert has served as a Director since August 1999. Since
January 1998, Mr. Beckert has served as the Vice President of Interactive
Enterprise Development, a division of American Express Relationship Services
(AERS) and part of American Express Travel Related Services Company, Inc., where
he is responsible for developing the global American Express Interactive
strategy, as well as all strategic equity investments in interactive companies.
From August 1996 to December 1998, Mr. Beckert served as the Director of
Interactive New Business Development within AERS. From 1994 to 1996, Mr. Beckert
was a director of the Customer Information Management group within American
Express Travel Related Services. Mr. Beckert received an M.A. from the Ecole
Nationale de la Statistique et de l'Administration Economique.
Linda Fayne Levinson has served as a Director since July 1998. Since April
1997, Ms. Levinson has served as a Principal of Global Retail Partners, L.P., a
private equity investment fund. From 1994 to 1997, she served as the President
of Fayne Levinson Associates, a senior management consulting firm. During 1993,
Ms. Levinson served as an executive at Creative Arts Agency, Inc., a talent
agency. Prior to that, Ms. Levinson was a partner at Alfred Checchi Associates,
Inc., a merchant banking firm; a Senior Vice President of American Express
Travel related Services Company, Inc.; and a partner at McKinsey & Co., a global
consulting firm. She is a Director of NCR Corporation, Administaff, Inc., Jacobs
Engineering Group Inc., GoTo.com, Inc. and CyberSource, Inc. Ms. Levinson
received an A.B. from Barnard College, an M.A from Harvard University and an
M.B.A. from New York University.
David D. Williams has served as a Director since December 1996. Since
December 1991, Mr. Williams has served as President and Chief Executive Officer
of Tribune Media Services, Inc., a creator and marketer of editorial and
advertising content for multiple media distribution. From July 1990 to November
1991, Mr. Williams served as the Executive Vice President and Chief Operating
Officer of Tribune Media Services. Prior to joining Tribune Media Services, Mr.
Williams held various advertising and marketing positions at the Chicago
Tribune. Mr. Williams is a Director of Knight-Ridder, Inc. and the Newspaper
Features Council. He received a B.A. from Michigan State University.
CLASSIFIED BOARD OF DIRECTORS
We currently have five directors. In August 1999, our board of directors
approved, subject to stockholder approval, our restated certificate of
incorporation to provide for, among other things, a classified board of
directors. The restated certificate of incorporation states that the terms of
office of the board of directors will be divided into three classes: class I,
whose term will expire at the annual meeting of stockholders to be held in 2000,
class II, whose term will expire at the annual meeting of stockholders to be
held in 2001, and class III, whose term will expire at the annual meeting of
stockholders to be held in 2002. At each annual meeting of stockholders
beginning with the 2000 annual meeting, the successors
47
<PAGE> 52
to directors whose terms expire will be elected to serve from the time of
election and qualification until the third annual meeting following election and
until their successors have been elected.
BOARD COMMITTEES
AUDIT COMMITTEE. Our audit committee consists of Mr. Goldman and Ms.
Levinson. The audit committee makes recommendations to the board of directors
regarding the selection of independent auditors, reviews the results and scope
of the audit and other services provided by our independent auditors and
evaluates our internal accounting procedures.
COMPENSATION COMMITTEE. Our compensation committee consists of Mr. Beckert
and Mr. Williams. The compensation committee reviews and approves compensation
and benefits for our executive officers. The compensation committee also
administers our compensation and stock plans and makes recommendations to the
board of directors regarding such matters.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. No member of
the compensation committee has been an officer or employee of Exactis.com at any
time. None of our executive officers serves as a member of the board of
directors or compensation committee of any other company that has one or more
executive officers serving as a member of our board of directors or compensation
committee.
DIRECTOR COMPENSATION
Other than reimbursing directors for customary and reasonable expenses
incurred in attending board of directors and committee meetings, we do not
currently compensate our directors.
EXECUTIVE COMPENSATION
The following table sets forth all compensation received during 1998 by our
former chief executive officer and our other former executive officers whose
annual salary and bonus exceeded $100,000 for services rendered in all
capacities to us during 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
---------------- ---------------------
SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
- --------------------------- -------- ----- --------------------- ------------
<S> <C> <C> <C> <C>
John T. Funk,
Former Chairman of the Board of Directors........ $159,712 -- -- --
Raymond H. Van Wagener, Jr.
Former President and Chief Executive Officer..... 125,000 -- 40,000 --
Eric R. Belcher
Former Vice President of Retail Sales............ 213,360 -- 40,000 $7,200
Craig M. Deans
Former Vice President of Engineering............. 119,034 -- 16,666 --
</TABLE>
Mr. Funk served as our Chairman of the Board from January 1997 to January
1999. Mr. Van Wagener served as our President and Chief Executive Officer from
February 1997 to January 1999. Mr. Belcher currently serves as a retail sales
consultant for the InfoBeat product and served as our Vice President of Retail
Sales from June 1997 to December 1998. Mr. Deans served as our Vice President of
Engineering from April 1997 to September 1998.
The amount reflected in the "All Other Compensation" column of the
foregoing table represents the amount allocated for an automobile allowance.
48
<PAGE> 53
OPTION GRANTS IN 1998
The following table sets forth information regarding options granted to the
executive officers listed in the Summary Compensation table during 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
PERCENT OF OF STOCK PRICE
TOTAL OPTIONS APPRECIATION
NUMBER OF GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE ---------------------
NAME GRANTED 1998 ($/SHARE) EXPIRATION DATE 5% 10%
- ---- --------- ------------- --------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
John T. Funk.......... -- -- -- -- -- --
Raymond H.
Van Wagener, Jr. ... 40,000 7.8% $3.40 April 1, 2008 $ 85,530 $216,749
Eric R. Belcher....... -- -- -- -- -- --
Craig M. Deans........ 16,666 3.2 4.32 August 21, 2001 11,349 23,831
</TABLE>
The percent of total options granted to employees in the above table is
based on 513,065 total options granted in 1998. Our board of directors may
reprice options under the terms of our stock option plans.
Options were granted at an exercise price equal to the fair market value of
our common stock, as determined by our board of directors on the date of grant.
In making this determination, the board of directors considered a number of
factors, including:
- our historical and prospective future revenue and profitability;
- our cash balance and rate of cash consumption;
- the development and size of the market for our services;
- the status of our financing activities;
- the stability of our management team; and
- the breadth of our service offerings.
The amounts reflected in the "Potential Realizable Value" column of the
foregoing table are calculated assuming that the fair market value of the common
stock on the date of the grant as determined by the board of directors
appreciates at the indicated annual rate compounded annually for the entire term
of the option, and that the option is exercised and the common stock received
therefor is sold on the last day of the term of the option for the appreciated
price. The 5% and 10% rates of appreciation are mandated by the rules of the
Securities and Exchange Commission and do not represent our estimate or
projection of future increases in the price of the common stock.
1998 OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth information concerning the number and value
of unexercised options held by each of the executive officers listed in the
Summary Compensation table at December 31, 1998. None of these executive
officers exercised options to purchase common stock in 1998.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT DECEMBER 31, 1998 DECEMBER 31, 1998
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John T. Funk.............. -- -- -- -- -- --
Raymond H. Van Wagener,
Jr. .................... -- -- 149,568 115,432 $186,767 $147,033
Eric R. Belcher........... -- -- 13,333 26,667 17,600 35,201
Craig M. Deans............ -- -- 16,666 -- -- --
</TABLE>
In the table above, the value of the unexercised in-the-money options is
based on the fair market value of our common stock as of December 31, 1998
(determined by the board of directors in the manner
49
<PAGE> 54
discussed above to be $4.32 per share), minus the per share exercise price,
multiplied by the number of shares underlying the option.
401(K) PLAN
Our employees are eligible to participate in our 401(k) Plan. Pursuant to
the 401(k) Plan, employees may elect to reduce their current compensation by up
to the lesser of 15% of eligible compensation or the statutorily prescribed
annual limit ($10,000 in 1998). Employees may contribute this amount to the
401(k) Plan. Employees direct the investment of the assets of the 401(k) Plan in
up to 13 different investment funds. The 401(k) Plan is intended to qualify
under Section 401 of the Internal Revenue Code so that contributions by
employees to the 401(k) Plan, and income earned on plan contributions, are not
taxable to employees until withdrawn, and so that the contributions by employees
will be deductible when made. An employee becomes eligible for the matching
contribution only if he or she makes a pretax contribution. We may make
discretionary matching contributions to the 401(k) Plan. Additionally, we may
make annual discretionary profit sharing contributions in amounts to be
determined annually by the board of directors. Since the 401(k) Plan's
inception, we have made no matching or profit sharing contributions.
STOCK PLANS
1996 STOCK OPTION PLAN
Our 1996 Stock Option Plan (the "1996 Plan") was adopted by the Board of
Directors and approved by the stockholders on February 1, 1996. No further
options will be granted under the 1996 Plan. Options currently outstanding under
the 1996 Plan will continue in full force and effect under the terms of the 1996
Plan until such outstanding options are exercised or terminated in accordance
with their terms.
As of June 30, 1999, we had granted options under the 1996 Plan to purchase
an aggregate of approximately 703,143 shares of common stock, of which options
to purchase approximately 9,053 shares had been exercised, options to purchase
approximately 568,560 shares had been cancelled (due to expiration or otherwise)
and options to purchase approximately 125,530 shares at a weighted average
exercise price of approximately $1.20 per share remained outstanding.
The 1996 Plan provides for the grant of incentive stock options under the
Internal Revenue Code to employees and nonstatutory stock options to employees
and consultants (including non-employee directors). The 1996 Plan is
administered by the Board or a committee appointed by the Board which determines
recipients and types of awards to be granted, including the exercise price,
number of shares subject to the award and the exercisability thereof.
The terms of stock options granted under the 1996 Plan generally may not
exceed ten years. The exercise price of options granted under the 1996 Plan is
determined by the Board, provided that the exercise price of an incentive stock
option cannot be less than 100% of the fair market value of the common stock on
the date of the option grant. Options granted under the 1996 Plan vest over four
years or at a rate set by the Board. No incentive stock option may be
transferred by the optionee other than by will or the laws of descent or
distribution. A nonstatutory stock option will only be transferable by will or
by the laws of descent and distribution or as otherwise specified by the Board.
An optionee whose relationship with us ceases due to termination by us
other than by death or permanent and total disability or for cause may exercise
vested options in the three-month period following cessation unless the options
terminate or expire sooner by their terms. If we terminate an optionee's
relationship for cause, all options held by the optionee immediately terminate.
If an optionee terminates his or her relationship with us in order to accept
employment with any entity engaged in the business of providing information
services via electronic means, all options held by optionee will immediately
terminate. Vested options may be exercised for up to 12 months after termination
due to death or disability unless the options terminate or expire sooner by
their terms.
All options outstanding under the 1996 plan will immediately vest and
become exercisable upon consummation of this offering or upon the acquisition of
all or substantially all of our assets or in which 40% or more of our
outstanding shares are acquired by a single person or entity or an affiliated
group of persons or entities.
50
<PAGE> 55
Upon acquisition, we have the option, but not the obligation, to cancel
options outstanding as of the effective date of acquisition, whether or not such
options are then exercisable, in return for payment to the optionees of an
amount equal to the difference between the net amount per share payable as a
result of the acquisition, less the exercise price of the option. For this
purpose, an "acquisition" means any transaction in which substantially all of
our assets are acquired or in which more than 50% of our outstanding shares are
acquired in each case by a single person or entity or an affiliated group of
persons and/or entities.
Our dissolution or a liquidation or a merger or consolidation in which we
are not the surviving corporation will cause every option outstanding under the
1996 Plan to terminate as of the effective date of the dissolution, liquidation,
merger or consolidation. However, the optionee either must be offered a
substitute option by the resulting or surviving corporation in a merger or
consolidation or will have the right to exercise any unexercised options whether
or not then exercisable.
1997 STOCK OPTION PLAN
Our 1997 Stock Option Plan (the "1997 Plan") was adopted by the Board of
Directors on March 17, 1997 and approved by the stockholders on March 26, 1997.
No further options will be granted under the 1997 Plan. Options currently
outstanding under the 1997 Plan will continue to be outstanding under the terms
of the 1997 Plan until exercised or terminated.
As of June 30, 1999, we had granted options under the 1997 Plan to purchase
an aggregate of approximately 2,042,726 shares of common stock, of which no
options had been exercised, options to purchase approximately 743,833 shares had
been cancelled (due to expiration or otherwise) and options to purchase
approximately 1,298,893 shares at a weighted average exercise price of
approximately $2.70 per share remained outstanding.
The 1997 Plan provides for the grant of incentive stock options under the
Code to employees and nonstatutory stock options to employees, directors and
consultants. The 1997 Plan is administered by the Board or a committee appointed
by the Board which determines recipients and types of awards to be granted,
including the exercise price, number of shares subject to the award and the
exercisability thereof.
The terms of stock options granted under the 1997 Plan generally may not
exceed ten years. The exercise price of options granted under the 1997 Plan is
determined by the Board, provided that the exercise price of an incentive stock
option cannot be less than 100% of the fair market value of the common stock on
the date of the option grant. Options granted under the 1997 Plan vest at the
rate specified in the applicable option agreement. No incentive stock option may
be transferred by the optionee other than by will or the laws of descent or
distribution. A nonstatutory stock option will only be transferable by will or
by the laws of descent and distribution or pursuant to a qualified domestic
relations order, and will be exercisable during the lifetime of the optionee
only by the optionee or by a permitted transferee. An optionee whose
relationship with us ceases for any reason other than death or permanent and
total disability may exercise vested options in the three-month period following
such cessation unless the options terminate or expire sooner by their terms.
Vested options may be exercised for up to 12 months after an optionee's
relationship with us or related corporations ceases due to death or disability
unless such options terminate or expire sooner by their terms. Vested options
may be exercised for up to 18 months after an optionee's death unless such
options terminate or expire sooner by their terms.
Upon certain changes in control, each outstanding option will become fully
vested and exercisable prior to such change in control or thereafter terminate.
If the benefit received by an optionee as a result of accelerated option vesting
resulting from a change of control would constitute a parachute payment within
the meaning of Section 280G of the Internal Revenue Code, the accelerated
vesting will be reduced to the extent necessary so that no portion of such
benefit is subject to the excise tax imposed by Section 4999 of the Code.
51
<PAGE> 56
1999 EQUITY INCENTIVE PLAN
Our 1999 Equity Incentive Plan (the "Incentive Plan") was adopted by the
Board of Directors and approved by the stockholders on August 11, 1999. There is
currently an aggregate of 1,400,000 shares of common stock authorized for
issuance under the Incentive Plan. The Incentive Plan will terminate on August
10, 2009 unless sooner terminated by the Board (or Committee).
The Incentive Plan provides for the grant of incentive stock options to
employees (including officers and employee-directors) and nonstatutory stock
options, restricted stock purchase awards, stock bonuses and stock appreciation
rights to employees (including officers and employee-directors), directors and
consultants. The Incentive Plan is administered by the Board or a committee
appointed by the Board which determines recipients and types of awards to be
granted, including the exercise price, number of shares subject to the award and
the exercisability thereof.
The terms of options granted under the Incentive Plan may not exceed ten
years. The Board or committee determines the exercise price of options granted
under the Incentive Plan. However, the exercise price for an incentive stock
option cannot be less than 100% of the fair market value of the common stock on
the date of the option grant, and the exercise price for a nonstatutory stock
option cannot be less than 85% of the fair market value of the common stock on
the date of the option grant. Options granted under the Incentive Plan vest at
the rate specified in the option agreement. Generally, the optionee may not
transfer a stock option other than by will or the laws of descent or
distribution unless the optionee holds a nonstatutory stock option that provides
for transfer in the stock option agreement. However, an optionee may designate a
beneficiary who may exercise the option following the optionee's death. An
optionee whose service relationship ceases for any reason may exercise vested
options for the term provided in the option agreement.
No incentive stock option may be granted to any person who, at the time of
the grant, owns (or is deemed to own) stock possessing more than 10% of the
total combined voting power of our stock or, unless the option exercise price is
at least 110% of the fair market value of the stock subject to the option on the
date of grant and the term of the option does not exceed five years from the
date of grant. In addition, the aggregate fair market value, determined at the
time of grant, of the shares of common stock with respect to which incentive
stock options are exercisable for the first time by an optionee during any
calendar year, under the Incentive Plan and, all of our other stock plans, may
not exceed $100,000.
Under Section 162(m) of the Code (which denies a deduction to publicly held
corporations for certain compensation paid to specified employees in a taxable
year to the extent that the compensation exceeds $1,000,000), no person may be
granted options under the Incentive Plan covering more than 700,000 shares of
common stock in any calendar year.
Shares subject to stock awards that have expired or otherwise terminated
without having been exercised in full again become available for the grant of
awards under the Incentive Plan. Under its general authority to grant and to
amend options, the Board (or committee) has the implicit authority to reprice
outstanding options or to offer optionees the opportunity to replace outstanding
options with new options for the same or a different number of shares. Both the
original and new options will count toward the Code Section 162(m) limitation
set forth above.
Restricted stock purchase awards granted under the Incentive Plan may be
granted pursuant to a repurchase option in favor of us in accordance with a
vesting schedule determined by the Board (or committee). The price of a
restricted stock purchase award under the Incentive Plan can not be less than
85% of the fair market value of the stock subject to the award on the date of
grant. Stock bonuses may be awarded in consideration of past services without a
purchase payment. Unless otherwise specified, rights under a stock bonus or
restricted stock bonus agreement generally may not be transferred other than by
will or the laws of descent and distribution during such period as the stock
awarded pursuant to such an agreement remains subject to the agreement. Stock
appreciation rights granted under the Incentive Plan allows a recipient to elect
to receive cash or stock of a value equal to the appreciation of optioned
rights. The Incentive Plan authorizes three types of stock appreciation rights:
a tandem stock appreciation right is
52
<PAGE> 57
granted along with a stock option and is subject to the same terms and
conditions applicable to the option. It requires the holder to elect between
exercising the option (and receiving our shares) or surrendering, in whole or in
part, the option and receiving instead cash or stock equal to the appreciation
of the shares that are surrendered. A concurrent stock appreciation right also
is granted with a stock option and is subject to the same terms and conditions
applicable to the option. However, it is exercised automatically at the same
that the recipient exercises the option. Without surrendering any of the shares
subject to the option, the recipient receives cash or stock equal to the
appreciation of the shares exercised. On the other hand, an independent stock
appreciation right is not granted with a stock option, although it generally is
subject to the same terms and conditions applicable to nonstatutory stock
options. On exercising the independent stock appreciation right, the recipient
receives cash or stock equal to the appreciation of the share equivalents that
the recipient is exercising.
If there is any sale of substantially all of our assets, any merger,
reverse merger or any consolidation in which we are not the surviving
corporation, or any acquisition by certain persons, entities or groups of 50% or
more of our stock, all outstanding awards under the Incentive Plan either will
be assumed or substituted for by any surviving entity. If the surviving entity
determines not to assume or substitute for such awards, the vesting provisions
of such stock awards will be accelerated and the awards terminated if not
exercised prior to such transaction.
1999 EMPLOYEE STOCK PURCHASE PLAN
Our Employee Stock Purchase Plan (the "Purchase Plan") was adopted by the
Board of Directors and approved by the stockholders on August 11, 1999. There is
currently an aggregate of 500,000 shares of common stock authorized for issuance
under the Purchase Plan. The Purchase Plan will become effective on the
effective date of this offering. The Purchase Plan is intended to qualify as an
"employee stock purchase plan" within the meaning of Section 423 of the Code.
Under the Purchase Plan, the Board may authorize participation by eligible
employees, including officers, in periodic offerings following the adoption of
the Purchase Plan. The offering period for any offering will be no longer than
27 months.
The Purchase Plan provides a means by which employees may purchase common
stock of Exactis through payroll deductions. The Purchase Plan is implemented by
offerings of rights to eligible employees. Under the Purchase Plan, Exactis may
specify offerings with a duration of not more than 27 months, and may specify
shorter purchase periods within each offering. The first offering will begin on
the effective date of the initial public offering of our common stock and will
end on January 31, 2001. Purchases will occur on July 31, 2000 and January 31,
2001. Unless otherwise determined by the Board, common stock is purchased for
accounts of employees participating in the Purchase Plan at a price per share
equal to the lower of (i) 85% of the fair market value of a share of common
stock on the date of commencement of participation in the offering or (ii) 85%
of the fair market value of a share of common stock on the date of purchase.
Generally, all regular employees, including executive officers, who work at
least 20 hours per week, who are customarily employed for at least five months
per calendar year and who are employed as of the start of an offering, or as of
the start of a purchase period within an offering, may participate in the
Purchase Plan and may authorize payroll deductions of up to 15% of their base
compensation for the purchase of stock under the Purchase Plan.
Eligible employees may be granted rights only if the rights together with
any other rights granted under employee stock purchase plans do not permit such
employee's rights to purchase stock of Exactis to accrue at a rate which exceeds
$25,000 of fair market value of such stock for each calendar year in which such
rights are outstanding. No employee will be eligible for the grant of any rights
under the Purchase Plan if immediately after such rights are granted, such
employee has voting power over 5% or more of Exactis' outstanding capital stock.
Upon certain changes of control, the Board has discretion to provide that
each right to purchase common stock will be assumed or an equivalent right
substituted by the successor corporation, or the Board may shorten the offering
period and provide for all sums collected by payroll deductions to be applied to
purchase stock immediately prior to the change in control. The Purchase Plan
will terminate at the Board's direction or when all of the shares reserved for
issuance have been purchased.
53
<PAGE> 58
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SERIES E FINANCING
On July 15, 1999 and August 13, 1999, we issued an aggregate of 1,357,284
shares of Series E preferred stock to certain principal stockholders and certain
other investors at a purchase price of $6.50 per share. We also issued warrants
to purchase an aggregate of 203,586 shares of Series E preferred stock at an
exercise price of $8.00 per share, exercisable on or prior to July 15, 2004. Of
the 1,357,284 shares of Series E preferred stock sold by us, an aggregate of
1,307,657 shares were sold to the following principal stockholders for an
aggregate purchase price of approximately $8.5 million:
<TABLE>
<CAPTION>
NUMBER NUMBER AGGREGATE
PURCHASER OF SHARES OF WARRANTS PURCHASE PRICE
- --------- --------- ----------- --------------
<S> <C> <C> <C>
Boulder Ventures II, L.P. ........................ 461,539 70,310 $3,000,707
Centennial Fund IV, L.P. ......................... 384,615 57,961 2,500,574
Global Retail Partners, L.P. ..................... 197,272 29,590 1,282,564
DLJ Diversified Partners, L.P. ................... 58,785 8,817 382,191
DLJ Diversified Partners - A, L.P. ............... 21,830 3,274 141,928
GRP Partners, L.P. ............................... 12,825 1,923 83,382
Global Retail Partners Funding, Inc. ............. 13,584 2,037 88,316
DLJ ESC II, L.P. ................................. 3,396 509 22,079
Tribune Company................................... 153,811 23,071 1,000,002
</TABLE>
SERIES D FINANCING
On June 8, 1998, we issued an aggregate of 625,001 shares of Series D
preferred stock to certain principal stockholders and certain other investors at
a purchase price of $5.08 per share. Of the 625,001 shares of Series D preferred
stock sold by us, an aggregate of 605,315 shares were sold to the following
principal stockholders for an aggregate purchase price of approximately $3.1
million:
<TABLE>
<CAPTION>
NUMBER AGGREGATE
PURCHASER OF SHARES PURCHASE PRICE
- --------- --------- --------------
<S> <C> <C>
Boulder Ventures, L.P....................................... 14,764 $ 75,001
Global Retail Partners, L.P................................. 378,630 1,923,440
DLJ Diversified Partners, L.P............................... 112,824 573,146
DLJ Diversified Partners-A, L.P............................. 41,899 212,847
GRP Partners, L.P........................................... 24,614 125,039
Global Retail Partners Funding, Inc. ....................... 26,068 132,425
DLJ ESC II, L.P............................................. 6,516 33,101
</TABLE>
SERIES C FINANCING
On July 25, 1997, we issued an aggregate of 1,911,533 shares of Series C
preferred stock to certain principal stockholders and certain other investors at
a purchase price of $4.00 per share. We also issued warrants to purchase an
aggregate of 210,917 shares of Series C preferred stock at an exercise price of
$4.00 per share, exercisable on or prior to July 24, 2001, and a warrant to
purchase an aggregate of 425,000 shares of Series C preferred stock at an
exercise price of $6.00 per share exercisable, subject to certain conditions, on
or prior to July 24, 2000. Of the 1,911,533 shares of Series C preferred stock
sold by
54
<PAGE> 59
us, an aggregate of 1,845,413 shares were sold to the following principal
stockholders for an aggregate purchase price of approximately $7.4 million:
<TABLE>
<CAPTION>
NUMBER NUMBER AGGREGATE
PURCHASER OF SHARES OF WARRANTS PURCHASE PRICE
- --------- --------- ----------- --------------
<S> <C> <C> <C>
American Express Travel Related Services
Company......................................... 875,000 556,250 $3,500,556
Boulder Ventures Ltd.............................. 40,898 3,355 163,598
Centennial Fund IV, L.P........................... 402,150 30,268 1,608,632
Telecom Partners, L.P............................. 201,290 12,160 805,173
Tribune Company................................... 326,075 33,884 1,304,335
</TABLE>
BRIDGE FINANCING
On June 20, 1997, we issued promissory notes in the aggregate principal
amount of $2.0 million bearing simple interest at a rate of 12.0% per annum to
certain principal stockholders and certain other investors. We also issued
warrants to purchase an aggregate of 75,000 shares of Series C preferred stock
at an exercise price of $4.00 per share exercisable on or prior to June 17,
2001. Immediately upon the closing of the Series C preferred stock financing,
the principal amount outstanding under the notes and accrued interest thereon
automatically converted into shares of Series C preferred stock at $4.00 per
share.
SERIES B FINANCING
On July 22, 1996, September 19, 1996 and November 27, 1996, we issued an
aggregate of 1,416,666, 440,000 and 666,667 shares of Series B preferred stock,
respectively, to certain principal stockholders and certain other investors at a
purchase price of $3.00 per share. Of the 2,523,333 shares of Series B preferred
stock sold by us, an aggregate of 1,683,333 shares were sold to the following
principal stockholders for an aggregate purchase price of approximately $7.6
million:
<TABLE>
<CAPTION>
NUMBER AGGREGATE
PURCHASER OF SHARES PURCHASE PRICE
- --------- --------- --------------
<S> <C> <C>
Boulder Ventures Ltd........................................ 83,333 $ 249,999
Centennial Fund IV, L.P..................................... 933,333 2,799,999
SoftBank Holdings, Inc. .................................... 440,000 1,320,000
Telecom Partners, L.P....................................... 400,000 1,200,000
Tribune Company............................................. 666,667 2,000,001
</TABLE>
SERIES A FINANCING
On February 14, 1996 and March 15, 1996, we issued an aggregate of 600,000
and 280,000 shares, respectively, of Series A preferred stock to certain
principal stockholders and certain other investors at a purchase price of $1.25
per share. Of the 880,000 shares of Series A preferred stock sold by us, an
aggregate of 840,000 shares were sold to the following principal stockholders
for an aggregate purchase price of approximately $1.1 million:
<TABLE>
<CAPTION>
NUMBER AGGREGATE
PURCHASER OF SHARES PURCHASE PRICE
- --------- --------- --------------
<S> <C> <C>
Centennial Fund IV, L.P. ................................... 400,000 $500,000
Telecom Partners, L.P. ..................................... 400,000 500,000
Boulder Ventures Ltd. ...................................... 40,000 50,000
</TABLE>
We believe that each of the transactions described above was carried out on
terms that were no less favorable to us than those that would have been obtained
from unaffiliated third parties. Any future transactions between us and any of
our directors, officers or principal stockholders will be on terms no less
favorable to us than could be obtained from unaffiliated third parties and will
be approved by a majority of the independent and disinterested members of the
board of directors.
55
<PAGE> 60
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of our common stock as of August 13, 1999 for:
- each person (or group of affiliated persons) known to us to own
beneficially more than five percent of the common stock;
- each of our directors;
- our executive officers listed in the Summary Compensation Table; and
- all of our directors and executive officers as a group.
The information has been adjusted to reflect the sale of the common stock
in this offering (assuming no exercise of the underwriters' over-allotment
option) and the conversion of all outstanding shares of preferred stock into
common stock.
In accordance with the rules of the Securities and Exchange Commission, the
following table gives effect to the shares of common stock that could be issued
upon the exercise of outstanding options within 60 days of August 13, 1999.
Unless otherwise noted in the footnotes to the table and subject to community
property laws where applicable, the following individuals have sole voting and
investment control with respect to the shares beneficially owned by them.
We have calculated the percent of shares beneficially owned based on
8,314,115 shares of common stock outstanding before this offering and
shares of common stock outstanding after this offering. An asterisk indicates
ownership of less than one percent.
<TABLE>
<CAPTION>
PERCENT OF SHARES
BENEFICIALLY OWNED
NUMBER OF SHARES --------------------------------
BENEFICIAL OWNERS BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
- ----------------- ------------------ --------------- --------------
<S> <C> <C> <C>
Centennial Fund IV, L.P.(1)........................ 2,237,789 26.5%
American Express Travel Related Services Company,
Inc.(2).......................................... 1,176,250 13.7
Tribune Company(3)................................. 1,218,374 14.5
Telecom Partners, L.P.(4).......................... 1,031,290 12.4
Global Retail Partners, L.P.(5).................... 944,393 11.3
Boulder Ventures, L.P. and Boulder Ventures II,
L.P.(6).......................................... 716,949 8.5
Softven No. 2 Investment Enterprise
Partnership(7)................................... 444,906 5.4
Eric R. Belcher.................................... 22,055 *
Pierric D. Beckert(8).............................. -- --
Craig M. Deans..................................... 16,666 *
E. Thomas Detmer, Jr.(9)........................... 231,105 2.7
John T. Funk(10)................................... 676,552 8.1
Adam Goldman(11)................................... -- --
Linda Fayne Levinson(12)........................... 944,393 11.3
Raymond H. Van Wagener, Jr. ....................... 31,260 *
David D. Williams(13).............................. -- --
All executive officers and directors as a group (9
persons)(14)..................................... 1,289,945 14.9%
</TABLE>
- ---------------
(1) Includes 117,691 shares of common stock issuable upon exercise of warrants.
The address of Centennial Fund IV, L.P. ("Centennial Fund IV") is 1428
Fifteenth Street, Denver, Colorado 80202.
(2) Includes 301,250 shares of common stock issuable upon exercise of vested
warrants. Excludes 255,000 shares of common stock issuable upon exercise of
unvested warrants. The address of
56
<PAGE> 61
American Express Travel Related Services Company, Inc. ("AMEX") is 3 World
Financial Center, 40th Floor, New York, New York 10285.
(3) Includes 71,821 shares of common stock issuable upon exercise of warrants.
The address of The Tribune Company ("Tribune") is 435 North Michigan
Avenue, Chicago, Illinois 60611.
(4) Includes 30,000 shares of common stock issuable upon exercise of warrants.
The address of Telecom Partners, L.P. is 6400 S. Fiddlers Green Circle,
Englewood, Colorado 80111.
(5) Consists of (i) the following shares of common stock: (A) 575,902 shares
held by Global Retail Partners, L.P. ("Global Retail"), (B) 171,609 shares
held by DLJ Diversified Partners, L.P. ("DLJ"), (C) 63,729 shares held by
DLJ Diversified Partners -- A, L.P. ("DLJ-A"), (D) 37,439 shares held by
GRP Partners, L.P. ("GRP"), (E) 39,652 shares held by Global Retail
Partners Funding, Inc. ("Global Funding") and (F) 9,912 shares held by DLJ
ESC II, L.P. ("DLJ ESC"), and (ii) the following shares of common stock
issuable upon exercise of warrants: (A) 29,590 shares held by Global
Retail, (B) 8,817 shares held by DLJ, (C) 3,274 shares held by DLJ-A, (D)
1,923 shares held by GRP, (E) 2,037 shares held by Global Funding and 509
shares held by DLJ ESC. DLJ, DLJ-A, GRP, Global Funding and DLJ-ESC are
affiliates of Global Retail and are referred to herein collectively as the
"GRP Affiliates." The address of Global Retail and the GRP Affiliates is
2121 Avenue of the Stars, Suite 1630, Los Angeles, California 90067.
(6) Consists of (i) the following shares of common stock: (A) 178,995 shares
held by Boulder Ventures, L.P. ("Boulder Ventures I") and (B) 461,539
shares held by Boulder Ventures II, L.P. ("Boulder Ventures II"), and (ii)
the following shares of common stock issuable upon the exercise of
warrants: (A) 6,105 shares held by Boulder Ventures I, and (B) 70,310
shares held by Boulder Ventures II. Boulder Ventures I and Boulder Ventures
II are affiliated entities. The address of Boulder Ventures I and Boulder
Ventures II is 1634 Walnut Street, Suite 301, Boulder, Colorado 80302.
(7) The address of Softven No. 2 Investment Enterprise Partnership is 3-12-3
Kanda-Nishikicho, Chiyoda, Tokyo 101-0054, Japan.
(8) Mr. Beckert is the Vice President of Interactive Enterprise Development, a
division of American Express Relationship Services and part of AMEX.
(9) Includes 215,628 shares of common stock issuable upon exercise of stock
options, of which 3,125 of such shares shall vest upon completion of this
offering.
(10) The address of Mr. Funk is 22583 Anasazi Way, Golden, Colorado 80401.
(11) The sole General Partner of Centennial Fund IV is Centennial Holdings IV,
L.P. ("Holdings IV"). Holdings IV may be deemed to indirectly beneficially
own the shares owned by Centennial Fund IV. Mr. Goldman is a general
partner of Holdings IV and may be deemed to be the indirect beneficial
owner of the shares owned by Centennial Fund IV. Mr. Goldman disclaims
beneficial ownership of the shares held by Centennial Fund IV, except to
the extent of his pecuniary interest.
(12) Ms. Levinson is a Principal of Global Retail. The shares listed represent
shares held by Global Retail and the GRP Affiliates. Ms. Levinson disclaims
beneficial ownership of all shares held by Global Retail and the GRP
Affiliates, except to the extent of her pecuniary interest.
(13) Mr. Williams is President and Chief Executive Officer of Tribune Media
Services, Inc., a wholly-owned subsidiary of Tribune.
(14) Includes shares included pursuant to note (12).
57
<PAGE> 62
DESCRIPTION OF SECURITIES
Following completion of this offering, our authorized capital stock will
consist of 35,000,000 shares of common stock, par value $.01 per share, and
3,500,000 shares of preferred stock, par value $.01 per share.
The following description of our securities reflects changes that will be
made to our certificate of incorporation and bylaws upon the closing of this
offering. We have filed our restated certificate of incorporation and amended
and restated bylaws as exhibits to the registration statement of which this
prospectus is a part.
COMMON STOCK
As of the date of this prospectus, there are 8,314,115 shares of common
stock outstanding and held of record by 60 stockholders. Upon the closing of
this offering, there will be shares of common stock outstanding
(assuming no exercise of the underwriters' over-allotment option).
Holders of common stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders. Holders of common stock are not
entitled to cumulative voting rights in the election of directors. Accordingly,
minority stockholders will not be able to elect directors on the basis of their
votes alone. Subject to preferences that may be applicable to any
then-outstanding shares of preferred stock, holders of common stock are entitled
to receive ratably such dividends as may be declared by our board of directors.
In the event we liquidate, dissolve or wind up our affairs, holders of common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preferences of any then-outstanding shares of
preferred stock. Holders of common stock have no preemptive, subscription,
redemption or conversion rights.
PREFERRED STOCK
Our board of directors is authorized, without further stockholder approval,
to issue up to an aggregate of 3,500,000 shares of preferred stock in one or
more series. The board of directors may fix or alter the designations,
preferences, rights and any qualifications, limitations or restrictions of the
shares of each such series, and the dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption price or prices and
liquidation preferences. The issuance of preferred stock could:
- adversely affect the voting power of holders of common stock;
- adversely affect the likelihood that the holders of common stock will
receive dividend payments and payments upon liquidation; and
- delay, defer or prevent a change in control.
We have no present plans to issue any shares of preferred stock.
WARRANTS
As of the date of this prospectus, we have outstanding warrants to purchase
an aggregate of 94,608 and 108,978 shares of common stock at an exercise price
of $8.00 per share issued to certain principal stockholders and certain other
investors, which expire on July 15, 2004 and August 13, 2004, respectively. The
warrants contain anti-dilution provisions providing for adjustments of the
exercise price and the number of shares of common stock underlying the warrants
upon the occurrence of any recapitalization, reclassification, stock dividend,
stock split, stock combination or similar transaction. The shares of common
stock issuable upon exercise of the warrants carry registration rights, as
discussed below.
As of the date of this prospectus, Sony Music holds a warrant to purchase
an aggregate of 600,000 shares of common stock at an exercise price of $6.00 per
share. The warrant expires on December 30, 2003. The warrant contains
anti-dilution provisions providing for adjustments of the exercise price and the
number of shares of common stock underlying the warrant upon the occurrence of
any recapitalization, reclassification, stock dividend, stock split, stock
combination or similar transaction. The
58
<PAGE> 63
shares of common stock issuable upon exercise of the warrant carry registration
rights, as discussed below. The warrant vests in four increments based upon the
achievement by Sony Music of performance milestones based upon monthly gross
revenue.
The warrant ceases to vest at such time as we are not providing services to
Sony Music under the service bureau agreement. As of June 30, 1999, none of the
performance milestones had been achieved by Sony Music.
As of the date of this prospectus, we have outstanding warrants to purchase
an aggregate of 70,094 and 210,917 shares of common stock at an exercise price
of $4.00 per share issued to certain principal stockholders and certain other
investors, which expire on June 17, 2001 and July 24, 2001, respectively. The
warrants contain anti-dilution provisions providing for adjustments of the
exercise price and the number of shares of common stock underlying the warrants
upon the occurrence of any recapitalization, reclassification, stock dividend,
stock split, stock combination or similar transaction. The shares of common
stock issuable upon exercise of the warrants carry registration rights, as
discussed below.
As of the date of this prospectus, we have outstanding a warrant to
purchase an aggregate of 425,000 shares of common stock at an exercise price of
$6.00 per share issued to American Express. The warrant expires on July 24,
2000. The warrant contains anti-dilution provisions providing for adjustments of
the exercise price and the number of shares of common stock underlying the
warrant upon the occurrence of any recapitalization, reclassification, stock
dividend, stock split, stock combination or similar transaction. The shares of
common stock issuable upon exercise of the warrant carry registration rights, as
discussed below. The warrant vests in increments based upon the achievement by
American Express of certain performance milestones. 63,750 shares vested in
1998; and the remaining 361,250 shares vest upon achievement of monthly gross
revenue targets.
As of the date of this prospectus, we have outstanding warrants to purchase
an aggregate of 46,666 shares of common stock at an exercise price of $3.00 per
share issued to MMC/GATX Partnership No. 1 and Silicon Valley Bank. The warrants
expire on the date that is five years from the date of closing of this offering.
The warrants contain anti-dilution provisions providing for adjustments of the
exercise price and the number of shares of common stock underlying the warrants
upon the occurrence of any recapitalization, reclassification, stock dividend,
stock split, stock combination or similar transaction. The shares of common
stock issuable upon exercise of the warrants carry registration rights, as
discussed below.
REGISTRATION RIGHTS
Pursuant to the Third Amended and Restated Stockholders' Agreement, holders
of 7,302,057 shares of common stock and up to 1,556,263 shares of common stock
issuable upon the exercise of warrants, have certain rights to require us to
register their shares for resale under the Securities Act of 1933 during the
ten-year period following this offering.
Subject to certain limitations, (i) the holders of more than a majority of
registrable securities may require that the we register such shares under the
Securities Act of 1933 on Form S-1 or any similar form, with respect to at least
25% of such shares, and (ii) any holder of such shares may demand that we
register on Form S-3 or any similar form, if available, shares having an
aggregate offering price to the public of more than $1,000,000. We are not
required to effect more than four demand registrations on Form S-1 or more than
ten demand registrations on Form S-3. In addition, these stockholders are
entitled to piggyback registration rights with respect to any public offering
registration statement we file under the Securities Act following this offering,
with certain limitations. Further, at any time after we become eligible to file
a registration statement on Form S-3 or any similar short-form registration
statement, such stockholders may require us to file such registration statements
from time to time, again with certain limitations. We are generally required to
bear all of the expenses of these registrations, except underwriting discounts
and commissions. Registration of any of the shares of common stock entitled to
these registration rights would result in such shares becoming freely tradable
without restriction under the Securities Act.
59
<PAGE> 64
Upon completion of this offering, the registration rights with respect to
the shares held by a stockholder will terminate if the stockholder holds less
than 5% of the then-outstanding shares of common stock and the stockholder's
shares are entitled to be resold without restriction under Rule 144 promulgated
under the Securities Act.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BYLAWS
Following the closing of this offering, we will be subject to the
provisions of Section 203 of the Delaware General Corporation Law, which
generally prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the interested stockholder attained that status with the
approval of the corporation's board of directors or unless the business
combination is approved in a prescribed manner. "Business combinations" include
mergers, asset sales and other transactions resulting in a financial benefit to
the interested stockholder. With certain exceptions, an "interested stockholder"
is a person who, together with affiliates and associates, owns, or within three
years did own, fifteen percent (15%) or more of a corporation's voting stock.
This statute could prohibit or delay the accomplishment of mergers or other
takeover or change-in-control attempts and, accordingly, may discourage attempts
to acquire us.
The following provisions of our restated certificate of incorporation and
amended and restated bylaws that will become effective upon the closing of this
offering may have an anti-takeover effect and may delay or prevent a tender
offer or takeover attempt that a stockholder might consider to be in its best
interest, including attempts that might result in a premium over the market
price for the common stock:
CLASSIFIED BOARD OF DIRECTORS. Our board of directors will be divided into
three classes. The directors in class I will hold office until the first annual
meeting of stockholders following this offering, the directors in class II will
hold office until the second annual meeting of stockholders following this
offering and the directors in class III will hold office until the third annual
meeting of stockholders following this offering. After each such election, the
directors in that class will serve for terms of three years. The classification
system of electing directors may tend to discourage a third party from making a
tender offer or otherwise attempting to obtain control of us and may maintain
the incumbency of the board of directors, since such classification generally
increases the difficulty of replacing a majority of the directors.
BOARD OF DIRECTOR VACANCIES. The board of directors will be authorized to
fill vacant directorships and to increase the size of the board of directors.
This may deter a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
resulting vacancies with its own nominees.
STOCKHOLDER ACTION; SPECIAL MEETINGS OF STOCKHOLDERS. Our stockholders will
not be permitted to take action by written consent, but only at duly called
annual or special meetings of stockholders. In addition, special meetings of
stockholders may be called only by the chairman of the board, the chief
executive officer or a majority of the board of directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. Stockholders seeking to bring business before an annual meeting of
stockholders, or to nominate candidates for election as directors at an annual
meeting of stockholders, must deliver a written notice to our principal
executive offices within a prescribed time period. Our amended and restated
bylaws also set forth specific requirements as to the form and content of a
stockholder's notice. These provisions may preclude stockholders from bringing
matters before an annual meeting of stockholders or from making nominations for
the election of directors at an annual meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to limitations imposed by the Nasdaq National
Market. We may use these additional shares for a variety of corporate purposes,
including future public offerings to raise additional capital, acquisitions and
employee benefit plans. The
60
<PAGE> 65
existence of authorized but unissued and unreserved common stock and preferred
stock could render more difficult or discourage an attempt to obtain control of
us by means of a proxy contest, tender offer, merger or otherwise.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our bylaws provide that we will indemnify its directors, officers,
employees and agents to the fullest extent permitted by Delaware law. In
addition, our certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, our directors will not be liable for monetary damages
for breach of the directors' fiduciary duty to us and our stockholders. This
provision of the certificate of incorporation does not eliminate the duty of
care. In appropriate circumstances equitable remedies such as an injunction or
other forms of non-monetary relief are available under Delaware law. This
provision also does not affect a director's responsibilities under any other
laws, such as the federal securities laws.
Each director will continue to be subject to liability for:
- breach of the director's duty of loyalty to Exactis.com;
- acts or omissions not in good faith or involving intentional misconduct;
- knowing violations of law;
- any transaction from which the director derived an improper personal
benefit;
- improper transactions between the director and Exactis.com; and
- improper distributions to stockholders and improper loans to directors
and officers.
We intend to enter into indemnity agreements with each of our directors and
executive officers under which each director and executive officer will be
indemnified against expenses and losses incurred for claims brought against them
by reason of their being a director or executive officer of Exactis.com. Our
board of directors has authorized the officers of Exactis.com to investigate and
obtain directors' and officers' liability insurance.
There is no pending litigation or proceeding involving a director or
officer of Exactis.com as to which indemnification is being sought. We are not
aware of any pending or threatened litigation that may result in claims for
indemnification by any director or officer.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and control persons
of Exactis.com pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act of 1933, and is, therefore,
unenforceable.
LISTING
We have applied for listing of the common stock on the Nasdaq National
Market under the trading symbol "XACT."
TRANSFER AGENT AND REGISTRAR
We have appointed to serve as the transfer agent and registrar
for the common stock.
61
<PAGE> 66
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. We cannot predict what effect, if any, market sales of shares or the
availability of shares for sale will have on the market price of our common
stock prevailing from time to time. Nevertheless, sales of substantial amounts
of common stock in the public market, or the perception that such sales could
occur, could adversely affect the market price of the common stock and could
impair our future ability to raise capital through the sale of our equity
securities.
Upon the closing of this offering, we will have a total of shares of
common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and no exercise of options or warrants. Of the outstanding
shares, the shares being sold in this offering will be freely tradable,
except that any shares held by our "affiliates" may only be sold in compliance
with the limitations described below. The remaining shares of common stock
will be "restricted securities" that may be sold in the public market only if
they are registered under the Securities Act or if they qualify for an exemption
from registration under Rule 144, 144(k) or 701 promulgated under the Securities
Act.
Subject to the lock-up agreements described below and the provisions of
Rules 144, 144(k) and 701, additional shares will become available for sale in
the public market as follows:
<TABLE>
<CAPTION>
NUMBER
OF SHARES DATE
- --------- ----
<S> <C>
............. Upon the date of this prospectus (shares eligible for resale
under Rule 144(k) and not subject to lock-up agreements)
............. 90 days following the date of this prospectus (shares
eligible for resale under Rules 144 and 701 and not subject
to lock-up agreements)
............. 180 days following the date of this prospectus (lock-up
agreements released)
</TABLE>
In general, under Rule 144, a person (or persons whose shares are required
to be aggregated), including an affiliate, 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 (i) 1% of the then-outstanding shares of common stock
(approximately shares immediately after this offering) or (ii) the average
weekly trading volume of the common stock during the four calendar weeks
preceding the date on which notice of that sale is filed. In addition, a person
who is not considered an affiliate of ours at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years is entitled to sell such shares under Rule 144(k) without
regard to the volume limitations described above.
In addition, following the closing of this offering, we intend to file a
registration statement to register for resale the shares of common stock
available for issuance under our stock plans. Accordingly, shares issued under
those plans will become eligible for resale in the public market from time to
time, subject to the lock-up agreements described below and, in the case of our
affiliates, the volume limitations of Rule 144 described above. As of the date
of this prospectus, options and purchase rights to acquire a total of
shares of common stock are outstanding under our stock plans, of which
are currently exercisable.
Directors, officers and stockholders of Exactis.com holding an aggregate of
shares of common stock have agreed that they will not sell any shares of
common stock without the prior written consent of Thomas Weisel Partners LLC for
a period of 180 days from the date of this prospectus. Please refer to our
discussion in "Underwriting" for further discussion of these agreements.
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of this prospectus, other
than the grant of options and purchase rights under our stock plans and the
issuance of common stock pursuant thereto.
Following this offering, certain of our stockholders will have rights to
have their shares of common stock registered for resale under the Securities
Act. Please refer to our discussion in "Description of
Securities -- Registration Rights" for further discussion of these registration
rights.
62
<PAGE> 67
UNDERWRITING
GENERAL
Subject to the terms and conditions set forth in an agreement among the
underwriters and us, each of the underwriters named below, through their
representatives, Thomas Weisel Partners LLC, Dain Rauscher Wessels, a division
of Dain Rauscher Incorporated, and Wit Capital Corporation, has severally agreed
to purchase from us the aggregate number of shares of common stock set forth
opposite its name below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
Thomas Weisel Partners LLC..................................
Dain Rauscher Wessels.......................................
Wit Capital Corporation.....................................
--------
Total.............................................
========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters are subject to various conditions, such as approval of legal
matters by counsel. The nature of the underwriters' obligations is such that
they are committed to purchase and pay for all of the shares of common stock
listed above if any are purchased.
The underwriting agreement provides that we will indemnify the underwriters
against liabilities specified in the underwriting agreement under the Securities
Act or will contribute to payments that the underwriters may be required to make
relating to these liabilities.
OVER-ALLOTMENT OPTION
We have granted a 30-day over-allotment option to the underwriters to
purchase up to an aggregate of additional shares of our common stock
exercisable at the "public offering price" less the "underwriting discounts and
commissions," each as set forth on the cover page of this prospectus. If the
underwriters exercise such option in whole or in part, then each of the
underwriters will be severally committed, subject to conditions described in the
underwriting agreement, to purchase the additional shares of our common stock in
proportion to their respective commitments set forth in the table above.
COMMISSIONS AND DISCOUNTS
The underwriters propose to offer the shares of common stock directly to
the public at the "public offering price" set forth on the cover page of this
prospectus, and at such price less a concession not in excess of $ per share
of common stock to other dealers specified in a master agreement among
underwriters who are members of the National Association of Securities Dealers,
Inc. The underwriters may allow, and such dealers may reallow, concessions, not
in excess of $ per share of common stock to these other dealers. After this
offering, the offering price, concessions and other selling terms may be changed
by the underwriters. Our common stock is offered subject to receipt and accept
by the underwriters and to other conditions, including the right to reject
orders in whole or in part.
The following table summarizes the compensation to be paid to the
underwriters by us and the expenses payable by us:
<TABLE>
<CAPTION>
TOTAL
-------------------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions paid by
us........................................... $ $ $
Expenses payable by us......................... $ $ $
</TABLE>
RESERVED SHARES
The underwriters, at our request, have reserved for sale at the initial
public offering price up to shares of common stock to be sold in this
offering for sale to our employees and other persons designated by us. The
number of shares available for sale to the general public will be reduced to the
63
<PAGE> 68
extent that any reserved shares are purchased. Any reserved shares not purchased
in this manner will be offered by the underwriters on the same basis as the
other shares offered in this offering.
NO SALES OF SIMILAR SECURITIES
Our directors, officers and stockholders who hold shares in the
aggregate, have agreed that they will not offer, sell, or agree to sell,
directly or indirectly, or otherwise dispose of any shares of common stock
without the prior written consent of Thomas Weisel Partners LLC for a period of
180 days from the date of this prospectus.
In addition, we have agreed that for a period of 180 days after the dates
of this prospectus we will not, without the prior written consent of Thomas
Weisel Partners LLC, offer, sell, or otherwise dispose of any shares of common
stock except for the shares of common stock offered in the offering and the
shares of common stock issuable upon exercise of outstanding options and
warrants.
INFORMATION REGARDING THOMAS WEISEL PARTNERS LLC AND WIT CAPITAL CORPORATION
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners LLC has been named as a lead or co-manager on 56
filed public offerings of equity securities, of which 33 have been completed,
and has acted as a syndicate member in an additional 28 public offerings of
equity securities. Thomas Weisel Partners LLC does not have any material
relationship with us or any of our officers, directors or controlling persons,
except with respect to its contractual relationship with us under the
underwriting agreement entered into in connection with this offering.
Wit Capital, a member of the National Association of Securities Dealers,
Inc., will participate in this offering as one of the underwriters. The National
Association of Securities Dealers, Inc. approved the membership of Wit Capital
on September 4, 1997. Since that time, Wit Capital has acted as an underwriter,
co-manager or selected dealer in over 75 public offerings. Except for its
participation as a manager in this offering, Wit Capital has no relationship
with Exactis.com or any of its founders or significant stockholders.
NASDAQ NATIONAL MARKET LISTING
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock was
determined through negotiations between us and representatives of the
underwriters. Some of the factors considered in these negotiations will be our
results of operations in recent periods, estimates of our prospects and the
industry in which we compete, an assessment of our management, the general state
of the securities markets at the time of this offering and the prices of similar
securities of generally comparable companies. We have applied to have our common
stock quoted on the Nasdaq National Market under the symbol "XACT." We cannot
assure you that an active or orderly trading market will develop for our common
stock or that our common stock will trade in the public markets subsequent to
this offering at or above the initial offering price.
The underwriters do not expect to confirm sales of common stock to any
accounts over which they exercise discretionary authority to exceed five percent
of shares being offered under this prospectus.
MARKET STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
In order to facilitate this offering, persons participating in this
offering may engage in transactions that stabilize, maintain or otherwise affect
the price of our common stock during and after this offering. Specifically, the
underwriters may over-allot or otherwise create a short position in our common
stock for their own account by selling more shares of common stock than we have
sold to them. The underwriters may elect to cover any short position by
purchasing shares of common stock in the open market or by exercising the
over-allotment option granted to the underwriters. In addition, the underwriters
may stabilize or maintain the price of the common stock by bidding for or
purchasing shares of common stock in the open market and may impose penalty
bids. Under these penalty bids, selling concessions that are allowed to
syndicate members or other broker-dealers participating in this offering are
reclaimed if shares of common stock previously distributed in this offering are
repurchased, usually in order to stabilize the
64
<PAGE> 69
market. The effect of these transactions may be to stabilize or maintain the
market price at a level above that which might otherwise prevail in the open
market. No representation is made as to the magnitude or effect of any such
stabilization or other transactions. These transactions may be effected on the
Nasdaq National Market or otherwise and may be discontinued at any time after
they are commenced.
A prospectus in electronic format is being made available on an Internet
Web site maintained by Wit Capital. In addition, pursuant to an e-Dealer
Agreement, all dealers purchasing shares from Wit Capital in the offering
similarly have agreed to make a prospectus in electronic format available on Web
sites maintained by each of the e-Dealers.
LEGAL MATTERS
Cooley Godward LLP, Boulder, Colorado will pass upon the validity of the
shares of common stock offered hereby. Attorneys at Cooley Godward LLP are the
beneficial owners, through investment partnerships, of approximately 8,700
shares of our common stock.
Brobeck, Phleger & Harrison LLP, San Francisco, California, will pass upon
certain legal matters in connection with the offering for the underwriters.
EXPERTS
The financial statements of Exactis.com, Inc. (formerly InfoBeat Inc.) as
of December 31, 1997 and 1998 and for the period from inception (January 30,
1996) to December 31, 1996 and for the years ended December 31, 1997 and 1998,
have been included herein and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 (including exhibits, schedules and amendments) under the
Securities Act with respect to the common stock to be sold in this offering.
This prospectus does not contain all of the information in the registration
statement. For further information about us and our common stock, please refer
to the registration statement. Statements contained in this prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete. In each instance, please refer to the copy of that contract, agreement
or document filed as an exhibit to the registration statement.
You may read and copy all or any portion of the registration statement or
any other information 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 on the SEC's web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended. In
accordance with those requirements, we will file periodic reports, proxy
statements and other information with the SEC. You may also inspect these
reports, proxy statements and other information at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
We intend to furnish our stockholders with annual reports containing
audited financial statements and with quarterly reports for the first three
quarters of each year containing unaudited interim financial information.
65
<PAGE> 70
EXACTIS.COM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets as of December 31, 1997 and 1998 and June 30,
1999 (unaudited).......................................... F-3
Statements of Operations for the period from inception
(January 30, 1996) to December 31, 1996, years ended
December 31, 1997 and 1998 and six months ended June 30,
1998 and 1999 (unaudited)................................. F-4
Statements of Stockholders' Deficit for the period from
inception (January 30, 1996) to December 31, 1996, years
ended December 31, 1997 and 1998 and six months ended June
30, 1999 (unaudited)...................................... F-5
Statements of Cash Flows for the period from inception
(January 30, 1996) to December 31, 1996, years ended
December 31, 1997 and 1998 and six months ended June 30,
1998 and 1999 (unaudited)................................. F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 71
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Exactis.com, Inc.:
We have audited the accompanying balance sheets of Exactis.com, Inc.
(formerly Infobeat Inc.) as of December 31, 1997 and 1998 and the related
statements of operations, stockholders' deficit and cash flows for the period
from inception (January 30, 1996) to December 31, 1996 and the years ended
December 31, 1997 and 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Exactis.com, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from inception (January 30, 1996) to December 31, 1996 and the
years ended December 31, 1997 and 1998 in conformity with generally accepted
accounting principles.
KPMG LLP
Denver, Colorado
April 2, 1999, except
as to Note 8, which
is as of August 13, 1999
F-2
<PAGE> 72
EXACTIS.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30,
1997 1998 1999
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 3,746,703 $ 6,383,255 $ 556,628
Restricted cash........................................... 750,320 -- --
Accounts receivable, net of allowance of approximately
$75,000 in 1997, 1998 and 1999.......................... 193,687 727,295 1,472,969
Receivable from sale of discontinued operations (note
2)...................................................... -- 1,500,000 1,500,000
Prepaid expenses and other................................ 104,207 96,961 299,619
------------ ------------ ------------
Total current assets................................ 4,794,917 8,707,511 3,829,216
------------ ------------ ------------
Equipment and purchased computer software, at cost (note 5):
Computers and equipment -- production..................... 1,736,167 2,304,982 3,329,149
Computers and equipment -- administrative................. 370,312 465,920 559,314
Furniture and fixtures.................................... 327,941 438,630 482,842
Purchased computer software............................... 234,442 322,973 650,134
Leasehold improvements.................................... 289,763 314,879 400,597
------------ ------------ ------------
2,958,625 3,847,384 5,422,036
Less accumulated depreciation and amortization............ (982,324) (2,010,118) (2,686,594)
------------ ------------ ------------
1,976,301 1,837,266 2,735,442
Deferred marketing and financing costs, net................. 151,289 59,275 19,822
Other assets................................................ 142,880 202,219 208,606
------------ ------------ ------------
Total assets........................................ $ 7,065,387 $ 10,806,271 $ 6,793,086
============ ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 116,808 $ 194,540 $ 789,225
Accrued liabilities....................................... 297,252 699,014 1,189,557
Deferred revenue (note 2)................................. 12,591 2,775,858 1,624,326
Current portion of notes payable (note 5)................. 482,506 677,777 679,060
Current portion of obligations under capital leases (note
6)...................................................... 22,307 8,056 --
------------ ------------ ------------
Total current liabilities........................... 931,464 4,355,245 4,282,168
Deferred revenue, net of current portion (note 2)........... -- 1,745,493 1,276,477
Notes payable, less current portion (note 5)................ 816,429 609,700 300,100
Obligations under capital leases, excluding current portion
(note 6).................................................. 8,056 -- --
------------ ------------ ------------
Total liabilities................................... 1,755,949 6,710,438 5,858,745
------------ ------------ ------------
MANDATORILY REDEEMABLE PREFERRED STOCK (note 3):
Series B, par value $.01, authorized 2,570,000 shares;
issued and outstanding 2,523,333 shares (aggregate
liquidation preference of $7,569,999)................... 7,546,884 7,553,489 7,556,791
Series C, par value $.01, authorized 3,550,000 shares;
issued and outstanding 1,911,533 shares (aggregate
liquidation preference of $7,646,136)................... 7,224,325 7,318,061 7,364,934
Series D, par value $.01, authorized 1,300,000 shares;
issued and outstanding 625,001 shares in 1998 and 1999
(aggregate liquidation preference of
$3,175,005)............................................. -- 3,153,037 3,155,478
Warrants for the purchase of mandatorily redeemable
preferred stock......................................... 577,713 647,936 647,936
------------ ------------ ------------
15,348,922 18,672,523 18,725,139
------------ ------------ ------------
STOCKHOLDERS' DEFICIT (note 3):
Series A preferred stock, par value $.01, authorized,
issued and outstanding 880,000 shares (aggregate
liquidation preference of $1,100,000)................... 1,094,413 1,094,413 1,094,413
Common stock, par value $.01. Authorized 13,500,000
shares; issued and outstanding 1,001,000, 1,009,053 and
1,009,053 shares, respectively.......................... 10,010 10,091 10,091
Additional paid-in capital................................ 3,523 43,138 750,253
Accumulated deficit....................................... (11,147,430) (15,724,332) (19,645,555)
------------ ------------ ------------
Total stockholders' deficit......................... (10,039,484) (14,576,690) (17,790,798)
Commitments and contingencies (note 6)......................
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT......... $ 7,065,387 $ 10,806,271 $ 6,793,086
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 73
EXACTIS.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JANUARY 30, SIX MONTHS ENDED
1996) TO YEARS ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------- -------------------------
1996 1997 1998 1998 1999
------------ ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE..................... $ -- $ 358,801 $ 821,410 $ 153,919 $ 3,574,498
Cost of revenue............. -- 132,000 255,976 92,883 398,706
----------- ----------- ----------- ----------- -----------
Gross profit...... -- 226,801 565,434 61,036 3,175,792
----------- ----------- ----------- ----------- -----------
Operating expenses:
Marketing and sales....... -- 1,033,628 1,621,135 594,914 1,274,767
Research, development and
engineering............ -- 700,810 1,807,176 732,662 3,134,080
General and
administrative......... -- 1,821,707 1,845,601 823,303 1,927,604
Depreciation and
amortization........... -- 580,898 730,541 337,103 689,593
----------- ----------- ----------- ----------- -----------
Total operating
expenses........ -- 4,137,043 6,004,453 2,487,982 7,026,044
----------- ----------- ----------- ----------- -----------
LOSS FROM
OPERATIONS...... -- (3,910,242) (5,439,019) (2,426,946) (3,850,252)
Interest expense, net....... -- (72,947) (100,907) (30,296) (18,360)
----------- ----------- ----------- ----------- -----------
LOSS FROM
CONTINUING
OPERATIONS...... -- (3,983,189) (5,539,926) (2,457,242) (3,868,612)
Discontinued operations
(note 2):
Loss from discontinued
operations............. (3,391,741) (3,715,724) (2,282,055) (925,949) --
Gain on sale of
discontinued
operations............. -- -- 3,347,861 -- --
----------- ----------- ----------- ----------- -----------
NET LOSS.......... $(3,391,741) $(7,698,913) $(4,474,120) $(3,383,191) $(3,868,612)
Accretion of preferred stock
to liquidation value...... (3,303) (53,473) (102,782) (50,171) (52,611)
----------- ----------- ----------- ----------- -----------
NET LOSS
ATTRIBUTABLE TO
COMMON
STOCKHOLDERS.... $(3,395,044) $(7,752,386) $(4,576,902) $(3,433,362) $(3,921,223)
=========== =========== =========== =========== ===========
LOSS PER COMMON
SHARE -- BASIC AND
DILUTED:
Loss from continuing
operations............. $ -- $ (4.04) $ (5.62) $ (2.50) $ (3.89)
Earnings (loss) from
discontinued
operations............. (3.40) (3.71) 1.06 (0.92) --
----------- ----------- ----------- ----------- -----------
$ (3.40) $ (7.75) $ (4.56) $ (3.42) $ (3.89)
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING -- BASIC AND
DILUTED................... 1,000,000 1,000,255 1,004,461 1,002,468 1,009,053
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 74
EXACTIS.COM, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
PERIOD FROM INCEPTION (JANUARY 30, 1996) TO DECEMBER 31, 1996,
YEARS ENDED DECEMBER 31, 1997 AND 1998 AND THE SIX MONTHS
ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SERIES A
PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ---------- --------- ------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT INCEPTION............ -- $ -- -- $ -- $ -- $ -- $ --
Issuance of common stock for
assets......................... -- -- 1,000,000 10,000 2,282 -- 12,282
Issuance of Series A preferred
stock, net of issuance costs... 880,000 1,094,413 -- -- -- -- 1,094,413
Accretion of redeemable preferred
stock to liquidation value..... -- -- -- -- -- (3,303) (3,303)
Net loss......................... -- -- -- -- -- (3,391,741) (3,391,741)
------- ---------- --------- ------- -------- ------------ ------------
BALANCES AT DECEMBER 31, 1996.... 880,000 1,094,413 1,000,000 10,000 2,282 (3,395,044) (2,288,349)
Issuance of common stock for
cash........................... -- -- 1,000 10 1,241 -- 1,251
Accretion of redeemable preferred
stock to liquidation value..... -- -- -- -- -- (53,473) (53,473)
Net loss......................... -- -- -- -- -- (7,698,913) (7,698,913)
------- ---------- --------- ------- -------- ------------ ------------
BALANCES AT DECEMBER 31, 1997.... 880,000 1,094,413 1,001,000 10,010 3,523 (11,147,430) (10,039,484)
Exercise of common stock
options........................ -- -- 8,053 81 9,911 -- 9,992
Issuance of common stock options
for services................... -- -- -- -- 29,704 -- 29,704
Accretion of redeemable preferred
stock to liquidation value..... -- -- -- -- -- (102,782) (102,782)
Net loss......................... -- -- -- -- -- (4,474,120) (4,474,120)
------- ---------- --------- ------- -------- ------------ ------------
BALANCES AT DECEMBER 31, 1998.... 880,000 1,094,413 1,009,053 10,091 43,138 (15,724,332) (14,576,690)
Stock options issued as
compensation at less than fair
value.......................... -- -- -- -- 707,115 -- 707,115
Accretion of redeemable preferred
stock to liquidation value..... -- -- -- -- -- (52,611) (52,611)
Net loss......................... -- -- -- -- -- (3,868,612) (3,868,612)
------- ---------- --------- ------- -------- ------------ ------------
BALANCES AT JUNE 30, 1999
(unaudited).................... 880,000 $1,094,413 1,009,053 $10,091 $750,253 $(19,645,555) $(17,790,798)
======= ========== ========= ======= ======== ============ ============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 75
EXACTIS.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JANUARY 30, SIX MONTHS ENDED
1996) TO YEARS ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------- -------------------------
1996 1997 1998 1998 1999
------------ ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................... $(3,391,741) $(7,698,913) $(4,474,120) $(3,383,191) $(3,868,612)
Adjustments to reconcile net loss to net cash
used by operating activities:
Loss from discontinued operations............ 3,391,741 3,715,724 2,282,055 925,949 --
Gain on sale of discontinued operations...... -- -- (3,347,861) -- --
Depreciation and amortization................ -- 580,898 730,541 337,103 689,593
Amortization of deferred marketing and
financing costs............................ -- 77,606 162,237 65,894 39,458
Preferred stock and preferred stock warrants
issued for financing costs, marketing cost
and interest expense....................... -- 113,197 -- -- --
Common stock options issued for services and
compensation............................... -- -- 29,704 -- 707,115
Accretion of premium on notes payable........ -- 29,748 53,286 25,251 25,520
Changes in operating assets and liabilities:
Accounts receivable.......................... -- (193,687) (2,033,608) (272,101) (745,674)
Prepaid expenses and other................... -- 26,601 7,246 (120,470) (202,658)
Other assets................................. -- (12,692) (66,693) (50,625) (6,387)
Accounts payable and accrued liabilities..... -- (75,170) 479,494 175,012 1,085,228
Deferred revenue............................. -- 12,591 4,508,760 237,394 (1,620,548)
----------- ----------- ----------- ----------- -----------
Net cash used by continuing operations... -- (3,424,097) (1,668,959) (2,059,784) (3,896,965)
Net cash used by discontinued operations....... (3,003,956) (3,491,102) (1,980,989) (794,850) --
----------- ----------- ----------- ----------- -----------
Net cash used by operating activities.... (3,003,956) (6,915,199) (3,649,948) (2,854,634) (3,896,965)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of discontinued
operations................................... -- -- 3,355,215 -- --
Purchase of equipment and software............. (1,848,753) (1,056,942) (894,493) (261,633) (1,587,769)
Proceeds from sale of equipment................ 31,289 7,358 1,921 -- --
----------- ----------- ----------- ----------- -----------
Net cash provided (used) by investing
activities............................. (1,817,464) (1,049,584) 2,462,643 (261,633) (1,587,769)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common and preferred
stock........................................ 8,631,389 5,414,330 3,160,588 3,163,486 --
Principal payments on capital lease
obligations.................................. (11,912) (19,768) (22,307) (10,955) (8,056)
Proceeds from notes payable.................... -- 3,522,658 477,343 111,452 --
Payments on notes payable...................... -- (253,471) (542,087) (240,130) (333,837)
Change in restricted cash...................... -- (750,320) 750,320 619,376 --
----------- ----------- ----------- ----------- -----------
Net cash provided (used) by financing
activities............................. 8,619,477 7,913,429 3,823,857 3,643,229 (341,893)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................ 3,798,057 (51,354) 2,636,552 526,962 (5,826,627)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD......................................... -- 3,798,057 3,746,703 3,746,703 6,383,255
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD....... $ 3,798,057 $ 3,746,703 $ 6,383,255 $ 4,273,665 $ 556,628
=========== =========== =========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION --
Cash paid for interest......................... $ 4,807 $ 86,865 $ 107,558 $ 54,860 $ 46,099
=========== =========== =========== =========== ===========
SUPPLEMENTAL NONCASH INVESTING AND FINANCING
ACTIVITIES:
Common stock and common stock options issued
for assets................................... $ 12,282 -- -- -- --
=========== =========== =========== =========== ===========
Redeemable preferred stock warrants issued for
financing and marketing costs................ $ -- $ 320,394 $ 70,223 -- --
=========== =========== =========== =========== ===========
Notes payable and accrued interest payable
converted to preferred stock................. $ -- $ 2,021,697 -- -- --
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 76
EXACTIS.COM, INC.
Notes to Financial Statements
December 31, 1997 and 1998 and June 30, 1999 (Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS AND BASIS OF FINANCIAL STATEMENT PRESENTATION
Exactis.com, Inc. (formerly Infobeat Inc.) (the "Company"), a Delaware
corporation, was formed on January 30, 1996. In January 1999, the
Company changed its name from Infobeat Inc. to Exactis.com, Inc. The
Company provides permission-based outsourced email marketing and
communications solutions. Through December 1998, the Company also sold
advertising, which was distributed with free email consumer newsletters
to subscribers (see note 2).
The accompanying unaudited financial information as of June 30, 1999 and
for the six-month periods ended June 30, 1998 and 1999 has been prepared
in accordance with generally accepted accounting principles for interim
financial information. All significant adjustments, consisting of only
normal and recurring adjustments, which, in the opinion of management,
are necessary for a fair presentation of the results of operations and
cash flows for the six months ended June 30, 1998 and 1999 have been
included. Operating results for the six month period ending June 30,
1999 are not necessarily indicative of the results that may be expected
for the full year.
The Company has incurred significant losses since inception and expects
to incur a loss in 1999. Should the Company be unable to generate
significant revenue and realize cash flows from operations in the near
term, the Company will require additional equity or debt financing to
meet working capital needs and to fund operating losses. Although the
Company completed financing transactions in July and August 1999, as
described in note 8, management believes the Company will require
additional financing and there can be no assurances that such financing
will be available in the future.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
(B) CASH EQUIVALENTS AND RESTRICTED CASH
The Company considers all highly liquid investments with maturities of
three months or less at the date of purchase to be cash equivalents.
Restricted cash in 1997 consisted of proceeds from the sale of preferred
stock to a strategic partner which was committed, and used in 1998, for
the development of the email services business.
(C) EQUIPMENT AND PURCHASED COMPUTER SOFTWARE
Equipment and purchased computer software are recorded at cost.
Depreciation and amortization is calculated using the straight-line
method over the estimated useful lives of the assets which range from 3
to 5 years.
(D) INCOME TAXES
The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes
(Statement 109). Under the asset and liability method of Statement 109,
deferred tax assets and liabilities are recognized for the
F-7
<PAGE> 77
EXACTIS.COM, INC.
Notes to Financial Statements -- (Continued)
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in operations in the
period that includes the enactment date. A valuation allowance is
required to the extent any deferred tax assets may not be realizable.
(E) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of certain of the Company's financial instruments,
including accounts receivable and accrued liabilities, approximate fair
value because of their short maturities. Because the interest rates on
the Company's notes payable and capital lease obligations reflect market
rates and terms, the fair values of these instruments approximate
carrying amounts.
(F) REVENUE RECOGNITION
Revenue generally is derived from the delivery of email messages for
clients on a pre-determined price per message basis and is recognized
upon delivery. The Company records deferred revenue for payments
received in advance of services performed.
(G) IMPAIRMENT OF LONG-LIVED ASSETS AND ASSETS TO BE DISPOSED OF
In accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, the
Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is generally measured by a comparison of
the carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is equal to the amount by which the
carrying amounts of the assets exceed the fair values of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value, less costs to sell.
(H) STOCK-BASED COMPENSATION
The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense is recorded on the date of grant only if
the current market price of the underlying stock exceeds the exercise
price of the option. Statement of Financial Accounting Standard No. 123,
Accounting for Stock-Based Compensation, permits entities to recognize
as expense, over the vesting period, the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net income or loss disclosures as if the
fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosures required by SFAS No. 123.
(I) CONTINGENT STOCK PURCHASE WARRANTS
The Company recorded contingent stock purchase warrants issued prior to
November 21, 1997 in accordance with Emerging Issues Task Force Bulletin
96-3: Accounting for Equity Instruments
F-8
<PAGE> 78
EXACTIS.COM, INC.
Notes to Financial Statements -- (Continued)
That Are Issued for Consideration Other Than Employee Services under
FASB Statement No. 123. Under EITF 96-3, the number of warrants
estimated to eventually be issued are recorded at the fair value at the
grant date. The Company expenses subsequent revisions to the estimated
number of warrants to be issued based on the fair value of the warrants,
as determined at the grant date.
The Company has recorded contingent stock purchase warrants issued
subsequent to November 20, 1997 in accordance with Emerging Issues Task
Force Bulletin 96-18: Accounting for Equity Instruments That Are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services. At the grant date, the minimum number of warrants
which may eventually be issued are recorded at their fair value, which
is adjusted in subsequent periods for revisions of the minimum number of
warrants to be issued and the then current fair value of the warrants.
(J) LOSS PER SHARE
Loss per share is presented in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, Earnings Per Share
(SFAS 128). Under SFAS 128, basic earnings (loss) per share (EPS)
excludes dilution for potential common stock and is computed by dividing
income or loss available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock.
Basic and diluted EPS are the same in 1996, 1997, 1998 and 1999, as all
potential common stock instruments are antidilutive.
(2) DISCONTINUED OPERATIONS
Prior to December 1998, the Company operated in two lines of business. The
Company's initial business, the "InfoBeat publishing business" was the
publication of advertising supported newsletters delivered daily to
subscribers via email. In early 1998, the Company launched its outsourced
email marketing and communications services business (the "email services
business").
In December 1998 the Company sold the InfoBeat publishing business,
including rights to the InfoBeat brand, the consumer newsletters and the
subscriber lists to Sony Music, a Group of Sony Music Entertainment Inc.
The sales agreement and related service agreement provide for the payment
of $5.0 million in 1998, $1.5 million in 1999 and minimum payments over a
three year period totaling $8.3 million for email distribution services to
be provided to Sony Music, including distribution of modified versions of
the InfoBeat newsletters. In connection with the agreements, Sony Music was
granted preferred stock purchase warrants with contingent vesting
provisions based on future performance criteria (see note 3).
The Company accounted for the sales transaction, and allocated the related
revenue, based on the estimated fair values of the separate elements of the
arrangement. Accordingly, the excess of the total minimum proceeds under
the agreement of $14.8 million over the estimated fair value of the service
arrangement, as determined by the Company's Board of Directors, was
recorded as a gain on the sale of the discontinued operations of
approximately $3.3 million. Proceeds received as of December 31, 1998 in
excess of the gain, and the related $1.5 million receivable for a payment
due in 1999, were recorded as deferred revenue totaling approximately $4.3
million, which will be amortized to revenue over the term of the service
agreement.
The results of the InfoBeat publishing business have been reported
separately as discontinued operations in the statements of operations. As
the Company has not recorded income tax benefits for
F-9
<PAGE> 79
EXACTIS.COM, INC.
Notes to Financial Statements -- (Continued)
net operating loss carryforwards, no income taxes were allocated to
discontinued operations. Revenue of the InfoBeat publishing business for
the period from inception to December 31, 1996 and the years ended December
31, 1997 and 1998 was $0, $496,099 and $1,957,700, respectively, which
amounts are included in loss from discontinued operations in the
accompanying statements of operations. The net assets specifically used in
the InfoBeat publishing business were not significant at December 31, 1998.
(3) PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(A) PREFERRED STOCK
The Company has four classes of preferred stock outstanding (Series A,
Series B, Series C and Series D) in addition to common stock. All
preferred shares are convertible at any time, at the option of the
holder, or in the case of an initial public offering meeting certain
offering price requirements, into an equal number of shares of common
stock, subject to adjustment for dilution that may occur from future
equity transactions. All preferred shares have voting rights on an as-
converted basis and have liquidation preferences equal to the face
amount of preferred shares sold.
The Series B, Series C and Series D Preferred Stock are subject to
mandatory redemption by the Company at $3.00, $4.00 and $5.08 per share,
respectively, as specified below:
<TABLE>
<CAPTION>
PERCENTAGE OF REMAINING
REDEMPTION DATE SHARES TO BE REDEEMED
- --------------- -----------------------
<S> <C>
July 31, 2003........................................... 33 1/3%
July 31, 2004........................................... 50%
July 31, 2005........................................... 100%
</TABLE>
The Series A preferred shares are not redeemable.
(B) WARRANTS
In April 1997, the Company issued warrants to purchase 46,666 shares of
Series B preferred stock at $3.00 per share in connection with the
issuance of notes payable to a bank. The warrants expire in 2007 and at
December 31, 1998, all of the warrants were exercisable. The fair value
of the warrants at the date of issuance was recorded as deferred
financing costs and is being amortized to interest expense over the term
of the notes using the interest method.
In June 1997, the Company issued warrants to purchase 75,000 shares of
Series C preferred stock at $4.00 per share in connection with a bridge
financing. The warrants expire in 2001 and at December 31, 1998, all of
the warrants were exercisable. The fair value of the warrants at the
date of issuance was recognized as interest expense in 1997.
In July 1997, the Company issued warrants to purchase 210,917 shares of
Series C preferred stock at $4.00 per share in connection with the
issuance of Series C preferred stock. The warrants expire in 2001 and at
December 31, 1998, all of the warrants were exercisable. The fair value
of the warrants at the date of issuance was separately recorded as
warrants for the purchase of mandatorily redeemable preferred stock and
as a reduction in the Series C preferred stock balance.
In July 1997, the Company issued warrants to purchase 425,000 shares of
Series C preferred stock at $6.00 per share in connection with a
marketing agreement. Vesting of the warrants is contingent upon the
recipient meeting certain performance requirements under the agreement.
F-10
<PAGE> 80
EXACTIS.COM, INC.
Notes to Financial Statements -- (Continued)
The warrants expire in 2000 and at December 31, 1998, 63,750 of the
warrants were exercisable. The fair value of the warrants is being
recognized as marketing and sales expense over the term of the
agreement, based on management's periodic estimate of the number of
warrants which will ultimately vest under the agreement. Such estimate
was adjusted in 1998 and the Company recorded an additional $70,223 of
deferred marketing expense. At June 30, 1999, 170,000 warrants were
vested and exercisable.
In December 1998, the Company issued warrants to purchase 600,000 shares
of Series D preferred stock in connection with the service arrangement
described in note 2. The exercise price per share is the greater of
$6.00 per share or the price per share that is received in a qualified
financing prior to performance requirements being met. Vesting of the
warrants is contingent upon the recipient meeting certain performance
requirements under the agreement. The warrants expire in 2003 and at
June 30, 1999 and December 31, 1998, none of the warrants were
exercisable. The fair value of the warrants is being recognized as
marketing and sales expense at the time performance requirements are
met.
(C) STOCK OPTIONS
In 1996 and 1997, the Company adopted stock option plans (the 1996 Plan
and the 1997 Plan) pursuant to which the Company's Board of Directors
may grant incentive stock options and non-qualified stock options to
employees, directors and consultants. The 1996 Plan and the 1997 Plan
authorize grants of options to purchase up to an aggregate of 1,600,000
shares of authorized but unissued common stock. Options forfeited under
the 1996 Plan are available for grant under the 1997 Plan. Stock options
are granted with an exercise price equal to the stock's fair market
value at the date of grant as determined by the Company's Board of
Directors. Incentive stock options have ten-year terms and generally
vest 25% one year from the grant date with the remainder vesting on a
pro-rata basis over 36 months. Non-qualified stock options have ten-year
terms and generally vest over periods up to four years from the grant
date.
At December 31, 1998, 587,081 shares were available for grant under the
Plans. The per share weighted-average fair value of stock options
granted during 1996, 1997 and 1998 was $0.10, $0.33 and $0.41,
respectively, on the date of grant using the Black Scholes
option-pricing model with the following weighted-average assumptions: no
volatility or dividends, risk-free interest rate of 6%, and an expected
life of 2 years.
The Company utilizes APB Opinion No. 25 in accounting for its Plans and,
accordingly, since the Company generally grants options at fair value,
no compensation cost was recognized for stock options in the
accompanying financial statements in 1996, 1997 and 1998. In May, 1999,
658,000 stock options were granted with exercise prices less than fair
market value, resulting in total compensation expense to be recognized
over the vesting period of $1,855,560, $707,115 of which was recognized
in the six months ended June 30, 1999. If the Company determined
compensation cost based on the fair value of the options at the grant
date under SFAS No. 123, the Company's net loss would have been
approximately $3,413,000, $7,714,000 and $4,540,000 in 1996, 1997 and
1998, respectively.
F-11
<PAGE> 81
EXACTIS.COM, INC.
Notes to Financial Statements -- (Continued)
The following table summarizes stock option activity from inception
(January 30, 1996) to June 30, 1999:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balances at inception.............................. -- $ --
Granted.......................................... 619,643 .93
Forfeited........................................ (3,500) .89
---------
Balance at December 31, 1996....................... 616,143 .93
Exercised........................................ (1,000) 1.25
Granted.......................................... 657,160 2.88
Forfeited........................................ (378,667) 1.14
---------
Balance at December 31, 1997....................... 893,636 1.71
Exercised........................................ (8,053) 1.25
Granted.......................................... 513,065 3.74
Forfeited........................................ (385,729) 2.04
---------
Balance at December 31, 1998....................... 1,012,919 3.05
Granted.......................................... 956,000 2.38
Forfeited........................................ (544,496) 3.13
---------
Balances at June 30, 1999 (unaudited).............. 1,424,423 2.57
=========
</TABLE>
At December 31, 1998, the range of exercise prices of outstanding
options was $0.75 to $4.32 and the remaining contractual life of
outstanding options was 8.71 years. At December 31, 1998, 291,284
incentive options and 75,043 non-qualified options were exercisable.
The following table summarizes information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- --------------------------------------------------- -----------------------
WEIGHTED NUMBER
RANGE AVERAGE WEIGHTED EXERCISABLE WEIGHTED
OF REMAINING AVERAGE AS OF AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICES OUTSTANDING LIFE PRICE 1998 PRICE
- ------------ ----------- ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$.75 -- 1.25 165,693 7.74 $1.20 100,395 $1.20
3.00 -- 3.40 689,810 8.72 3.21 247,016 3.13
4.32 157,416 9.69 4.32 18,916 4.32
--------- -------
1,012,919 8.71 3.05 366,327 2.66
========= =======
</TABLE>
F-12
<PAGE> 82
EXACTIS.COM, INC.
Notes to Financial Statements -- (Continued)
(4) INCOME TAXES
Income tax benefit relating to losses from continuing operations for the
period and years ended December 31 differs from the amounts that would
result from applying the federal statutory rate of 34% as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
Expected tax benefit....................................... $(1,354,284) $(1,883,575)
State income taxes, net of federal benefit................. (78,867) (109,691)
Change in valuation allowance for deferred tax assets...... 1,505,151 2,028,266
Other, net................................................. (72,000) (35,000)
----------- -----------
Actual income tax benefit.................................. $ -- $ --
=========== ===========
</TABLE>
No tax benefit was recorded by the Company for the six months ended June
30, 1999 due to net operating losses and an increase in the valuation
allowance for deferred tax assets.
Temporary differences that give rise to the components of deferred tax
assets as of December 31 are as follows:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Net operating loss carryforwards........................... $ 3,665,164 $ 4,372,641
Receivables due to allowance for doubtful accounts for tax
purposes only............................................ 27,771 27,771
Deferred revenue........................................... -- 1,138,453
Equipment and leasehold improvements due to differences in
depreciation............................................. (4,938) 71,082
Accrued expenses........................................... 22,203 78,692
Other, net................................................. -- 49,827
----------- -----------
Gross deferred tax asset......................... 3,710,200 5,738,466
Valuation allowance........................................ (3,710,200) (5,738,466)
----------- -----------
Net deferred tax asset........................... $ -- $ --
=========== ===========
</TABLE>
At December 31, 1998, the Company had a net operating loss carryforward for
federal income tax purposes of approximately $11.8 million, which is
available to offset future federal taxable income, if any, through 2018.
Management believes the utilization of the carryforwards will be limited by
Internal Revenue Code Section 382 relating to changes in ownership, as
defined.
Due to the uncertainty regarding the realization of the deferred tax assets
relating to the net operating loss carryforwards and other temporary
differences, a valuation allowance has been recorded for the entire amount
of the Company's deferred tax asset at December 31, 1997 and 1998 and June
30, 1999.
F-13
<PAGE> 83
EXACTIS.COM, INC.
Notes to Financial Statements -- (Continued)
(5) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1997 1998 1999
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
14.0% note, payable in monthly installments of
$31,669, including interest, with final payment
of $75,000 due March 1, 2000; secured by
computer equipment............................. $ 796,513 $ 502,994 $ 340,709
12.5% note, payable in monthly installments of
$12,815, including interest, with final payment
of $30,622 due October 1, 2000; secured by
computer equipment and furniture............... 388,056 276,148 214,735
12.5% note, payable in monthly installments of
$3,585, including interest, with final payment
of $8,577 due December 1, 2000; secured by
computer equipment............................. 114,366 82,830 65,976
12.3% note, payable in monthly installments of
$3,487, including interest with final payment
of $8,359 due May 1, 2001...................... -- 93,631 78,013
12.3% note, payable in monthly installments of
$11,454, including interest, with final payment
of $27,442 due August 1, 2001.................. -- 331,874 279,727
---------- ---------- ---------
1,298,935 1,287,477 979,160
Less current portion................... (482,506) (677,777) (679,060)
---------- ---------- ---------
Long-term debt, excluding current
portion.............................. $ 816,429 $ 609,700 $ 300,100
========== ========== =========
</TABLE>
The above notes payable are included in a bank financing agreement. The
aggregate maturities for long-term debt for each of the years subsequent to
December 31, 1998 are as follows: 1999 -- $677,777; 2000 -- $496,938 and
2001 -- $112,762.
In June 1997, the Company borrowed $2.0 million in the form of convertible
subordinated promissory notes with an interest rate of 12%, which amount
was converted to Series C preferred stock in July 1997.
F-14
<PAGE> 84
EXACTIS.COM, INC.
Notes to Financial Statements -- (Continued)
(6) COMMITMENTS AND CONTINGENCIES
(A) LEASES
The Company leases office facilities under an operating lease agreement
which expires in 2001. Additionally, the Company has leased $62,043 of
computer equipment under capital leases. Future minimum lease payments
as of December 31, 1998, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASE
------- ---------
<S> <C> <C>
1999...................................................... $8,260 $175,176
2000...................................................... -- 175,176
2001...................................................... -- 175,176
------ --------
Total future minimum lease payments............. 8,260 $525,528
========
Less amount representing interest......................... (204)
------
Present value of future minimum lease payments--
current....................................... $8,056
======
</TABLE>
Rent expense for the period from inception (January 30, 1996) to
December 31, 1996, the years ended December 31, 1997 and 1998 and the
six months ended June 30, 1999 was $57,300, $152,461, $167,862 and
$88,107, respectively.
(B) EMPLOYEE BENEFIT PLAN
During 1996, the Company established a 401(k) plan that allows eligible
employees to contribute up to 15% of their compensation up to a maximum
amount provided by the Internal Revenue Code. The Company may make
discretionary contributions to the 401(k) plan. The Company has made no
contributions to the Plan since inception.
(C) LITIGATION
The Company is subject to litigation and claims incidental to its
business. While it is not feasible to predict or determine the financial
outcome of these matters, management does not believe that the ultimate
resolution of these matters will result in a significant adverse effect
on the Company's financial position, results of operations or liquidity.
(7) SIGNIFICANT CUSTOMERS
Revenue from continuing operations attributable to significant customers
(as a percentage of total revenue from continuing operations) in 1997, 1998
and 1999 was as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, SIX MONTHS
------------- ENDED JUNE 30,
1997 1998 1999
----- ----- --------------
(UNAUDITED)
<S> <C> <C> <C>
Customer A................................................. -- -- 62%
Customer B................................................. 100% 6% --
Customer C................................................. -- 18% 5%
Customer D................................................. -- 11% 3%
</TABLE>
F-15
<PAGE> 85
EXACTIS.COM, INC.
Notes to Financial Statements -- (Continued)
(8) SUBSEQUENT EVENTS
On July 15, 1999, the Company issued 630,738 shares of Series E redeemable
preferred stock, and warrants to purchase 94,608 shares of Series E
redeemable preferred stock, for proceeds of approximately $4.1 million. On
August 13, 1999, the Company issued 726,546 additional shares of Series E
redeemable preferred stock, and additional warrants to purchase 108,978
shares of Series E redeemable preferred stock, for proceeds of
approximately $4.7 million. The Series E preferred shares have similar
rights and obligations as the Series B, C and D redeemable preferred stock
(see note 3). The warrants have an exercise price of $8.00 per share and
expire in July 2004.
F-16
<PAGE> 86
PROSPECTUS
[EXACTIS.COM LOGO]
Shares
Common Stock
THOMAS WEISEL PARTNERS LLC
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
WIT CAPITAL CORPORATION
<PAGE> 87
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 the
underwriting discount and commissions, payable by us in connection with the sale
of the common stock being registered hereby. All amounts shown are estimates,
except the Securities and Exchange Commission registration fee, the NASD filing
fee and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 15,985.00
NASD filing fee............................................. 6,250.00
Nasdaq National Market listing application fee.............. 5,000.00
Blue Sky fees and expenses.................................. 10,000.00
Printing and engraving expenses............................. 175,000.00
Legal fees and expenses..................................... 300,000.00
Accounting fees and expenses................................ 100,000.00
Transfer agent and registrar fees........................... 10,000.00
Miscellaneous expenses...................................... 27,765.00
-----------
Total.................................................. 650,000.00
===========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our bylaws provide that we will indemnify our directors, officers,
employees and agents to the fullest extent permitted by Delaware law. In
addition, our certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, our directors will not be liable for monetary damages
for breach of the directors' fiduciary duty to us and our stockholders. This
provision of the certificate of incorporation does not eliminate the duty of
care. In appropriate circumstances equitable remedies such as an injunction or
other forms of non-monetary relief are available under Delaware law. This
provision also does not affect a director's responsibilities under any other
laws, such as the federal securities laws.
Each director will continue to be subject to liability for:
- breach of the director's duty of loyalty to Exactis.com;
- acts or omissions not in good faith or involving intentional misconduct;
- knowing violations of law;
- any transaction from which the director derived an improper personal
benefit;
- improper transactions between the director and Exactis.com; and
- improper distributions to stockholders and improper loans to directors
and officers.
We intend to enter into indemnity agreements with each of our directors and
executive officers under which each director and executive officer will be
indemnified against expenses and losses incurred for claims brought against them
by reason of their being a director or executive officer of Exactis.com. Our
board of directors has authorized the officers of Exactis.com to investigate and
obtain directors' and officers' liability insurance.
There is no pending litigation or proceeding involving a director or
officer of Exactis.com as to which indemnification is being sought. We are not
aware of any pending or threatened litigation that may result in claims for
indemnification by any director or officer.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and control persons
of Exactis.com pursuant to the foregoing provisions, or
II-1
<PAGE> 88
otherwise, Exactis.com has been advised that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act of
1933, and is, therefore, unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Described below is information regarding all securities that have been
issued by us during the past three years.
On various dates between August 1996 and August 1999, we issued an
aggregate of 12,058 shares of its common stock to 11 employees pursuant to the
exercise of options granted under its stock options. The exercise prices per
share range from $0.75 to $1.25, for aggregate consideration of $14,988. We
relied on the exemption provided by Rule 701 of the Securities Act.
On July 15, 1999, we issued an aggregate of 630,738 shares of our Series E
preferred stock at a purchase price of $6.50 per share and warrants to purchase
up to 94,608 shares of Series E preferred stock at an exercise price of $8.00
per share to nine accredited investors for cash proceeds in the aggregate amount
of $4.1 million. In a second closing held on August 13, 1999, we issued an
additional 726,546 shares of our Series E preferred stock at a purchase price of
$6.50 per share and warrants to purchase up to 108,978 shares of Series E
preferred stock at an exercise price of $8.00 per share to twenty-nine
accredited investors for cash proceeds in the aggregate amount of $4.7 million.
We relied on the exemption provided by Rule 506 of Regulation D under the
Securities Act.
On December 30, 1998, we issued a warrant to purchase an aggregate of
600,000 shares of our Series D preferred stock at an exercise price of $6.00 per
share to one accredited investor in connection with our sale of certain assets.
We relied on the exemption provided by Rule 506 of Regulation D under the
Securities Act.
On June 8, 1998, we issued an aggregate of 625,001 shares of our Series D
preferred stock to eight accredited investors at a purchase price of $5.08 per
share for cash proceeds in the aggregate amount of $3.2 million. We relied on
the exemption provided by Rule 506 of Regulation D under the Securities Act.
On July 24, 1997, we issued an aggregate of 1,911,533 shares of our Series
C preferred stock at a purchase price of $4.00 per share and warrants to
purchase up to 210,917 shares of Series C preferred stock at an exercise price
of $4.00 per share to six accredited investors for cash proceeds in the
aggregate amount of $7.6 million. We relied on the exemption provided by Rule
506 of Regulation D under the Securities Act.
On July 24, 1997, we issued a warrant to purchase an aggregate of 425,000
shares of our Series C preferred stock at an exercise price of $6.00 per share
to one accredited investor in connection with a marketing agreement. We relied
on the exemption provided by Rule 506 of Regulation D under the Securities Act.
On June 20, 1997, we issued convertible promissory notes in the aggregate
principal amount of $2.0 million bearing simple interest at a rate of 12.0% per
annum and warrants to purchase up to 75,000 shares of Series C preferred stock
at an exercise price of $4.00 per share to five accredited investors for cash
proceeds in the aggregate amount of $2.0 million. We relied on the exemption
provided by Rule 506 of Regulation D under the Securities Act.
In connection with a Loan and Security Agreement dated March 27, 1997, we
issued warrants to two lenders to purchase up to an aggregate of 46,666 shares
of Series B preferred stock at an exercise price of $3.00 per share. We relied
on the exemption provided by Rule 506 of Regulation D under the Securities Act.
On July 22, 1996, we issued an aggregate of 1,416,666 shares of our Series
B preferred stock to three accredited investors at a purchase price of $3.00 per
share. On September 19, 1996, we issued 440,000 shares of Series B preferred
stock to an additional accredited investor at a purchase price of $3.00 per
share. On November 27, 1996, we issued 666,667 shares of Series B preferred
stock to an additional accredited investor at a purchase price of $3.00 per
share. The Company received cash proceeds
II-2
<PAGE> 89
from the issuance of Series B preferred stock in the aggregate amount of $7.6
million. We relied on the exemption provided by Rule 506 of Regulation D under
the Securities Act.
The recipients of the above-described securities represented their
intention to acquire the securities for investment only and not with a view for
distribution thereof. Appropriate legends were affixed to the stock certificates
issued in such transactions. All recipients had adequate access, through
employment or other relationships, to information about Exactis.com.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1* -- Form of Underwriting Agreement.
3.1 -- Restated Certificate of Incorporation of Exactis.com.
3.2* -- Certificate of Amendment to Restated Certificate of
Incorporation of Exactis.com.
3.3 -- Form of Restated Certificate of Incorporation of
Exactis.com to become effective upon the closing of this
offering.
3.4 -- Bylaws of Exactis.com.
3.5 -- Amended and Restated Bylaws of Exactis.com to become
effective upon the closing of this offering.
4.1 -- Reference is made to Exhibits 3.1 through 3.4.
4.2* -- Specimen stock certificate representing shares of common
stock of Exactis.com.
5.1* -- Opinion of Cooley Godward LLP regarding the legality of
the securities being registered.
10.1 -- 1996 Stock Option Plan of Exactis.com.
10.2* -- 1997 Stock Option Plan of Exactis.com.
10.3 -- 1999 Equity Incentive Plan of Exactis.com.
10.4 -- 1999 Employee Stock Purchase Plan of Exactis.com.
10.5 -- Third Amended and Restated Stockholders' Agreement, among
Exactis.com and certain of its stockholders, dated July
15, 1999.
10.6 -- Form of Indemnity Agreement to be entered into between
Exactis.com and each of its directors and executive
officers.
10.7 -- Sublease Agreement, between Exactis.com and Atlantic
Richfield Company, as amended, dated August 7, 1996.
10.8 -- Series A Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated February 14, 1996 and March 15, 1996.
10.9 -- Series B Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated July 22, 1996 September 19, 1996 and November 27,
1996.
10.10 -- Series C Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated July 24, 1997.
10.11 -- Series D Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated June 8, 1998.
10.12 -- Series E Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated July 15, 1999.
10.13*+ -- Asset Purchase Agreement, between Exactis.com and Sony
Music, a Group of Sony Music Entertainment Inc., dated
December 15, 1998.
</TABLE>
II-3
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.14*+ -- Service Bureau Agreement, between Exactis.com and Sony
Music, a Group of Sony Music Entertainment Inc., dated
January 1, 1999.
10.15 -- Form of Series B Preferred Stock Warrant.
10.16 -- Form of Series C Preferred Stock Warrant.
10.17 -- Form of Series C Preferred Stock Warrant issued to
American Express on July 24, 1997.
10.18 -- Form of Series D Preferred Stock Warrant.
10.19 -- Form of Series E Preferred Stock Warrant.
23.1* -- Consent of Cooley Godward LLP (included in Exhibit 5.1).
23.2 -- Consent of KPMG LLP.
24.1 -- Powers of attorney (included on Page II-5).
27 -- Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment will be requested with respect to portions of these
exhibits.
(B) FINANCIAL STATEMENT SCHEDULES.
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by 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 Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the 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 of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 91
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Denver,
County of Denver, State of Colorado, on August 16, 1999.
By: /s/ E. THOMAS DETMER, JR.
----------------------------------
E. Thomas Detmer, Jr.
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints E. Thomas Detmer, Jr. and Kenneth W.
Edwards, Jr. and each of them, as his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments, exhibits thereto and other
documents in connection therewith) to this Registration Statement and any
subsequent registration statement filed by the registrant pursuant to Rule
462(b) of the Securities Act of 1933, as amended, which relates to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ADAM GOLDMAN Chairman of the Board of August 16, 1999
- ----------------------------------------------------- Directors
Adam Goldman
/s/ E. THOMAS DETMER, JR. President, Chief Executive August 16, 1999
- ----------------------------------------------------- Officer and Director
E. Thomas Detmer, Jr. (Principal Executive Officer)
/s/ KENNETH W. EDWARDS, JR. Chief Financial Officer, August 16, 1999
- ----------------------------------------------------- Secretary and Treasurer
Kenneth W. Edwards, Jr. (Principal Financial and
Accounting Officer)
/s/ PIERRIC D. BECKERT Director August 16, 1999
- -----------------------------------------------------
Pierric D. Beckert
/s/ LINDA FAYNE LEVINSON Director August 16, 1999
- -----------------------------------------------------
Linda Fayne Levinson
/s/ DAVID D. WILLIAMS Director August 16, 1999
- -----------------------------------------------------
David D. Williams
</TABLE>
II-5
<PAGE> 92
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1* -- Form of Underwriting Agreement.
3.1 -- Restated Certificate of Incorporation of Exactis.com.
3.2* -- Certificate of Amendment to Restated Certificate of
Incorporation of Exactis.com.
3.3 -- Form of Restated Certificate of Incorporation of
Exactis.com to become effective upon the closing of this
offering.
3.4 -- Bylaws of Exactis.com.
3.5 -- Amended and Restated Bylaws of Exactis.com to become
effective upon the closing of this offering.
4.1 -- Reference is made to Exhibits 3.1 through 3.4.
4.2* -- Specimen stock certificate representing shares of common
stock of Exactis.com.
5.1* -- Opinion of Cooley Godward LLP regarding the legality of
the securities being registered.
10.1 -- 1996 Stock Option Plan of Exactis.com.
10.2* -- 1997 Stock Option Plan of Exactis.com.
10.3 -- 1999 Equity Incentive Plan of Exactis.com.
10.4 -- 1999 Employee Stock Purchase Plan of Exactis.com.
10.5 -- Third Amended and Restated Stockholders' Agreement, among
Exactis.com and certain of its stockholders, dated July
15, 1999.
10.6 -- Form of Indemnity Agreement to be entered into between
Exactis.com and each of its directors and executive
officers.
10.7 -- Sublease Agreement, between Exactis.com and Atlantic
Richfield Company, as amended, dated August 7, 1996.
10.8 -- Series A Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated February 14, 1996 and March 15, 1996.
10.9 -- Series B Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated July 22, 1996 September 19, 1996 and November 27,
1996.
10.10 -- Series C Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated July 24, 1997.
10.11 -- Series D Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated June 8, 1998.
10.12 -- Series E Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated July 15, 1999.
10.13*+ -- Asset Purchase Agreement, between Exactis.com and Sony
Music, a Group of Sony Music Entertainment Inc., dated
December 15, 1998.
10.14*+ -- Service Bureau Agreement, between Exactis.com and Sony
Music, a Group of Sony Music Entertainment Inc., dated
January 1, 1999.
10.15 -- Form of Series B Preferred Stock Warrant.
10.16 -- Form of Series C Preferred Stock Warrant.
10.17 -- Form of Series C Preferred Stock Warrant issued to
American Express on July 24, 1997.
10.18 -- Form of Series D Preferred Stock Warrant.
</TABLE>
<PAGE> 93
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.19 -- Form of Series E Preferred Stock Warrant.
23.1* -- Consent of Cooley Godward LLP (included in Exhibit 5.1).
23.2 -- Consent of KPMG LLP.
24.1 -- Powers of attorney (included on Page II-5).
27 -- Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment will be requested with respect to portions of these
exhibits.
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
EXACTIS.COM, INC.
EXACTIS.COM, INC., a Delaware corporation, hereby certifies as follows:
1. The original name of the Corporation was Mercury Mail, Inc., and its
current name is Exactis.com, Inc. The original Certificate of Incorporation of
the Corporation was filed with the Delaware Secretary of State on July 17, 1996.
2. This Restated Certificate of Incorporation amends and restates the
provisions of the Certificate of Incorporation of the Corporation and has been
duly adopted in accordance with Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware.
3. The text of the Certificate of Incorporation of the Corporation is
hereby amended and restated to read in its entirety as follows:
ARTICLE ONE
The name of the corporation is Exactis.com, Inc. (the "CORPORATION" or
the "COMPANY").
ARTICLE TWO
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware 19805. The name of its
registered agent at such address is The Prentice-Hall Corporation System, Inc.
ARTICLE THREE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE FOUR
The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is twenty-six million
(26,000,000) shares, fifteen million (15,000,000) shares of which shall be
Common Stock (the "COMMON STOCK"), $.01 par value per share, and eleven million
(11,000,000) shares of which shall be Preferred Stock, $.01 par value per share
(the "PREFERRED STOCK").
DESIGNATION OF PREFERRED STOCK
Eight hundred eighty thousand (880,000) of the authorized shares of
Preferred Stock are hereby designated "Series A Preferred Stock" (the "SERIES A
PREFERRED"), two million five
2.
<PAGE> 2
hundred seventy thousand (2,570,000) of the authorized shares of Preferred Stock
are hereby designated "Series B Preferred Stock" (the "SERIES B PREFERRED"),
three million five hundred fifty thousand (3,550,000) of the authorized shares
of Preferred Stock are hereby designated "Series C Preferred Stock" (the "SERIES
C PREFERRED"), one million three hundred thousand (1,300,000) of the authorized
shares of Preferred Stock are hereby designated "Series D Preferred Stock" (the
"SERIES D PREFERRED"), and two million five hundred thousand (2,500,000) of the
authorized shares of Preferred Stock are hereby designated "Series E Preferred
Stock" (the "SERIES E PREFERRED"). The relative rights, preferences privileges,
restrictions and other matters relating to the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred
(hereinafter collectively referred to as the "PREFERRED STOCK") are as follows:
1. DIVIDEND RIGHTS.
a. Holders of Preferred Stock, in preference to the holders of
Common Stock and any other stock of the Corporation that is not by its terms
expressly senior in right of payment to the Preferred Stock (collectively,
"JUNIOR STOCK"), shall be entitled to receive dividends if, when and as declared
by the Corporation's Board of Directors, but only out of funds that are legally
available therefor. In the event that the Corporation declares or pays any
dividends upon the Common Stock (whether payable in cash, securities or other
property) other than dividends payable solely in shares of Common Stock, the
Corporation shall also declare and pay to the holders of the Preferred Stock, at
the same time that it declares and pays such dividends to the holders of the
Common Stock, the dividends which would have been declared and paid with respect
to the Common Stock issuable upon conversion of the Preferred Stock had all of
the outstanding Preferred Stock been converted immediately prior to the record
date for such dividend, or if no record date is fixed, the date as of which the
record holders of Common Stock entitled to such dividends are to be determined.
No dividends shall be paid on the Series A Preferred, Series B Preferred, Series
C Preferred, Series D Preferred or Series E Preferred unless equivalent
dividends (determined on an as-converted basis) are concurrently paid on the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred.
b. So long as any Preferred Stock remains outstanding, without the
prior written consent of the holders of a majority in interest of the
outstanding shares of Preferred Stock, voting together as a separate class with
each holder of Preferred Stock entitled to a number of votes equal to the number
of whole shares of Common Stock issuable upon conversion of the aggregate number
of shares of Preferred Stock held by such holder (the "REQUIRED HOLDERS"), the
Corporation shall not, nor shall it permit any Subsidiary to, directly or
indirectly redeem, purchase or otherwise acquire any Junior Stock, nor shall the
Corporation directly or indirectly pay or declare any dividend or make any
distribution upon any Junior Stock. The provisions of this Section l(b) shall
not, however, apply to (i) the acquisition of shares of any Junior Stock solely
in exchange for shares of any other Junior Stock, (ii) the payment of cash
dividends on the Common Stock to the extent that equivalent dividends are paid
on the Preferred Stock as provided above, or (iii) any repurchase of any vested
Reserved Employee Stock from former employees, directors or consultants in
connection with termination of employment or service as a director or consultant
pursuant to contractual repurchase rights or that is otherwise approved by the
Corporation's Board of Directors.
2.
<PAGE> 3
2. VOTING RIGHTS.
a. GENERALLY. Except as otherwise provided herein or as required
by law, the Preferred Stock shall vote with the shares of the Common Stock of
the Corporation (and not as a separate class) at any annual or special meeting
of stockholders of the Corporation, and may act by written consent in the same
manner as the Common Stock, in either case upon the following basis: each holder
of shares of Preferred Stock shall be entitled to such number of votes as shall
be equal to the whole number of shares of Common Stock into which such holder's
aggregate number of shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred are convertible (pursuant
to Section 5 below) on the record date fixed for such meeting or the effective
date of such written consent.
b. ELECTION OF DIRECTORS. In each election of directors of the
Corporation, the holders of the Preferred Stock, voting together as a separate
class with each holder of Preferred Stock entitled to a number of votes equal to
the number of whole shares of Common Stock issuable upon conversion of the
aggregate number of shares of Preferred Stock held by such holder, shall be
entitled to elect four (4) directors (the "INVESTOR DIRECTORS") to serve on the
Corporation's Board of Directors until such persons' successors are duly elected
by the holders of the Preferred Stock or such persons are removed from office by
the holders of the Preferred Stock. If the holders of the Preferred Stock for
any reason fail to elect a director to fill any such directorship, such position
shall remain vacant until such time as the holders of the Preferred Stock elect
a director to fill such position and shall not be filled by resolution or vote
of the Corporation's Board of Directors or the Corporation's other stockholders.
During the existence of an Event of Noncompliance and for a period of six (6)
months after such Event of Noncompliance has been cured or waived, the directors
elected by the holders of Preferred Stock shall be deemed to constitute a
separate class of directors of the Corporation within the meaning of Section
141(d) of the Delaware General Corporation Law, and such directors shall
together be entitled to cast a number of votes on each matter considered by the
Board of Directors (including for purposes of determining the existence of a
quorum) equal to the sum of the number of votes entitled to be cast by all other
members of the Board of Directors plus one.
c. CLASS VOTE REQUIREMENT. Without the affirmative vote of the
Required Holders, the Corporation will not (i) create, issue or authorize the
issuance of any additional Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred or any other capital stock
of the Corporation that is senior to or pari passu with the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E Preferred
with respect to the payment of dividends, redemptions or payments in connection
with the liquidation of the Corporation, (ii) engage in any merger,
consolidation, recapitalization, liquidation or sale of substantial assets
outside the ordinary course of business, (iii) engage in any acquisition of
substantial assets outside the ordinary course of business or engage in any
business other than the business of the Corporation described in the Company's
most recent annual business plan, (iv) increase the amount of Reserved Employee
Stock or (v) engage in any transaction with an affiliate of the Corporation that
is not approved by a majority of the Corporation's disinterested directors. In
addition, the Corporation will not amend its Restated Certificate of
Incorporation or by-laws in a manner that adversely affects the holders of
Series A
3.
<PAGE> 4
Preferred, Series B Preferred or Series E Preferred without the affirmative vote
of the holders of two-thirds of the shares of the affected series of Preferred
Stock.
d. SERIES C AND SERIES D RIGHTS. In addition to any other rights
provided by law, so long as any Series C Preferred and/or Series D Preferred
shall be outstanding, the Corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of not less than a majority,
or, if two or more of the original holders of the Series C Preferred who
purchased such Series C Preferred in the initial closing in July 1997 vote
against or withhold their consent to such proposed action, sixty-six and
two-thirds percent (662/3%), of the outstanding shares of Series C Preferred and
Series D Preferred, voting together as a single class separate from the Common
Stock and other series of Preferred Stock of the Corporation:
(i) Amend or repeal any provision of, or add any provision
to, the Corporation's Certificate of Incorporation or Bylaws which adversely
affects any of the rights of the holders of the Series C Preferred or Series D
Preferred or which changes the number of authorized directors of the
Corporation;
(ii) Authorize or issue, or obligate itself to issue, shares
of any class or series of stock that is senior to or pari passu with the Series
C Preferred or Series D Preferred with respect to dividends, redemption,
liquidation preference, voting or other rights of the Series C Preferred or
Series D Preferred ("SENIOR PREFERRED"), or authorize or issue, or obligate
itself to issue, shares of stock of any class or series or any bonds,
debentures, notes or other obligations convertible into or exchangeable for, or
having option rights to purchase, any shares of Senior Preferred;
(iii) Reclassify any class or series of any securities of the
Corporation into shares that have rights that are senior to or pari passu with
the Series C Preferred or Series D Preferred with respect to dividends,
redemption, liquidation preference, voting or other rights of the Series C
Preferred or Series D Preferred;
(iv) Apply any of its assets to the redemption, retirement,
purchase or acquisition, directly or indirectly, through affiliates or
otherwise, of any shares of any class or series of Preferred Stock or Common
Stock, except (A) by redemption in accordance with Section 4 hereof but in no
event prior to the scheduled date of redemption of the Series C Preferred or
Series D Preferred; (B) by conversion in accordance with Section 5 hereof; or
(C) by repurchase from former employees, advisors, officers, directors or
consultants of the Corporation if a majority of the directors elected by holders
of the Preferred Stock approves such repurchase; or
(v) Pay or declare any dividend on the Common Stock.
3. LIQUIDATION RIGHTS.
a. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of any Junior Stock or the holders of
Series A Preferred, Series B Preferred, Series C Preferred or
4.
<PAGE> 5
Series D Preferred, the holders of Series E Preferred shall be entitled to be
paid out of the assets of the Corporation an amount with respect to each share
of Series E Preferred equal to the sum of $6.50, as appropriately adjusted for
any future stock splits, stock combination, stock dividends or similar
transactions affecting the Series E Preferred (the "ORIGINAL SERIES E ISSUE
PRICE"), plus all declared but unpaid dividends thereon (the "SERIES E
LIQUIDATION VALUE").
b. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of any Junior Stock, (i) the holders of
Series A Preferred shall be entitled to be paid out of the assets of the
Corporation an amount with respect to each share of Series A Preferred equal to
the sum of $1.25, as appropriately adjusted for any future stock splits, stock
combination, stock dividends or similar transactions affecting the Series A
Preferred (the "ORIGINAL SERIES A ISSUE PRICE"), plus all declared but unpaid
dividends thereon (the "SERIES A LIQUIDATION VALUE"), (ii) the holders of Series
B Preferred shall be entitled to be paid out of the assets of the Corporation an
amount with respect to each share of Series B Preferred equal to the sum of
$3.00, as appropriately adjusted for any future stock splits, stock combination,
stock dividends or similar transactions affecting the Series B Preferred (the
"ORIGINAL SERIES B ISSUE PRICE"), plus all declared but unpaid dividends thereon
(the "SERIES B LIQUIDATION VALUE"), (iii) the holders of Series C Preferred
shall be entitled to be paid out of the assets of the Corporation an amount with
respect to each share of Series C Preferred equal to the sum of $4.00, as
appropriately adjusted for any future stock splits, stock combination, stock
dividends or similar transactions affecting the Series C Preferred (the
"ORIGINAL SERIES C ISSUE PRICE"), plus all declared but unpaid dividends thereon
(the "SERIES C LIQUIDATION VALUE"), and (iv) the holders of Series D Preferred
shall be entitled to be paid out of the assets of the Corporation an amount with
respect to each share of Series D Preferred equal to the sum of $5.08, as
appropriately adjusted for any future stock splits, stock combination, stock
dividends or similar transactions affecting the Series D Preferred (the
"ORIGINAL SERIES D ISSUE PRICE"), plus all declared but unpaid dividends thereon
(the "SERIES D LIQUIDATION VALUE"). The Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred shall rank on a parity as to the
receipt of the respective preferential amounts for each such series.
c. After the payment of the full liquidation preference of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred as set forth in Sections 3(a) and (b) above, the
remaining assets of the Corporation legally available for distribution, if any,
shall be distributed to the holders of Junior Stock entitled to a preference
over the Common Stock and, thereafter, to the holders of Common Stock. The
holders of Preferred Stock shall be entitled to participate in distributions to
holders of the Common Stock such that, giving effect to all distributions
pursuant to Sections 3(a) and (b) and all exercises of Options and conversions
of Convertible Securities effected on or prior to the date on which
distributions are made to holders of Common Stock, the holders of Preferred
Stock receive aggregate distributions equal to the greater of the Series A
Liquidation Value, Series B Liquidation Value, Series C Liquidation Value,
Series D Liquidation Value or Series E Liquidation Value (as applicable) and the
amounts that such holders would have received if the Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred or Series E Preferred (as
applicable) had been converted into Common Stock immediately prior to such
liquidation, dissolution or winding up of the Corporation.
5.
<PAGE> 6
d. At the option of (i) the Required Holders as to all of the
Preferred Stock, (ii) the holders of a majority in interest of the outstanding
shares of Series C Preferred and Series D Preferred, voting together as a
separate class with each holder of Preferred Stock entitled to a number of votes
equal to the number of whole shares of Common Stock issuable upon conversion of
the aggregate number of shares of Preferred Stock held by such holders, as to
the Series C Preferred and Series D Preferred only, or (iii) the holders of a
majority in interest of the outstanding shares of Series E Preferred, voting
together as a separate class with each holder of Preferred Stock entitled to a
number of votes equal to the number of whole shares of Common Stock issuable
upon conversion of the aggregate number of shares of Preferred Stock held by
such holders, as to the Series E Preferred only, the following events shall be
considered a liquidation under Section 3(a): (i) any consolidation or merger of
the Corporation with or into any other corporation or other entity or person, or
any other corporate reorganization, in which the stockholders of the Corporation
immediately prior to such consolidation, merger or reorganization own capital
stock representing less than fifty percent (50%) of the Corporation's voting
power immediately after such consolidation, merger or reorganization, or any
other transaction or series of related transactions in which capital stock
representing in excess of fifty percent (50%) of the Corporation's voting power
is transferred to any single entity or group of related entities (an
"ACQUISITION"); or (ii) a sale, lease or other disposition of all or
substantially all of the assets of the Corporation (an "ASSET TRANSFER").
e. If, upon any liquidation, distribution, or winding up, the
assets of the Company shall be insufficient to make payment in full to the
holders of Series E Preferred of the amounts set forth in Section 3(a) above,
then such assets shall be distributed ratably to the holders of Series E
Preferred at the time outstanding. If, upon any liquidation, distribution, or
winding up, the assets of the Company shall be sufficient to make payment in
full to the holders of Series E Preferred of the amounts set forth in Section
3(a) above, but shall be insufficient to make payment in full to the holders of
Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred of the amounts set forth in Section 3(b) above, then, after payment of
the full amounts set forth in Section 3(a) above, such assets shall be
distributed to the holders of Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred at the time outstanding, ratably in proportion
to the full amounts to which they would otherwise be respectively entitled.
4. REDEMPTION RIGHTS.
a. GENERAL. Except as expressly provided in this Section 4, the
Preferred Stock shall not be redeemable at the option of the Corporation or
otherwise.
b. SCHEDULED REDEMPTIONS. The Corporation shall redeem the
corresponding percentage specified below of the then-outstanding Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred on July
31 of each year, commencing in the year specified below (the "PREFERRED
SCHEDULED REDEMPTION DATES"), at a price per share equal to the Series B
Liquidation Value, Series C Liquidation Value, Series D Liquidation Value or
Series E Liquidation Value (as applicable) in effect on the applicable Scheduled
Redemption Date:
<TABLE>
<CAPTION>
SCHEDULED
SERIES REDEMPTION DATE SPECIFIED PERCENTAGE
------ --------------- --------------------
<S> <C> <C>
Series B, Series C, Series D
and Series E July 31, 2003 33-1/3%
July 31, 2004 50%
July 31, 2005 100%
</TABLE>
6.
<PAGE> 7
c. REDEMPTION PAYMENTS. For each share of Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred that is to be
redeemed hereunder, the Corporation shall be obligated on the Scheduled
Redemption Date to pay to the holder thereof (upon surrender by such holder at
the Corporation's principal office of the certificate representing such share)
an amount in cash equal to the Series B Liquidation Value, Series C Liquidation
Value, Series D Liquidation Value or Series E Liquidation Value (as applicable).
If the funds of the Corporation legally available for redemption of Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred on any
Scheduled Redemption Date are insufficient to redeem the total number of shares
to be redeemed on such date, those funds that are legally available shall be
used to redeem (i) first, the maximum possible number of shares pro rata among
the holders of Series E Preferred to be redeemed based upon the aggregate Series
E Liquidation Value and (ii) then, the maximum possible number of shares pro
rata among the holders of Series B Preferred, Series C Preferred and Series D
Preferred to be redeemed based upon the aggregate Series B Liquidation Value,
Series C Liquidation Value and Series D Liquidation Value (as applicable). At
any time thereafter when additional funds of the Corporation are legally
available for the redemption of Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred, such funds shall immediately be used to redeem
(i) first, the balance of the Series E Preferred shares which the Corporation
has become obligated to redeem on any Scheduled Redemption Date but which it has
not redeemed and (ii) then, the balance of the Series B Preferred, Series C
Preferred and Series D Preferred shares which the Corporation has become
obligated to redeem on any Scheduled Redemption Date but which it has not
redeemed.
d. NOTICE OF REDEMPTION. Except as otherwise provided herein, the
Corporation shall mail written notice of each redemption of Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred to each record
holder thereof not more than 60 nor less than 30 days prior to the Scheduled
Redemption Date. The holders of Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred to be redeemed shall in any event have the
right to convert their shares into Common Stock at any time prior to the close
of business on the Scheduled Redemption Date. In case fewer than the total
number of shares represented by any certificate are redeemed, a new certificate
representing the number of unredeemed shares shall be issued to the holder
thereof without cost to such holder within five (5) business days after
surrender of the certificate representing the redeemed shares.
e. DETERMINATION OF THE NUMBER OF SHARES TO BE REDEEMED. The
number of shares of Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred to be redeemed from each holder thereof in redemptions
hereunder shall be the number of shares determined by multiplying the total
number of shares of Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred to be redeemed times a fraction, the numerator of which
shall be the total number of shares of Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred then held by such holder and the
denominator of which shall be the total number of shares of Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred (as applicable) to
be redeemed then outstanding.
7.
<PAGE> 8
f. OTHER REDEMPTIONS OR ACQUISITIONS. The Corporation shall not,
nor shall it permit any Subsidiary to, redeem or otherwise acquire any shares of
Preferred Stock, except as expressly authorized herein or pursuant to a purchase
offer made pro rata to all holders of Preferred Stock on the basis of the number
of shares owned by each such holder.
5. CONVERSION RIGHTS.
The holders of the Preferred Stock shall have the following rights with
respect to the conversion of the Preferred Stock into shares of Common Stock:
a. OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 5, any shares of Preferred Stock may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Series A Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series A
Preferred being converted. The number of shares of Common Stock to which a
holder of Series B Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series B Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series B
Preferred being converted. The number of shares of Common Stock to which a
holder of Series C Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series C Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series C
Preferred being converted. The number of shares of Common Stock to which a
holder of Series D Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series D Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series D
Preferred being converted. The number of shares of Common Stock to which a
holder of Series E Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series E Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series E
Preferred being converted.
b. SERIES A, SERIES B, SERIES C, SERIES D AND SERIES E CONVERSION
RATES. The conversion rate in effect at any time for conversion of the Series A
Preferred (the "SERIES A CONVERSION RATE") shall be the quotient obtained by
dividing the Original Series A Issue Price, plus any declared but unpaid
dividends thereon, by the "Series A Conversion Price" calculated as provided in
Section 5(c). The conversion rate in effect at any time for conversion of the
Series B Preferred (the "SERIES B CONVERSION RATE") shall be the quotient
obtained by dividing the Original Series B Issue Price, plus any declared but
unpaid dividends thereon, by the "Series B Conversion Price" calculated as
provided in Section 5(c). The conversion rate in effect at any time for
conversion of the Series C Preferred (the "SERIES C CONVERSION RATE") shall be
the quotient obtained by dividing the Original Series C Issue Price, plus any
declared but unpaid dividends thereon, by the "Series C Conversion Price"
calculated as provided in Section 5(c). The conversion rate in effect at any
time for conversion of the Series D Preferred (the "SERIES D
8.
<PAGE> 9
CONVERSION RATE") shall be the quotient obtained by dividing the Original Series
D Issue Price, plus any declared but unpaid dividends thereon, by the "Series D
Conversion Price" calculated as provided in Section 5(c). The conversion rate in
effect at any time for conversion of the Series E Preferred (the "SERIES E
CONVERSION RATE") shall be the quotient obtained by dividing the Original Series
E Issue Price, plus any declared but unpaid dividends thereon, by the "Series E
Conversion Price" calculated as provided in Section 5(c).
c. SERIES A, SERIES B, SERIES C, SERIES D AND SERIES E CONVERSION
PRICES. The conversion price for the Series A Preferred (the "SERIES A
CONVERSION PRICE") shall initially be the Original Series A Issue Price. The
conversion price for the Series B Preferred (the "SERIES B CONVERSION PRICE")
shall initially be the Original Series B Issue Price. The conversion price for
the Series C Preferred (the "SERIES C CONVERSION PRICE") shall initially be the
Original Series C Issue Price. The conversion price for the Series D Preferred
(the "SERIES D CONVERSION PRICE") shall initially be the Original Series D Issue
Price. The conversion price for the Series E Preferred (the "SERIES E CONVERSION
PRICE") shall initially be the Original Series E Issue Price. Such initial
Series A, Series B, Series C, Series D and Series E Conversion Prices shall be
adjusted from time to time in accordance with this Section 5. If and whenever on
or after the Original Issue Date, as defined in Section 6 of this Article, the
Corporation issues or sells, or in accordance with this Section 5(c) is deemed
to have issued or sold, any shares of its Common Stock (other than pursuant to a
Permitted Issuance) for a consideration per share less than the Series A
Conversion Price in effect immediately prior to the time of such issue or sale,
then immediately upon such issue or sale or deemed issue or sale the Series A
Conversion Price shall be reduced to the amount determined by dividing (a) the
sum of (1) the product derived by multiplying the Series A Conversion Price in
effect immediately prior to such issue or sale by the number of shares of Common
Stock Deemed Outstanding immediately prior to such issue or sale, plus (2) the
consideration, if any, received or deemed to have been received by the
Corporation upon such issue or sale, by (b) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale. All references to the
Series A Conversion Price herein shall mean the Series A Conversion Price as so
adjusted. If and whenever on or after the Original Issue Date the Corporation
issues or sells, or in accordance with this Section 5(c) is deemed to have
issued or sold, any shares of its Common Stock (other than pursuant to a
Permitted Issuance) for a consideration per share less than the Series B
Conversion Price in effect immediately prior to the time of such issue or sale,
then immediately upon such issue or sale or deemed issue or sale the Series B
Conversion Price shall be reduced to the amount determined by dividing (a) the
sum of (1) the product derived by multiplying the Series B Conversion Price in
effect immediately prior to such issue or sale by the number of shares of Common
Stock Deemed Outstanding immediately prior to such issue or sale, plus (2) the
consideration, if any, received or deemed to have been received by the
Corporation upon such issue or sale, by (b) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale. All references to the
Series B Conversion Price herein shall mean the Series B Conversion Price as so
adjusted. If and whenever on or after the Original Issue Date the Corporation
issues or sells, or in accordance with this Section 5(c) is deemed to have
issued or sold, any shares of its Common Stock (other than pursuant to a
Permitted Issuance) for a consideration per share less than the Series C
Conversion Price in effect immediately prior to the time of such issue or sale,
then immediately upon such issue or sale or deemed issue or sale the Series C
Conversion Price shall be reduced to the amount determined by dividing (a) the
sum of (1) the product derived by multiplying the
9.
<PAGE> 10
Series C Conversion Price in effect immediately prior to such issue or sale by
the number of shares of Common Stock Deemed Outstanding immediately prior to
such issue or sale, plus (2) the consideration, if any, received or deemed to
have been received by the Corporation upon such issue or sale, by (b) the number
of shares of Common Stock Deemed Outstanding immediately after such issue or
sale. All references to the Series C Conversion Price herein shall mean the
Series C Conversion Price as so adjusted. If and whenever on or after the
Original Issue Date the Corporation issues or sells, or in accordance with this
Section 5(c) is deemed to have issued or sold, any shares of its Common Stock
(other than pursuant to a Permitted Issuance) for a consideration per share less
than the Series D Conversion Price in effect immediately prior to the time of
such issue or sale, then immediately upon such issue or sale or deemed issue or
sale the Series D Conversion Price shall be reduced to the amount determined by
dividing (a) the sum of (1) the product derived by multiplying the Series D
Conversion Price in effect immediately prior to such issue or sale by the number
of shares of Common Stock Deemed Outstanding immediately prior to such issue or
sale, plus (2) the consideration, if any, received or deemed to have been
received by the Corporation upon such issue or sale, by (b) the number of shares
of Common Stock Deemed Outstanding immediately after such issue or sale. All
references to the Series D Conversion Price herein shall mean the Series D
Conversion Price as so adjusted. If and whenever on or after the Original Issue
Date the Corporation issues or sells, or in accordance with this Section 5(c) is
deemed to have issued or sold, any shares of its Common Stock (other than
pursuant to a Permitted Issuance) for a consideration per share less than the
Series E Conversion Price in effect immediately prior to the time of such issue
or sale, then immediately upon such issue or sale or deemed issue or sale the
Series E Conversion Price shall be reduced to the amount determined by dividing
(a) the sum of (1) the product derived by multiplying the Series E Conversion
Price in effect immediately prior to such issue or sale by the number of shares
of Common Stock Deemed Outstanding immediately prior to such issue or sale, plus
(2) the consideration, if any, received or deemed to have been received by the
Corporation upon such issue or sale, by (b) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale. All references to the
Series E Conversion Price herein shall mean the Series E Conversion Price as so
adjusted. For purposes of determining the adjusted Series A, Series B, Series C,
Series D and Series E Conversion Prices, the following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Corporation in any
manner grants or sells any Options and the price per share for which Common
Stock is issuable upon the exercise of such Options, or upon conversion or
exchange of any Convertible Securities issuable upon exercise of such Options,
is less than the Series A Conversion Price, the Series B Conversion Price, the
Series C Conversion Price, the Series D Conversion Price or the Series E
Conversion Price (as applicable) in effect immediately prior to the time of the
granting or sale of such Options, then for purposes of such Conversion Price the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued and sold by the Corporation at the time of the
granting or sale of such Options for such price per share. For purposes of this
paragraph, the "price per share for which Common Stock is issuable" shall be
determined by dividing (A) the total amount, if any, received or receivable by
the Corporation as consideration for the granting or sale of such Options, plus
the minimum aggregate amount of additional consideration payable to the
Corporation upon exercise of all such Options, plus in the case of such Options
which relate to
10.
<PAGE> 11
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. In the event of an
adjustment to the Series A, Series B, Series C, Series D Conversion Price or
Series E Conversion Price as a result of the grant or sale of Options, no
further adjustment to such Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of the Convertible Securities issued pursuant to such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Corporation
in any manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon conversion or exchange thereof is less
than the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price or Series E Conversion Price (as
applicable) in effect immediately prior to the time of such issue or sale, then
for purposes of such Conversion Price the maximum number of shares of Common
Stock issuable upon conversion or exchange of such Convertible Securities shall
be deemed to have been issued and sold by the Corporation at the time of the
issuance or sale of such Convertible Securities for such price per share;
provided, however, that if such Convertible Securities contain a default or
similar provision that provides for the issuance of additional securities upon
the occurrence of a future event, no adjustment will be made to the Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D
Conversion Price or Series E Conversion Price with respect to such additional
securities until the occurrence of such event. For the purposes of this
paragraph, the "price per share for which Common Stock is issuable" shall be
determined by dividing (A) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. In the event of an adjustment to
the Series A Conversion Price, Series B Conversion Price, Series C Conversion
Price, Series D Conversion Price or Series E Conversion Price as a result of the
issuance or sale of Convertible Securities, no further adjustment of such
Conversion Price shall be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustments of such Conversion Price had been or are to be made pursuant
to other provisions of this Section 5, no further adjustment of such Conversion
Price shall be made by reason of such issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Series A Conversion
Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion
Price or Series E Conversion Price (as applicable) in effect at the time of such
change shall be immediately adjusted to the Conversion Price which would have
been in effect at such time had such Options or Convertible Securities still
outstanding provided for such changed
11.
<PAGE> 12
purchase price, additional consideration or conversion rate, as the case may be,
at the time initially granted, issued or sold, but without prejudice to any
other adjustment required by this Section 5.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Security without the exercise of any such
Option or right, the Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price, Series D Conversion Price or Series E Conversion
Price (as applicable) then in effect hereunder shall be adjusted immediately to
the Conversion Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Security, to the extent
outstanding immediately prior to such expiration or termination, never been
issued, but without prejudice to any other adjustment required by this Section
5.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Corporation therefor (net of discounts,
commissions and related expenses). If any Common Stock, Option or Convertible
Security is issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Corporation shall be the fair
value of such consideration. If any Common Stock, Option or Convertible Security
is issued to the owners of the non-surviving entity in connection with any
merger in which the Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Option or Convertible Security, as the case may be. The fair
value of any consideration other than cash and securities shall be determined
jointly by the Corporation and the Required Holders. If such parties are unable
to reach agreement within a reasonable period of time, the fair value of such
consideration shall be determined by an independent appraiser experienced in
valuing such type of consideration jointly selected by the Corporation and the
Required Holders. The determination of such appraiser shall be final and binding
upon the parties, and the fees and expenses of such appraiser shall be borne by
the Corporation.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of $.01.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.
d. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Series A Conversion
Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion
Price and Series E Conversion Price in effect immediately before that
subdivision shall be proportionately decreased. Conversely, if the Corporation
shall at
12.
<PAGE> 13
any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock into a smaller number of shares, the Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D
Conversion Price and Series E Conversion Price in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
Section 5(d) shall become effective at the close of business on the date the
subdivision or combination becomes effective.
e. ADJUSTMENT FOR COMMON STOCK DIVIDENDS and Distributions. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series A Conversion Price, Series
B Conversion Price, Series C Conversion Price, Series D Conversion Price and
Series E Conversion Price then in effect shall be decreased as of the time of
such issuance or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying the Series A Conversion Price,
Series B Conversion Price, Series C Conversion Price, Series D Conversion Price
or Series E Conversion Price (as applicable) then in effect by a fraction (1)
the numerator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (2) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Conversion Price, Series B Conversion Price, Series
C Conversion Price, Series D Conversion Price and Series E Conversion Price
shall be recomputed accordingly as of the close of business on such record date
and thereafter the Series A Conversion Price, Series B Conversion Price, Series
C Conversion Price, Series D Conversion Price and Series E Conversion Price
shall be adjusted pursuant to this Section 5(e) to reflect the actual payment of
such dividend or distribution.
f. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Preferred Stock shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Corporation which
they would have received had the Preferred Stock been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 5 with
respect to the rights of the holders of the Preferred Stock or with respect to
such other securities by their terms.
g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If
at any time or from time to time after the Original Issue Date, the Common Stock
is changed into the same or a different number of shares of any class or classes
of stock, whether by recapitalization, reclassification or otherwise (other than
a subdivision or combination of shares or stock dividend
13.
<PAGE> 14
or a reorganization, merger or consolidation provided for elsewhere in this
Section 5), in any such event each holder of Preferred Stock shall have the
right thereafter to convert such stock into the kind and amount of stock and
other securities and property receivable in connection with such
recapitalization, reclassification or other change with respect to the maximum
number of shares of Common Stock into which such shares of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E Preferred
could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustments as provided
herein or with respect to such other securities or property by the terms
thereof.
h. REORGANIZATIONS, MERGERS OR CONSOLIDATIONS. If at any time or
from time to time after the Original Issue Date, the Common Stock is converted
into other securities or property, whether pursuant to a reorganization, merger
or otherwise (other than a recapitalization, subdivision, combination,
reclassification, exchange or substitution of shares provided for elsewhere in
this Section 5), as a part of such transaction, provision shall be made so that
the holders of the Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred the number of shares of stock or other
securities or property of the Corporation to which a holder of the maximum
number of shares of Common Stock deliverable upon conversion would have been
entitled in connection with such transaction, subject to adjustment in respect
of such stock or securities by the terms thereof. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 5
with respect to the rights of the holders of Preferred Stock after such
transaction to the end that the provisions of this Section 5 (including
adjustment of the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price and Series E Conversion Price then
in effect and the number of shares issuable upon conversion of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred) shall be applicable after that event and be as nearly equivalent as
practicable. The Corporation shall not be a party to any reorganization, merger
or consolidation in which the Corporation is not the surviving entity unless the
entity surviving such transaction assumes, by written instrument satisfactory to
the Required Holders, all of the Corporation's obligations hereunder.
i. CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series A Conversion Price, Series B Conversion Price, Series
C Conversion Price, Series D Conversion Price or Series E Conversion Price or
the number of shares of Common Stock or other securities issuable upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred, the Corporation, at its expense, shall
compute such adjustment or readjustment in accordance with the provisions hereof
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to each registered
holder of Preferred Stock at the holder's address as shown in the Corporation's
books. The certificate shall set forth such adjustment or readjustment, showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (1) the consideration received or deemed to be received
by the Corporation for any additional shares of Common Stock issued or sold or
deemed to have been issued or sold, (2) the Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price and
Series E Conversion Price in effect before and after such adjustment, (3) the
number of additional shares of Common Stock issued or sold or deemed to have
been issued or sold, and (4)
14.
<PAGE> 15
the type and amount, if any, of other property which at the time would be
received upon conversion of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred.
j. NOTICES OF RECORD DATE. Upon (i) any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 3(c)) or
other capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation with or into any other corporation, any Asset
Transfer (as defined in Section 3(c)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Preferred Stock at least twenty (20) days prior to the
record date specified therein a notice specifying (1) the date on which any such
record is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (2) the date on which any such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up is expected to become
effective, and (3) the date, if any, that is to be fixed for determining the
holders of record of Common Stock (or other securities) that shall be entitled
to exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up.
k. AUTOMATIC CONVERSION. Each share of Series A Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series A Conversion Price, at any time upon the affirmative
election of the holders of sixty six and two-thirds percent (66 2/3%) of the
outstanding Series A Preferred. Each share of Series B Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series B Conversion Price, at any time upon the affirmative
election of the holders of sixty six and two-thirds percent (66 2/3%) of the
outstanding Series B Preferred. Each share of Series C Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series C Conversion Price, at any time upon the affirmative
election of the holders of sixty six and two-thirds percent (66 2/3%) of the
outstanding Series C Preferred. Each share of Series D Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series D Conversion Price, at any time upon the affirmative
election of the holders of sixty six and two-thirds percent (66 2/3%) of the
outstanding Series D Preferred. Each share of Series E Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series E Conversion Price, at any time upon the affirmative
election of the holders of sixty six and two-thirds percent (66 2/3%) of the
outstanding Series E Preferred. Each share of Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price or Series
D Conversion Price, as applicable, immediately upon the closing of a firmly
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Corporation in which (i) the per share price
to the public is at least $15.00 per share (as adjusted for stock splits,
recapitalizations and the like) and (ii) the gross cash proceeds to the
Corporation (before
15.
<PAGE> 16
underwriting discounts, commissions and fees) are at least $20,000,000. Each
share of Series E Preferred shall automatically be converted into shares of
Common Stock, based on the then-effective Series E Conversion Price, immediately
upon the closing of a firmly underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the Corporation
in which (i) the per share price to the public is at least $19.50 per share (as
adjusted for stock splits, recapitalizations and the like) and (ii) the gross
cash proceeds to the Corporation (before underwriting discounts, commissions and
fees) are at least $20,000,000. Upon such automatic conversion, all declared but
unpaid dividends on the Preferred Stock, if any, shall be paid in accordance
with Section 5(l).
L. MECHANICS OF CONVERSION.
(i) OPTIONAL CONVERSION. Each holder of Preferred Stock who
desires to convert the same into shares of Common Stock pursuant to this Section
5 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Corporation or any transfer agent for such securities, and
shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred being converted. Thereupon, the Corporation shall promptly
issue and deliver at such office to such holder a certificate or certificates
for the number of shares of Common Stock to which such holder is entitled and
shall promptly pay in cash or, to the extent sufficient funds are not then
legally available therefor, in Common Stock (at the Common Stock's fair market
value determined by the Board of Directors as of the date of such conversion) or
a combination of cash and Common Stock, any declared but unpaid dividends on the
shares of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred being converted. Such conversion shall be deemed
to have been made at the close of business on the date of such surrender of the
certificate representing the shares of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred to be converted,
and the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock on such date.
(ii) AUTOMATIC CONVERSION. Upon the occurrence of the event
specified in Section 5(k) above, the outstanding shares of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E Preferred
(as applicable) shall be converted into Common Stock automatically without any
further action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent; provided, however, that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such conversion
unless the certificates evidencing such shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred are
either delivered to the Corporation or its transfer agent as provided below, or
the holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. Upon surrender by any holder of the
certificates formerly representing shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred at the
office of
16.
<PAGE> 17
the Corporation or any transfer agent for such securities, there shall be issued
and delivered to such holder promptly at such office and in its name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred surrendered were convertible on the date on which such automatic
conversion occurred, and the Corporation shall promptly pay in cash or, to the
extent sufficient funds are not legally available therefor, in Common Stock (at
the Common Stock's fair market value determined by the Board as of the date of
such conversion) or a combination of cash and Common Stock, all declared but
unpaid dividends on the shares of Series A Preferred, Series B Preferred, Series
C Preferred, Series D Preferred or Series E Preferred being converted. Until
surrendered as provided above, each certificate formerly representing shares of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred shall be deemed for all corporate purposes to represent
the number of shares of Common Stock resulting from such automatic conversion.
m. FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred by a holder thereof shall be aggregated for purposes of
determination whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Corporation shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board)
on the date of conversion.
6. CERTAIN DEFINITIONS.
"EVENT OF NONCOMPLIANCE" means any material deviation by the
Corporation from its most recent strategic plan approved by the Corporation's
Board of Directors without the prior approval of the Board of Directors by a
majority of the Investor Directors.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the sum of
the number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock issuable pursuant to Options and Convertible
Securities outstanding on the Original Issue Date to the extent that such
Options and/or Convertible Securities remain outstanding as of the date of
determination, plus the number of shares of Common Stock deemed to have been
issued pursuant to Section 5(c) hereof whether or not the Options or Convertible
Securities are actually exercisable at such time.
"CONVERTIBLE SECURITIES" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
17.
<PAGE> 18
"ORIGINAL ISSUE DATE" means (i) February 14, 1996, with respect to
Series A Preferred, (ii) July 17, 1996, with respect to Series B Preferred,
(iii) June 23, 1997, with respect to Series C Preferred; (iv) June 8, 1998 with
respect to the Series D Preferred; and (v) July 15, 1999 with respect to the
Series E Preferred.
"PERMITTED ISSUANCE" means (i) any issuance of Common Stock upon
conversion of shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred, (ii) any issuance of
warrants to purchase equity securities of the Corporation in connection with a
commercial loan or leasing transaction approved by the Corporation's Board of
Directors, (iii) any issuance of Reserved Employee Stock or (iv) shares of
Common Stock issued or issuable pursuant to the exercise or conversion of
options, warrants or convertible securities outstanding as of the Original Issue
Date applicable to the Series E Preferred.
"RESERVED EMPLOYEE STOCK" means up to 1,600,000 shares of Common Stock
issuable to employees, directors or consultants of the Corporation and its
Subsidiaries subject to the approval of the Corporation's Board of Directors.
"SUBSIDIARY" means any corporation of which the shares of outstanding
capital stock possessing the voting power (under ordinary circumstances) in
electing at least a majority of the board of directors are, at the time as of
which any determination is being made, owned by the Corporation either directly
or indirectly through Subsidiaries.
7. AMENDMENT AND WAIVER.
Subject to the provisions of Delaware General Corporation Law, no
amendment, modification or waiver of any of the terms or provisions of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred shall be binding or effective without the prior written
consent of the holders of two-thirds of the outstanding Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E
Preferred, as applicable, and no change in the terms hereof may be accomplished
by merger or consolidation of the Corporation with another corporation or entity
unless the Corporation has obtained the prior written consent of the holders of
two-thirds of the outstanding Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred, as applicable. Any
amendment, modification or waiver of any of the terms or provisions of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred approved in the manner described in this Section 7,
whether prospective or retroactively effective, shall be binding upon all
holders of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred, as applicable.
8. REGISTRATION OF TRANSFER.
The Corporation shall keep at its principal office a register for the
registration of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred. Upon the surrender of any certificate
representing Series A Preferred, Series B Preferred, Series C Preferred, Series
D Preferred or Series E Preferred at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
18.
<PAGE> 19
representing in the aggregate the number of shares represented by the
surrendered certificate. Each such new certificate shall be registered in such
name and shall represent such number of shares as is requested by the holder of
the surrendered certificate and shall be substantially identical in form to the
surrendered certificate.
9. REPLACEMENT.
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing shares
of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
10. RESERVATION OF COMMON STOCK ISSUABLE UPON CONVERSION.
The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then-outstanding
shares of the Series A Preferred, Series B Preferred, Series C Preferred, Series
D Preferred and Series E Preferred, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
11. NOTICES.
Any notice required by the provisions of this Article IV shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All notices to stockholders shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Corporation.
19.
<PAGE> 20
12. PAYMENT OF TAXES.
The Corporation will pay all taxes (other than taxes based upon income)
and other governmental charges that may be imposed with respect to the issue or
delivery of shares of Common Stock upon conversion of shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred, excluding any tax or other charge imposed in connection with any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the shares of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred so converted were
registered.
13. NO DILUTION OR IMPAIRMENT.
The Corporation will not, by amendment of its Certificate of
Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, and
will at all times in good faith assist in carrying out of all of the provisions
of this Restated Certificate of Incorporation and in taking all such action as
may be necessary or appropriate to protect the conversion rights and other
rights of the holders of the Preferred Stock against impairment.
14. NO REISSUANCE OF SERIES A PREFERRED, SERIES B PREFERRED, SERIES C
PREFERRED, SERIES D PREFERRED OR SERIES E PREFERRED.
No share or shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred acquired by the Corporation
by reason of redemption, purchase, conversion or otherwise shall be reissued.
ARTICLE FIVE
The Corporation is to have perpetual existence.
ARTICLE SIX
The Corporation expressly elects not to be governed by Section 203 of
the General Corporation Law of the State of Delaware.
ARTICLE SEVEN
No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
person as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Seven shall
apply to or have any effect on the liability or alleged liability of any
director of
20.
<PAGE> 21
the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
ARTICLE EIGHT
1. NATURE OF INDEMNITY. Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he (or a person of
which he is the legal representative) is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee,
fiduciary or agent or in any other capacity while serving as a director,
officer, employee, fiduciary or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent which it is empowered to do so by the
General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment) against all expense, liability and loss (including attorney's fees
actually and reasonably incurred by such person in connection with such
proceeding) and such indemnification shall inure to the benefit of such person's
heirs, executors and administrators; provided, however, that except as provided
in Section 2 of this Article Eight, the Corporation shall not indemnify any such
person in connection with a proceeding initiated by such person unless such
proceeding was authorized by the Board of Directors of the Corporation. The
Corporation may, by action of the Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
2. PROCEDURE FOR INDEMNIFICATION OF DIRECTORS AND OFFICERS. Any
indemnification of a director or officer of the Corporation under Section 1 of
this Article Eight or advance of expenses under Section 5 of this Article Eight
shall be made promptly and, in any event within 30 days, upon the written
request of the director or officer. If a determination by the Corporation that
the director of officer is entitled to indemnification pursuant to this Article
Eight is required, and the Corporation fails to respond within 60 days to a
written request for indemnity, the Corporation shall be deemed to have approved
the request. If the Corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within 30 days, the right to indemnification or
advances as granted by this Article Eight shall be enforceable by the director
or officer in any court of competent jurisdiction. Such person's costs and
expenses incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the Corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the Corporation.
Neither the
21.
<PAGE> 22
failure of the Corporation (including the Board of Directors, independent legal
counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because such person met the applicable standard of conduct set
forth in the General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
3. NONEXCLUSIVITY OF ARTICLE EIGHT. The rights to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article Eight shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
certificate of incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
4. INSURANCE. The Corporation may purchase and maintain insurance on
its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary or agent of the Corporation or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity, whether or not the Corporation would have the power to indemnify such
person against such liability under this Article Eight.
5. EXPENSES. Unless the Board of Directors shall have determined that a
person described in Section 1 of this Article Eight has failed to meet the
applicable standard of conduct for indemnification under the Delaware General
Corporation Law, expenses incurred by such person in defending a proceeding
shall be paid by the Corporation in advance of such proceeding's final
disposition upon receipt of an undertaking by or on behalf of such person to
repay such amounts if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
6. EMPLOYEES AND AGENTS. Persons who are not covered by the foregoing
provisions of this Article Eight and who are or were employees or agents of the
Corporation, or who are or were serving at the request of the Corporation as
employees or agents of another corporation, partnership, joint venture, trust or
other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the Board of Directors.
7. CONTRACT RIGHTS. The provisions of this Article Eight shall be
deemed to be a contract right between the Corporation and each director or
officer who serves in any such capacity at any time while this Article Eight and
the relevant provisions of the General Corporation Law of the State of Delaware
or other applicable law are in effect, and any repeal or modification of this
Article Eight or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
22.
<PAGE> 23
8. MERGER OR CONSOLIDATION. For purposes of this Article Eight,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article
Eight with respect to the resulting or surviving corporation as such person
would have with respect to such constituent corporation if its separate
existence had continued.
ARTICLE NINE
The Board of Directors shall have the power to adopt, amend or repeal
the Corporation's Bylaws, except as may be otherwise be provided in the Bylaws
and in this Restated Certificate of Incorporation.
ARTICLE TEN
1. In recognition that American Express Travel Related Services
Company, Inc. ("AMEX") is a substantial stockholder of the Corporation, and in
anticipation that the Corporation and such stockholder may engage in the same or
similar activities or lines of business and have an interest in the same area of
corporate opportunities, and in recognition of the benefits to be derived by the
Corporation through its possible continued contractual, corporate and business
relations with such stockholder, the provisions of this Article Ten are set
forth to regulate and define the conduct of certain affairs of the Corporation
as they may involve such stockholder and its officers, directors and employees,
and the powers, rights, duties and liabilities of the Corporation and its
officers, directors and stockholders in connection therewith.
2. AmEx shall have no duty to refrain from any of the following: (a)
engaging in the same or similar activities or lines of business as the
Corporation; (b) doing business with any client or customer of the Corporation;
and (c) investing (publicly or privately) in, or developing other relationships
with, other persons or entities in the same or similar businesses as that of the
Corporation; provided, however, that nothing in this Article Ten shall be
construed to limit in any way the duty of any director of the Corporation to
hold in confidence, and not to use, except for the benefit of the Corporation,
or to disclose to any person or entity without the written authorization of the
Board of Directors of the Corporation, any trade secrets or other confidential
proprietary information of the Corporation.
3. In the event that AmEx or any officer, director or employee of AmEx
acquires knowledge of a potential transaction or matter which may be a corporate
opportunity for both AmEx and the Corporation (where such knowledge comes from
other than an officer, director or employee of the Corporation), neither AmEx
nor its officers, directors or employees shall have any duty to communicate or
offer such corporate opportunity to the Corporation, and neither AmEx nor its
officers, directors or employees shall be liable to the Corporation or its
stockholders for breach of any fiduciary or other duty, as a stockholder or
otherwise, by reason of the fact that AmEx pursues or acquires such corporate
opportunity for itself, directs such corporate
23.
<PAGE> 24
opportunity to another person or entity, or does not communicate such corporate
opportunity or information regarding such corporate opportunity to the
Corporation; provided, however, that this Article Ten, Section 3 shall not apply
to any director of the Corporation designated by AmEx with respect to any
corporate opportunity for the Corporation that has come to the attention of such
director solely and exclusively in his capacity as a director of the
Corporation.
4. Any person or entity purchasing or otherwise acquiring any interest
in shares of the capital stock of the Corporation shall be deemed to have
consented to the provisions of this Article Ten.
5. Any reference in this Article Ten to "AMEX" shall mean AmEx and its
Affiliates. Any reference in this Article Ten to the "Corporation" shall mean
the Corporation and its Affiliates. "Affiliate" shall mean, when used with
respect to a specified "Person", another "Person" that directly, or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with the "Person" specified. "PERSON" shall mean any individual,
firm, corporation, partnership, trust, joint venture, governmental authority or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
[SIGNATURE PAGE FOLLOWS]
24.
<PAGE> 25
I, the undersigned, being the Chief Financial Officer of the
Corporation, do make and file this Certificate, hereby declaring and certifying
that the facts herein stated are true, and accordingly have hereunto set my
hands this _____ day of July, 1999.
---------------------------------------
Kenny Edwards, Chief Financial Officer
<PAGE> 1
EXHIBIT 3.3
RESTATED CERTIFICATE OF INCORPORATION
OF
EXACTIS.COM, INC.
I.
The undersigned, E. Thomas Detmer, Jr., hereby certifies that:
ONE: He is the duly elected and acting President and Chief Executive
Officer of Exactis.com, Inc.
TWO: The original name of the Corporation was Mercury Mail, Inc., and
its current name is Exactis.com, Inc. The original Certificate of Incorporation
of the Corporation was filed with the Delaware Secretary of State on July 17,
1996.
THREE: This Restated Certificate of Incorporation restates, integrates
and amends the corporation's Restated Certificate of Incorporation filed on July
15, 1999 and has been duly adopted in accordance with Sections 242 and 245 of
the General Corporation Law of the State of Delaware.
FOUR: The text of the Restated Certificate of Incorporation of this
corporation is hereby amended and restated to read in its entirety as follows:
II.
The name of this corporation is EXACTIS.COM, INC.
III.
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware 19805. The name of its
registered agent at such address is The Prentice-Hall Corporation System, Inc.
IV.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
V.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is thirty eight million
five hundred thousand shares (38,500,000). Thirty five million (35,000,000)
shares shall be Common Stock, each having a par
1.
<PAGE> 2
value of one cent ($.01). Three million five hundred thousand (3,500,000) shares
shall be Preferred Stock, each having a par value of one cent ($.01).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law
("DGCL"), to fix or alter from time to time the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions of any wholly unissued series of Preferred Stock, and to
establish from time to time the number of shares constituting any such series or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
VI.
For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. 1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "1933
Act"), covering the offer and sale of Common Stock to the public (the "Initial
Public Offering"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until such director's successor is duly elected and qualified or
until his death, resignation or removal.
2.
<PAGE> 3
No decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
3. REMOVAL OF DIRECTORS
a. Subject to the rights of the holders of any series of Preferred
Stock, neither the Board of Directors nor any individual director may be removed
without cause.
b. Subject to any limitation imposed by law, any individual director or
directors may be removed with cause by the holders of a majority of the voting
power of the corporation entitled to vote at an election of directors (the
"Voting Stock").
4. VACANCIES
a. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
b. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
B. 1. BYLAW AMENDMENTS
Subject to paragraph (h) of Section 43 of the Bylaws, the
Bylaws may be altered or amended or new Bylaws adopted by the affirmative vote
of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then-outstanding shares of the Voting Stock of the corporation
entitled to vote. The Board of Directors shall also have the power to adopt,
amend, or repeal Bylaws.
2. The directors of the corporation need not be elected by
written ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the
corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws.
3.
<PAGE> 4
Following the closing of the Initial Public Offering, no action shall be taken
by the stockholders by written consent.
4. Advance notice of stockholder nominations for the election
of directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VII.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article VII shall be prospective
and shall not affect the rights under this Article VII in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VIII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VIII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles VI, VII,
and VIII.
[SIGNATURE PAGE FOLLOWS]
4.
<PAGE> 5
IN WITNESS WHEREOF, this Certificate has been subscribed this ____ day
of __________, 1999 by the undersigned who affirms that the statements made
herein are true and correct.
-------------------------------------
E. Thomas Detmer, Jr.
President and Chief Executive Officer
5.
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
EXACTIS.COM, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
SECTION 3. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 4. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less
1.
<PAGE> 2
than one hundred twenty (120) calendar days in advance of the date of the
corporation's proxy statement released to stockholders in connection with the
previous year's annual meeting of stockholders; provided, however, that in the
event that no annual meeting was held in the previous year or the date of the
annual meeting has been changed by more than thirty (30) days from the date
contemplated at the time of the previous year's proxy statement, notice by the
stockholder to be timely must be so received a reasonable time before the
solicitation is made. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the annual meeting: (i)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address, as they appear on the corporation's books, of the
stockholder proposing such business, (iii) the class and number of shares of the
corporation which are beneficially owned by the stockholder, (iv) any material
interest of the stockholder in such business and (v) any other information that
is required to be provided by the stockholder pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), in his
capacity as a proponent to a stockholder proposal. Notwithstanding the
foregoing, in order to include information with respect to a stockholder
proposal in the proxy statement and form of proxy for a stockholder's meeting,
stockholders must provide notice as required by the regulations promulgated
under the 1934 Act. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b). The chairman of the annual meeting
shall, if the facts warrant, determine and declare at the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of this paragraph (b), and, if he should so determine, he shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 5. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re election as a director: (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the corporation
which are beneficially owned by such person, (D) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nominations are to be made by the stockholder, and (E) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the 1934 Act (including without limitation such
person's written consent to being named in the proxy statement, if any, as a
nominee and to serving as a director if elected); and (ii) as to such
stockholder giving notice, the information required to be provided pursuant to
paragraph (b) of this Section 5. At the
2.
<PAGE> 3
request of the Board of Directors, any person nominated by a stockholder for
election as a director shall furnish to the Secretary of the corporation that
information required to be set forth in the stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
director of the corporation unless nominated in accordance with the procedures
set forth in this paragraph (c). The chairman of the meeting shall, if the facts
warrant, determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare at the meeting, and the defective nomination
shall be disregarded.
SECTION 5. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption) or (iii) by the
holders of shares entitled to cast not less than ten percent (10%) of the votes
at the meeting, and shall be held at such place, on such date, and at such time
as the Board of Directors shall fix; provided, however, that following
registration of any of the classes of equity securities of the corporation
pursuant to the provisions of the 1934 Act, special meetings of the stockholders
may only be called by the Board of Directors pursuant to a resolution adopted by
a majority of the total number of authorized directors.
(b) If a special meeting is called by any person or persons other
than the Board of Directors, the request shall be in writing, specifying the
general nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the President, any Vice
President, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The officer
receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Section 7 of
these Bylaws, that a meeting will be held not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is not
given within twenty (20) days after the receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing contained in this
paragraph (b) shall be construed as limiting, fixing, or affecting the time when
a meeting of stockholders called by action of the Board of Directors may be
held.
SECTION 6. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting
3.
<PAGE> 4
is not lawfully called or convened. Any stockholder so waiving notice of such
meeting shall be bound by the proceedings of any such meeting in all respects as
if due notice thereof had been given.
SECTION 7. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. Any shares, the voting of
which at said meeting is enjoined, or which for any reason cannot be lawfully
voted at such meeting, shall not be counted to determine a quorum at such
meeting. In the absence of a quorum any meeting of stockholders may be
adjourned, from time to time, either by the chairman of the meeting or by vote
of the holders of a majority of the shares represented thereat, but no other
business shall be transacted at such meeting. The stockholders present at a duly
called or convened meeting, at which a quorum is present, may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws, all action taken by the
holders of a majority of the voting power represented at any meeting at which a
quorum is present shall be valid and binding upon the corporation; provided,
however, that directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the shares of
such class or classes or series present in person or represented by proxy at the
meeting shall be the act of such class or classes or series.
SECTION 8. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
represented thereat. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 9. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a written proxy granted in
accordance with Delaware law. An
4.
<PAGE> 5
agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period. All elections of directors shall be by written ballot, unless otherwise
provided in the Certificate of Incorporation.
SECTION 10. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even split for the purpose of subsection (c)
shall be a majority or even split in interest.
SECTION 11. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 12. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded.
5.
<PAGE> 6
Delivery made to a corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of the State of Delaware if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
SECTION 13. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE III
DIRECTORS
SECTION 14. NUMBER AND TERM OF OFFICE. Except as otherwise provided in
the Certificate of Incorporation or the Delaware General Corporation Law, the
business and affairs of the Corporation shall be managed by or under the
direction of a board of directors consisting of one or more members. Directors
need not be stockholders unless so required by the Certificate of Incorporation.
The board of directors, by resolution, may increase or decrease the number of
directors from time to time. If for any cause, the directors shall not have been
elected at an
6.
<PAGE> 7
annual meeting, they may be elected as soon thereafter as convenient at a
special meeting of the stockholders called for that purpose in the manner
provided in these Bylaws.
SECTION 15. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 16. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies occurring on the Board of Directors and any newly
created directorships resulting from any increase in the authorized number of
directors shall, unless the Board of Directors determines by resolution that any
such vacancies and newly created directorships shall be filled by stockholders,
be filled only by the affirmative vote of a majority of the directors then in
office, even though less than a quorum of the Board of Directors. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the director for which the vacancy was created or
occurred and until such director's successor shall have been elected and
qualified. A vacancy in the Board of Directors shall be deemed to exist under
this Bylaw in the case of the death, removal or resignation of any director.
SECTION 17. RESIGNATION. Any director may resign at any time by
delivering his written resignation to either the Board of Directors or the
Secretary, such resignation to specify whether it will be effective at a
particular time, upon receipt by the Board of Directors or the Secretary or at
the pleasure of the Board of Directors. If no such specification is made, it
shall be deemed effective at the pleasure of the Board of Directors. Unless
otherwise provided in the Certificate of Incorporation, when one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each director so chosen shall hold office for the unexpired portion of the term
of the director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
SECTION 18. REMOVAL. At a special meeting of stockholders called for
the purpose in the manner hereinabove provided, subject to any limitations
imposed by law or the Certificate of Incorporation, the Board of Directors, or
any individual director, may be removed from office, with or without cause, and
a new director or directors elected by a vote of stockholders holding a majority
of the outstanding shares entitled to vote at an election of directors.
SECTION 19. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be
7.
<PAGE> 8
maintained pursuant to Section 2 hereof. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may
also be held at any place within or without the State of Delaware which has been
designated by resolution of the Board of Directors or the written consent of all
directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or a majority of the
directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 20. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 42 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with Section 15 hereof, a quorum
of the Board of Directors shall consist of a majority of the exact number of
directors fixed from time to time in accordance with Section 15 of these Bylaws;
provided, however, at any meeting whether a quorum be present or otherwise, a
majority of the directors present may adjourn from time to time until the time
fixed for the next regular meeting of the Board of Directors, without notice
other than by announcement at the meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the
8.
<PAGE> 9
directors present, unless a different vote be required by law, the Certificate
of Incorporation or these Bylaws.
SECTION 21. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 22. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 23. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by resolution
passed by a majority of the whole Board of Directors appoint an Executive
Committee to consist of one (1) or more members of the Board of Directors. The
Executive Committee, to the extent permitted by law and specifically granted by
the Board of Directors shall have and may exercise when the Board of Directors
is not in session all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, including, without
limitation, the power or authority to declare a dividend, to authorize the
issuance of stock and to adopt a certificate of ownership and merger, and may
authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending
these Bylaws.
(b) OTHER COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, from time to time appoint
such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such
9.
<PAGE> 10
committees, but in no event shall such committee have the powers denied to the
Executive Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to the provisions of
subsections (a) or (b) of this Bylaw may at any time increase or decrease the
number of members of a committee or terminate the existence of a committee. The
membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 24 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 24. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
10.
<PAGE> 11
ARTICLE IV
OFFICERS
SECTION 25. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 26. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 27.
(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time.
(d) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
11.
<PAGE> 12
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(e) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
SECTION 27. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
SECTION 28. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 29. REMOVAL. Any officer may be removed from office at any
time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
12.
<PAGE> 13
ARTICLE V
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 30. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositories on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 31. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock
and other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VI
SHARES OF STOCK
SECTION 32. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or
13.
<PAGE> 14
Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this Section 33 or otherwise
required by law or with respect to this Section 33 a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 33. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
SECTION 34. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
SECTION 35. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of
14.
<PAGE> 15
Directors may fix, in advance, a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which record date shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting. If no record date
is fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given, or
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within 10 days after the date on
which such a request is received, adopt a resolution fixing the record date. If
no record date has been fixed by the Board of Directors within 10 days of the
date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 36. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends,
15.
<PAGE> 16
and to vote as such owner, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
OTHER SECURITIES OF THE CORPORATION
SECTION 37. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 33), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature of a trustee under an indenture pursuant to which such bond, debenture
or other corporate security shall be issued, the signatures of the persons
signing and attesting the corporate seal on such bond, debenture or other
corporate security may be the imprinted facsimile of the signatures of such
persons. Interest coupons appertaining to any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall be signed by
the Treasurer or an Assistant Treasurer of the corporation or such other person
as may be authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall have signed or
attested any bond, debenture or other corporate security, or whose facsimile
signature shall appear thereon or on any such interest coupon, shall have ceased
to be such officer before the bond, debenture or other corporate security so
signed or attested shall have been delivered, such bond, debenture or other
corporate security nevertheless may be adopted by the corporation and issued and
delivered as though the person who signed the same or whose facsimile signature
shall have been used thereon had not ceased to be such officer of the
corporation.
ARTICLE VIII
DIVIDENDS
SECTION 38. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation.
SECTION 39. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to
16.
<PAGE> 17
the interests of the corporation, and the Board of Directors may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE IX
FISCAL YEAR
SECTION 40. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE X
INDEMNIFICATION
SECTION 41. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.
(a) DIRECTORS. The corporation shall indemnify its directors to
the fullest extent not prohibited by the Delaware General Corporation Law;
provided, however, that the corporation shall not be required to indemnify any
director in connection with any proceeding (or part thereof) initiated by such
person or any proceeding by such person against the corporation or its
directors, officers, employees or other agents unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the corporation, (iii) such indemnification is
provided by the corporation, in its sole discretion, pursuant to the powers
vested in the corporation under the Delaware General Corporation Law.
(b) OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation shall
have power to indemnify its officers, employees and other agents as set forth in
the Delaware General Corporation Law.
(c) GOOD FAITH.
(1) For purposes of any determination under this Bylaw, a
director or executive officer shall be deemed to have acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe that his conduct was unlawful, if his action
is based on information, opinions, reports and statements, including financial
statements and other financial data, in each case prepared or presented by:
(i) one or more officers or employees of the corporation
whom the director or executive officer believed to be reliable and competent in
the matters presented;
(ii) counsel, independent accountants or other persons
as to matters which the director or executive officer believed to be within such
person's professional competence; and
17.
<PAGE> 18
(iii) with respect to a director, a committee of the
Board upon which such director does not serve, as to matters within such
Committee's designated authority, which committee the director believes to merit
confidence; so long as, in each case, the director or executive officer acts
without knowledge that would cause such reliance to be unwarranted.
(2) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding, that
he had reasonable cause to believe that his conduct was unlawful.
(3) The provisions of this paragraph (c) shall not be deemed
to be exclusive or to limit in any way the circumstances in which a person may
be deemed to have met the applicable standard of conduct set forth by the
Delaware General Corporation Law.
(d) EXPENSES. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or
executive officer, of the corporation, or is or was serving at the request of
the corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
(e) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. Neither the failure of the corporation (including its
Board of Directors, independent legal counsel or its stockholders) to have made
a determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant
18.
<PAGE> 19
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that claimant has not met the applicable standard
of conduct.
(f) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(g) SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(h) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
(i) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(j) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(k) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(i) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(ii) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(iii) The term the "corporation" shall include, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have
19.
<PAGE> 20
had power and authority to indemnify its directors, officers, and employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Bylaw with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(iv) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(v) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XI
NOTICES
SECTION 42. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices
20.
<PAGE> 21
was or were given, and the time and method of giving the same, shall in the
absence of fraud, be prima facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
21.
<PAGE> 22
ARTICLE XII
AMENDMENTS
SECTION 43. AMENDMENTS.
Subject to paragraph (i) of Section 41 of these Bylaws, these
Bylaws may be altered or amended or repealed and new Bylaws adopted by the
affirmative vote of at least fifty percent (50%) of the voting power of all the
then-outstanding shares of voting stock. The Board of Directors shall also have
the power to adopt, amend, or repeal Bylaws.
ARTICLE XIII
LOANS TO OFFICERS
SECTION 44. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
22.
<PAGE> 23
BYLAWS
OF
EXACTIS.COM, INC.
(A DELAWARE CORPORATION)
<PAGE> 1
EXHIBIT 3.5
AMENDED AND RESTATED
BYLAWS
OF
EXACTIS.COM, INC.
(A DELAWARE CORPORATION)
<PAGE> 2
AMENDED AND RESTATED
BYLAWS
OF
EXACTIS.COM, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of , County of .
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETINGS.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors. Nominations of persons for election
to the Board of Directors of the corporation and the proposal
1.
<PAGE> 3
of business to be considered by the stockholders may be made at an annual
meeting of stockholders: (i) pursuant to the corporation's notice of meeting of
stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by
any stockholder of the corporation who was a stockholder of record at the time
of giving of notice provided for in the following paragraph, who is entitled to
vote at the meeting and who complied with the notice procedures set forth in
Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the General Corporation Law of Delaware, (iii) if the
stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting
2.
<PAGE> 4
and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner, and
(iii) whether either such stockholder or beneficial owner intends to deliver a
proxy statement and form of proxy to holders of, in the case of the proposal, at
least the percentage of the corporation's voting shares required under
applicable law to carry the proposal or, in the case of a nomination or
nominations, a sufficient number of holders of the corporation's voting shares
to elect such nominee or nominees (an affirmative statement of such intent, a
"Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section
5(b) of these Bylaws to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the corporation
at least one hundred (100) days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 5 shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
3.
<PAGE> 5
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption), and shall be held at such place, on such date, and at
such time as the Board of Directors, shall fix.
(b) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
4.
<PAGE> 6
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the
5.
<PAGE> 7
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the Delaware General Corporation Law, Section 217(b). If
the instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum
6.
<PAGE> 8
number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the Delaware General Corporation Law if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written consent has been given in accordance with
Section 228 of the Delaware General Corporation Law.
(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments
7.
<PAGE> 9
by participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. CLASSES OF DIRECTORS. Subject to the rights of the holders
of any series of Preferred Stock to elect additional directors under specified
circumstances, following the closing of the Initial Public Offering, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the closing of the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting.
Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
SECTION 18. VACANCIES.
(a) Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal
8.
<PAGE> 10
or other causes and any newly created directorships resulting from any increase
in the number of directors shall, unless the Board of Directors determines by
resolution that any such vacancies or newly created directorships shall be
filled by stockholders, except as otherwise provided by law, be filled only by
the affirmative vote of a majority of the directors then in office, even though
less than a quorum of the Board of Directors. Any director elected in accordance
with the preceding sentence shall hold office for the remainder of the full term
of the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified. A vacancy in the
Board of Directors shall be deemed to exist under this Bylaw in the case of the
death, removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
Delaware General Corporation Law.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 20. REMOVAL.
(a) Neither the Board of Directors nor any individual director may
be removed without cause.
(b) Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the affirmative vote of a
majority of the voting power of the corporation entitled to vote at an election
of directors.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
9.
<PAGE> 11
(b) REGULAR MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors.
(b) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
10.
<PAGE> 12
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
Delaware General Corporation Law to be submitted to stockholders for approval,
or (ii) adopting, amending or repealing any bylaw of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall any such committee have the powers denied to
the Executive Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the
11.
<PAGE> 13
committee or from the Board of Directors. The Board of Directors may at any time
for any reason remove any individual committee member and the Board of Directors
may fill any committee vacancy created by death, resignation, removal or
increase in the number of members of the committee. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee, and,
in addition, in the absence or disqualification of any member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President (if a director), or if the President is absent, the
most senior Vice President (if a director), or, in the absence of any such
person, a chairman of the meeting chosen by a majority of the directors present,
shall preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one
12.
<PAGE> 14
or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers and
such other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers, as
the Board of Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the
13.
<PAGE> 15
Secretary in the absence or disability of the Secretary, and each Assistant
Secretary shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors or the President shall designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any
time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into
14.
<PAGE> 16
contracts on behalf of the corporation, except where otherwise provided by law
or these Bylaws, and such execution or signature shall be binding upon the
corporation.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock
and other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class
15.
<PAGE> 17
of stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights. Except as otherwise expressly provided by
law, the rights and obligations of the holders of certificates representing
stock of the same class and series shall be identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in \person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the Delaware General Corporation Law.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the
16.
<PAGE> 18
stockholders authorize or take corporate action by written consent shall, by
written notice to the Secretary, request the Board of Directors to fix a record
date. The Board of Directors shall promptly, but in all events within ten (10)
days after the date on which such a request is received, adopt a resolution
fixing the record date. If no record date has been fixed by the Board of
Directors within ten (10) days of the date on which such a request is received,
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by applicable law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a
17.
<PAGE> 19
trustee under an indenture pursuant to which such bond, debenture or other
corporate security shall be issued, the signatures of the persons signing and
attesting the corporate seal on such bond, debenture or other corporate security
may be the imprinted facsimile of the signatures of such persons. Interest
coupons appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation and applicable law, if any, may be declared by the Board of
Directors pursuant to law at any regular or special meeting. Dividends may be
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation and applicable law.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
18.
<PAGE> 20
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law or any other applicable law; provided, however, that the
corporation may modify the extent of such indemnification by individual
contracts with its directors and executive officers; and, provided, further,
that the corporation shall not be required to indemnify any director or
executive officer in connection with any proceeding (or part thereof) initiated
by such person unless (i) such indemnification is expressly required to be made
by law, (ii) the proceeding was authorized by the Board of Directors of the
corporation, (iii) such indemnification is provided by the corporation, in its
sole discretion, pursuant to the powers vested in the corporation under the
Delaware General Corporation Law or any other applicable law or (iv) such
indemnification is required to be made under subsection (d).
(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the Delaware General Corporation Law or any other applicable law.
The Board of Directors shall have the power to delegate the determination of
whether indemnification shall be given to any such person except executive
officers to such officers or other persons as the Board of Directors shall
determine.
(c) EXPENSES. The corporation shall advance to any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even
19.
<PAGE> 21
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, that the facts known to the decision-making
party at the time such determination is made demonstrate clearly and
convincingly that such person acted in bad faith or in a manner that such person
did not believe to be in or not opposed to the best interests of the
corporation.
(d) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law or any other applicable law for the corporation
to indemnify the claimant for the amount claimed. In connection with any claim
by an executive officer of the corporation (except in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such executive officer is or was a director of the corporation)
for advances, the corporation shall be entitled to raise a defense as to any
such action clear and convincing evidence that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation, or with respect to any criminal action or
proceeding that such person acted without reasonable cause to believe that his
conduct was lawful. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law or any
other applicable law, nor an actual determination by the corporation (including
its Board of Directors, independent legal counsel or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that claimant has not met the applicable
standard of conduct. In any suit brought by a director or executive officer to
enforce a right to indemnification or to an advancement of expenses hereunder,
the burden of proving that the director or executive officer is not entitled to
be indemnified, or to such advancement of expenses, under this Article XI or
otherwise shall be on the corporation.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any applicable statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law, or by any other applicable law.
20.
<PAGE> 22
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law or any other applicable law, the corporation, upon
approval by the Board of Directors, may purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to this Bylaw.
(h) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law. If this Section
43 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full to the full extent under any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
21.
<PAGE> 23
(4) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
22.
<PAGE> 24
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least
23.
<PAGE> 25
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the voting stock of the corporation entitled to vote.
The Board of Directors shall also have the power to adopt, amend, or repeal
Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
24.
<PAGE> 26
<TABLE>
<S> <C> <C> <C>
ARTICLE I OFFICES........................................................................................1
Section 1. Registered Office.....................................................................1
Section 2. Other Offices.........................................................................1
ARTICLE II CORPORATE SEAL.................................................................................1
Section 3. Corporate Seal........................................................................1
ARTICLE III STOCKHOLDERS'MEETINGS..........................................................................1
Section 4. Place Of Meetings.....................................................................1
Section 5. Annual Meetings.......................................................................1
Section 6. Special Meetings......................................................................4
Section 7. Notice Of Meetings....................................................................5
Section 8. Quorum................................................................................5
Section 9. Adjournment And Notice Of Adjourned Meetings..........................................5
Section 10. Voting Rights.........................................................................6
Section 11. Joint Owners Of Stock.................................................................6
Section 12. List Of Stockholders..................................................................6
Section 13. Action Without Meeting................................................................6
Section 14. Organization..........................................................................7
ARTICLE IV DIRECTORS......................................................................................8
Section 15. Number And Term Of Office.............................................................8
Section 16. Powers................................................................................8
Section 17. Classes of Directors..................................................................8
Section 18. Vacancies.............................................................................9
Section 19. Resignation...........................................................................9
Section 20. Removal...............................................................................9
Section 21. Meetings.............................................................................10
Section 22. Quorum And Voting....................................................................11
Section 23. Action Without Meeting...............................................................11
Section 24. Fees And Compensation................................................................11
Section 25. Committees...........................................................................11
Section 26. Organization.........................................................................12
ARTICLE V OFFICERS......................................................................................13
Section 27. Officers Designated..................................................................13
</TABLE>
i
<PAGE> 27
<TABLE>
<S> <C> <C> <C>
Section 28. Tenure And Duties Of Officers........................................................13
Section 29. Delegation Of Authority..............................................................14
Section 30. Resignations.........................................................................14
Section 31. Removal..............................................................................15
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION..........15
Section 32. Execution Of Corporate Instruments...................................................15
Section 33. Voting Of Securities Owned By The Corporation........................................15
ARTICLE VII SHARES OF STOCK...............................................................................15
Section 34. Form And Execution Of Certificates...................................................15
Section 35. Lost Certificates....................................................................16
Section 36. Transfers............................................................................16
Section 37. Fixing Record Dates..................................................................16
Section 38. Registered Stockholders..............................................................18
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION...........................................................18
Section 39. Execution Of Other Securities........................................................18
ARTICLE IX DIVIDENDS.....................................................................................18
Section 40. Declaration Of Dividends.............................................................18
Section 41. Dividend Reserve.....................................................................18
ARTICLE X FISCAL YEAR...................................................................................19
Section 42. Fiscal Year..........................................................................19
ARTICLE XI INDEMNIFICATION...............................................................................19
Section 43. Indemnification Of Directors, Executive Officers, Other Officers, Employees
And Other Agents.....................................................................19
ARTICLE XII NOTICES.......................................................................................22
Section 44. Notices..............................................................................22
ARTICLE XIII AMENDMENTS....................................................................................24
Section 45. Amendments...........................................................................24
ARTICLE XIV LOANS TO OFFICERS.............................................................................24
Section 46........Loans To Officers 24
</TABLE>
ii
<PAGE> 1
EXHIBIT 10.1
EXACTIS.COM, INC.
1996 STOCK OPTION PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT. Exactis.com, Inc., a Colorado corporation (the
"Company"), hereby establishes a stock option plan for employees and others
providing services to the Company, as described herein, which shall be known as
the 1996 Stock Option Plan (the "Plan"). It is intended that certain of the
options issued pursuant to the Plan to employees of the Company may constitute
incentive stock options within the meaning of section 422 of the Internal
Revenue Code, and that other options issued pursuant to the Plan shall
constitute nonstatutory options. The Board shall determine which options are to
be incentive stock options and which are to be nonstatutory options and shall
enter into option agreements with recipients accordingly.
1.2 PURPOSE. The purpose of this Plan is to enhance stockholder
investment by attracting, retaining and motivating key employees and consultants
of the Company and to encourage stock ownership by such employees and
consultants by providing them with a means to acquire a proprietary interest in
the Company's success.
ARTICLE 2
DEFINITIONS
2.1 DEFINITIONS. Whenever used herein, the following terms shall have
the respective meanings set forth below, unless the context clearly requires
otherwise, and when such meaning IS intended, the term shall be capitalized.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Committee" means the Committee provided for by Article IV
hereof, which may be created at the discretion of the Board.
(d) "Company" means Mercury Mail, Inc., a Colorado
corporation.
(e) "Consultant" means any person or entity, including an
officer or director of the Company who provides services (other than as an
Employee) to the Company and includes a Nonemployee Director, as defined below.
(f) "Date of Exercise" means the date the Company receives
notice, by an Optionee, of the exercise of an Option pursuant to section 8.1 of
this Plan. Such notice shall indicate the number of shares of Stock the Optionee
intends to exercise.
1.
<PAGE> 2
(g) "Employee" means any person, including an officer or
director of the Company who is employed by the Company.
(h) "Fair Market Value" means the fair market value of Stock
upon which an Option is granted under this Plan.
(i) "Incentive Stock Option" means an Option granted under
this Plan which is intended to qualify as an "Incentive stock option" within the
meaning of section 422 of the Code.
(j) "Nonemployee Director" means a member of the Board who is
not an Employee at the time an Option is granted hereunder.
(k) "Nonstatutory Option" means an Option granted under this
Plan which is not intended to qualify as an incentive stock option within the
meaning of section 422 of the Code. Nonstatutory Options may be granted at such
times and subject to such restrictions as the Board shall determine without
conforming to the statutory rules of section 422 of the Code applicable to
incentive stock options.
(l) "Option" means the right, granted under this Plan, to
purchase Stock of the Company at the option price for a specified period of
time. For purposes of this Plan, an Option may be either an Incentive Stock
Option or a Nonstatutory Option.
(m) "Optionee" means an Employee or Consultant holding an
Option under the Plan.
(n) "Parent Corporation" shall have the meaning set forth in
section 425(c) of the Code with the Company being treated as the employer
corporation for purposes of this definition.
(o) "Significant Shareholder" means an individual who, within
the meaning of section 422(b)(6) of the Code, owns stock possessing more than
ten percent of the total combined voting power of all classes of stock of the
Company. In determining whether an individual is a Significant Shareholder, an
individual shall be treated as owning stock owned by certain relatives of the
Individual and certain stock owned by corporations in which the individual is a
partner, and estates or trusts of which the individual is a beneficiary, all as
provided in section 425(d) of the Code.
(p) "Stock" means the S.01 par value common stock of the
Company.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context,
any masculine terminology when used in this Plan also shall include the feminine
gender and the definition of any term herein in the singular shall also include
the plural.
2.
<PAGE> 3
ARTICLE 3
ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY AND PARTICIPATION. All Employees are eligible to
participate in this Plan and receive Incentive Stock Options and/or Nonstatutory
Options hereunder. All consultants are eligible to participate in this Plan and
receive Nonstatutory Options hereunder. Optionees in the Plan shall be selected
by the Board from among those Employees and Consultants who, in the opinion of
the Board, arc in a position to contribute materially to the Company's continued
growth and development and to its long-term financial success.
ARTICLE 4
ADMINISTRATION
4.1 ADMINISTRATION. The Board shall be responsible for administering
the Plan.
The Board is authorized to interpret the Plan, to prescribe, amend, and
rescind rules and regulations relating to the Plan, to provide for conditions
and assurances deemed necessary or advisable to protect the interests of the
Company, and to make all other determinations necessary or advisable for the
administration of the Plan, but only to the extent not contrary to the express
provisions of the Plan. Determinations, interpretations or other actions made or
taken by the Board, pursuant to the provisions of this Plan, shall be final and
binding and conclusive for all purposes and upon all persons.
At the discretion of the Board, this Plan may be administered by a
Committee which shall be an executive committee of the Board, consisting of not
less than three members of the Board. The members of such Committee may be
directors who are eligible to receive Options under this Plan, but Options may
be granted to such persons only by action of the full Board and not by action of
the Committee. Such Committee shall have full power and authority, subject to
the limitations of the Plan and any limitations imposed by the Board, to
construe, interpret, and administer this Plan and to make determinations which
shall be final, conclusive and binding upon all persons, including, without
limitation, the Company, the stockholders, the directors and any persons having
any interests in any Options which may be granted under this Plan and, by
resolution providing for the creation and issuance of any such Option, to fix
the terms upon Which, the time or times at or within which, and the price or
prices at which any such shares may be purchased from the Company upon the
exercise of such Option, which terms, be set forth or incorporated time or times
and price or prices shall, in every case, by reference in the instrument or
instruments evidencing such Option, and shall be consistent with the provisions
of the Plan.
The Board may from time to time remove members from or add members to,
the Committee. The Board may terminate the Committee at any time. Vacancies on
the Committee, howsoever caused, shall be filled by the Board. The Committee
shall select one of its members as Chairman, and shall hold meetings at such
times and places as the Chairman may determine. A majority of the Committee at
which a quorum is present, or acts reduced to or approved in writing by all of
3.
<PAGE> 4
the members of the Committee, shall be the valid acts of the Committee. A quorum
shall consist of two-thirds of the members of the Committee.
Where the Committee has been created by the Board, references herein to
actions to be taken by the Board shall be deemed to refer to the Committee as
well, except where limited by this Plan or by the Board.
The Board shall have all of the enumerated powers of the Committee but
shall not be limited to such powers. No member of the Board or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Option granted under it.
4.2 SPECIAL PROVISIONS FOR GRANTS TO OFFICERS OR DIRECTORS. Rule 16b-3
under the Securities and Exchange Act of 1934 (the "Act") provides that the
grant of a stock option to a director or officer of a company subject to the Act
will be exempt from the provisions of Section 16(b) of the Act if the conditions
set forth in such Rule are satisfied. Unless otherwise specified by the Board,
grants of Options hereunder to individuals who are officers or directors of the
Company shall be made in a manner that satisfies the conditions of such Rule.
ARTICLE 5
STOCK SUBJECT TO THE PLAN
5.1 NUMBER. The total numbers of shares of Stock hereby made available
and reserved for issuance under the Plan shall be 700,000. The aggregate number
of shares of Stock available under this Plan shall be subject to adjustment as
provided in section 5.3. The total number of shares of Stock may be authorized
but unissued shares of Stock, or shares acquired by purchase as directed by the
Board from time to time in its discretion, to be used for issuance upon exercise
of Options granted hereunder.
5.2 UNUSED STOCK. If an Option shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares of Stock subject
thereto shall (unless the Plan shall have terminated) become available for other
Options under the Plan.
5.3 ADJUSTMENT IN CAPITALIZATION. In the event of any change in the
outstanding shares of Stock by reason of a stock dividend or split,
recapitalization, reclassification or other similar corporate change, the
aggregate number of shares of Stock set forth in section 5.1 shall be
appropriately adjusted by the Board, whose determination shall be conclusive;
provided, however, that fractional shares shall be rounded to the nearest whole
share. In any such case, the number and kind of shares that are subject to any
Option (including any Option outstanding after termination of employment) and
the Option price per share shall be proportionately and appropriately adjusted
without any change in the aggregate Option price to be paid therefor upon
exercise of the Option.
4.
<PAGE> 5
ARTICLE 6
DURATION OF THE PLAN
6.1 DURATION OF THE PLAN. The Plan shall be in effect for ten years
from the date of its approval by the Company's shareholders. Any Options
outstanding at the end of such period shall remain in effect accordance with
their terms. The Plan shall terminate before the end of such period, if all
Stock subject to it has been purchased pursuant to the exercise of Options
granted under the Plan.
ARTICLE 7
TERMS OF STOCK OPTIONS
7.1 GRANT OF OPTIONS. Subject to section 5. 1, Options may be granted
to Employees or Consultants at any time and from time to time as determined by
the Board; provided, however, that Consultants may receive only Nonstatutory
Options, and may not receive Incentive Stock Options. The Board shall have
complete discretion in determining the number of Options granted to each
optionee. In making such determinations, the Board may take into account the
nature of services rendered by such Employees or Consultants, their present and
potential contributions to the Company, and such other factors as the Board in
its discretion shall deem relevant. The Board shall also determine whether an
Option is to be an Incentive Stock Option or a Nonstatutory Option.
In the cases of Incentive Stock Options the total Fair Market Value
(determined at the date of grant) of shares of Stock 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 under which incentive
stock options may be granted (and all such plans of any Parent Corporations and
any Subsidiary Corporations of the Company) shall not exceed $100,000.
(Hereinafter, this requirement is sometimes referred to as the "$100,000
Limitation.")
Nothing in this Article VII of the Plan shall be deemed to prevent the
grant of Options permitting exercise in excess of the maximums established by
the preceding paragraph where such excess amount is treated as a Nonstatutory
Option.
The Board is expressly given the authority to issue amended or
replacement Options with respect to shares of Stock subject to an Option
previously granted hereunder. An amended Option amends the terms of an Option
previously granted and thereby supersedes the previous Option. A replacement
Option is similar to a new Option granted hereunder except that it provides that
it shall be forfeited to the extent that a previously granted Option is
exercised, or except that its issuance is conditioned upon the termination of a
previously granted option.
7.2 NO TANDEM OPTIONS. Where an Option granted under this Plan is
intended to be an Incentive Stock Option, the Option shall not contain terms
pursuant to which the exercise of the Option would affect the Optionee's right
to exercise another Option, or vice versa, such that the Option intended to be
an Incentive Stock Option would be deemed a tandem stock option within the
meaning of the regulations under section 422 of the Code.
5.
<PAGE> 6
7.3 OPTION AGREEMENT; TERMS AND CONDITIONS TO APPLY UNLESS OTHERWISE
SPECIFIED. As determined by the Board on the date of grant, each Option shall be
evidenced by an Option agreement (the "Option Agreement") that includes the
nontransferability provisions required by section 10.2 hereof and specifies:
whether the Option is an Incentive Stock Option or a Nonstatutory Option; the
Option price; the duration of the Option; the number of shares of Stock to which
the Option applies; any vesting or exercisability restrictions which the Board
may impose; in the case of an Incentive Stock Option, a provision implementing
the $100,000 Limitation; and any other terms and conditions that shall be
determined by the Board at the time of grant of the Option.
If not otherwise specified by the Board, the following terms and
conditions shall apply to Options granted under the Plan:
(a) TERM. The duration of the Option shall be ten years from
the date of grant.
(b) EXERCISE OF OPTION. Unless an Option is terminated as
provided hereunder, an Optionee may exercise his Option for up to, but not in
excess of, the amounts of shares then vested in the Optionee. All Options
granted under this Plan shall have a vesting period of four years or such lesser
period as may be determined by the Committee. Subject to modification by the
Committee, Options shall vest as to one-quarter of the Shares subject to any
Option, on the first anniversary of the date of the start of a Participant's
full-time employment with the Company (the "Anniversary Date"). The remaining
Options shall vest pro rata on a monthly basis on the last day of each month
over a period of 36 months commencing the first month immediately following the
Anniversary Date, until fully vested. Options which have vested in accordance
with the terms of this Plan shall be referred to as "Vested Shares." A
Participant may exercise his or her Options with respect to Vested Shares at any
time following vesting, in accordance with the terms and conditions of this
Plan.
The Board shall be free to specify terms and conditions other than
those set forth above, in its discretion.
All Option Agreements shall incorporate the provisions of this Plan by
reference, with certain provisions to apply depending upon whether the Option
Agreement applies to an Incentive Stock Option or to a Nonstatutory Option.
7.4 OPTION PRICE. No Incentive Stock Option granted pursuant to this
Plan shall have an Option price that is less than the Fair Market Value of Stock
on the date the Option is granted. Incentive Stock Options granted to
Significant Shareholders shall have an Option price of not less than I 10
percent of the Fair Market Value of Stock on the date of grant. The Option price
for Nonstatutory Options shall be established by the Board.
7.5 TERM OF OPTIONS. Each Option shall expire at such time as the Board
shall determine when it is granted, provided, however, that no Option shall be
exercisable later than the tenth anniversary date of its grant.
6.
<PAGE> 7
7.6 EXERCISE OF OPTIONS. Options granted under the plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Board shall in each instance approve, which need not be the same for all
Optionees.
7.7 PAYMENT. Payment for all shares of Stock shall be made at the time
that an Option, or any part thereof, is exercised, and no shares shall be issued
until full payment therefor has been made. Payment shall be made (i) in cash, or
(ii) if acceptable to the Board, in Stock or in some other form- provided,
however, in the case of an Incentive Stock Option, such other form of payment
does not prevent the Option from qualifying for treatment as an "incentive
stock option" within the meaning of the Code.
7.8 ACCELERATION OF VESTING SCHEDULE. If either of the following events
occurs, all options currently outstanding, regardless of whether such options
have vested pursuant to Section 7.2 above or pursuant to a vesting schedule
otherwise specified by the Board, shall immediately vest and the Employee or
Consultant, as the case may be, may exercise his options for the full amount of
the shares granted thereunder:
(i) Consummation of an underwritten public offering of Stock
resulting in proceeds to the Company of not less than $10 million (prior to
expenses and underwriting commissions) and at an offering price per share equal
to at least $3.75, subject to antidilution adjustments for stock dividends,
stock splits and similar transactions affecting the Stock as well as issuances
of Stock and Stock equivalents.
(ii) Any transaction in which substantially all of the
Company's assets are acquired or in which a controlling amount of the Company's
outstanding shares are acquired, in each case by a single person or entity or an
affiliated group of persons and/or entities. For purposes of this section a
controlling amount shall mean 40% or more of the issued and outstanding shares
of stock of the Company.
ARTICLE 8
WRITTEN NOTICE, ISSUANCE OF STOCK CERTIFICATES, STOCKHOLDER PRIVILEGE
8.1 WRITTEN NOTICE. An Optionee wishing to exercise an Option shall
give written notice to the Company, in the form and manner prescribed by the
Board. Full payment for the shares exercised pursuant to the Option must
accompany the written notice.
8.2 ISSUANCE OF STOCK CERTIFICATE. As soon as practicable after the
receipt of written notice and payment, the Company shall deliver to the Optionee
or to a nominee of the Optionee a certificate or certificates for the requisite
number of shares of Stock.
8.3 PRIVILEGES OF A STOCKHOLDER. An Optionee or any other person
entitled to exercise an Option under this Plan shall not have stockholder
privileges with respect to any Stock covered by the Option until the date of
issuance of a stock certificate for such stock.
7.
<PAGE> 8
ARTICLE 9
TERMINATION OF EMPLOYMENT OR SERVICES.
Except as otherwise expressly specified by the Board of Nonstatutory
Options, all Options granted under this Plan shall be subject to the following
termination provisions.
9.1 DEATH. If an Optionee's employment in the case of an Employee, or
provision of services as a Consultant, in the case of a Consultant, terminates
by reason of death, the Option may thereafter be exercised at any time prior to
the expiration date of the Option or within 12 months after the date of such
death, whichever period is the shorter, by the person or persons entitled to do
so under the Optionee's will or, if the Optionee shall fail to make a
testamentary disposition of an Option or shall die intestate, the Optionee's
legal representative or representatives. The Option shall be exercisable only to
the extent that such Option was exercisable as of the date of death.
9.2 TERMINATION BY COMPANY. In the event of an Optionee's termination
of employment by the Company, in the case of an Employee, or termination of the
provision of services as a Consultant, in the case of a Consultant, other than
by reason of death or for cause (as defined below), the Optionee may exercise
such portion of his Option as was exercisable by him at the date of such
termination (the "Termination Date") at any time within three months of the
Termination Date; provided, however, that where the Optionee is an Employee, and
is terminated due to disability within the meaning of Code section 422, he may
exercise such portion of his Option as was exercisable by him on his Termination
Date within one year of his Termination Date. In any event, the Option cannot be
exercised after the expiration of the term of the Option. Options not exercised
within the applicable period specified above shall terminate.
In the case of an Employee, a change of duties or position within the
if any, or from such a Corporation to the Company, shall not be company,
considered a termination of employment for purposes of this Plan. The Option
Agreements may contain such provisions as the Board shall approve with reference
to the effect of approved leaves of absence upon termination of employment.
9.3 TERMINATION FOR CAUSE. In the event of an Optionee's termination of
employment, in the case of an Employee, or termination of the provision of
services as a Consultant, in the case of a Consultant, which termination is by
the Company for cause, any Option or Options held by him under the Plan, to the
extent not exercised before such termination, shall forthwith terminate. For
purposes of this section. "Cause" shall mean the failure of Optionee, other than
for reasons of disability, to perform or to observe and comply with any of the
material terms or provisions of any Employment or Consulting Agreement entered
into between Optionee and the Company, the Company's good faith determination
that Optionee is not adequately performing his duties, misconduct or action on
the part of Optionee that is damaging or detrimental to the Company, violation
of the policies of the Company with respect to non-discrimination, sexual
harassment, or similar policies affecting workers and the workplace, conviction
of a crime involving a felony, fraud, embezzlement or the like, habitual
insobriety, habitual use of a controlled substance, or misappropriation of the
Company's funds.
8.
<PAGE> 9
9.4 TERMINATION BY OPTIONEE. In the event of an Optionee's termination
of employment, in the case of an Employee, or termination of the provision of
services as a Consultant, in the case of a Consultant, which termination is by
the Employee or Consultant, as the case may be, for purposes of accepting
employment with a Competitor of the Company, any Option or Options held by him
under the Plan, to the extent not exercised before such termination, shall
forthwith terminate. For purposes of this section, "Competitor" shall mean any
entity engaged in the business of providing information services via electronic
means, including without limitation electronic mail.
ARTICLE 10
RIGHTS OF OPTIONEES
10.1 SERVICE. Nothing in this Plan shall interfere with or limit in any
way the night of the Company to terminate any Employee's employment, or any
Consultant's services, at any time, nor confer upon any Employee any right to
continue in the employ of the Company, or upon any Consultant any night to
continue to provide services to the Company.
10.2 NONTRANSFERABILITY. Except as otherwise specified by the Board
for Nonstatutory Options, Options granted under this Plan shall be
nontransferable by the Optionee, other than by will or the laws of descent and
distribution, and shall be exercisable during the Optionee's lifetime only by
the Optionee.
ARTICLE 11
OPTIONEE-EMPLOYEE'S LEAVE OF ABSENCE
11.1 OPTIONEE-EMPLOYEE'S LEAVE OF ABSENCE. For Plan purposes a leave of
absence for an Optionee (i) which is duly authorized In writing by the Company
and (ii) if the Optionee holds an Incentive Stock Option which qualifies under
the applicable regulations under the Code, shall not be deemed a termination of
employment. However, under no circumstances may an Optionee exercise an Option
during any leave of absence, unless authorized by the Board.
ARTICLE 12
AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN
12.1 AMENDMENT, MODIFICATION, AND TERMINATION OF THE PLAN. The Board
may at any time terminate, and from time to time may amend or modify the Plan,
provided, however, that no such action of the Board, without approval of the
stockholders, may
(a) increase the total amount of Stock which may be purchased
through Options granted under the Plan, except as provided in Article V;
(b) change the class of Employees or Consultants
eligible to receive Options;
No amendment, modification or termination of the Plan shall in any manner
adversely affect any outstanding Option under the Plan without the consent of
the Optionee holding the Option.
9.
<PAGE> 10
ARTICLE 13
ACQUISITION, MERGER AND LIQUIDATION
13.1 ACQUISITION. In the event that an Acquisition occurs with respect
to the Company, the company shall have the option, but not the obligation, to
cancel Options outstanding as of the effective date of Acquisition, whether or
not such Options are then exercisable, in return for payment to the Optionees of
an amount equal to a reasonable estimate of an amount (hereinafter the "Spread")
equal to the difference between the net amount per share payable in the
Acquisition, or as a result of the Acquisition, less the exercise price of the
Option. In estimating the Spread, appropriate adjustments to give effect to the
existence of the options shall be made, such as deeming the Options to have been
exercised, with the Company receiving the exercise price payable thereunder, and
treating the shares receivable upon exercise of the Options as being outstanding
in determining the net amount per share. For purposed of this section, an
"Acquisition" shall mean any transaction in which substantially all of the
Company's assets are acquired or in which a controlling amount of the Company's
outstanding shares are acquired, in each case by a single person or entity or an
affiliated group of persons and/or entities. For purposes of this section a
controlling amount shall mean more than 50% of the issued and outstanding shares
of stock of the Company. The Company shall have such an option regardless of how
the Acquisition is effectuated, whether by direct purchase, through a merger or
similar corporate transaction, or otherwise. In cases where the acquisition
consists of the acquisition of assets of the Company, the net amount per share
shall be calculated on the basis of the net amount receivable with respect to
shares upon a distribution and liquidation by the company after giving effect to
expenses and charges, including but not limited to taxes, payable by the company
before the liquidation can be completed.
Where the Company does not exercise its option under this section 13.1,
the remaining provisions of this Article XIII shall apply, to the extent
applicable.
13.2 MERGER OR CONSOLIDATION. Subject to any required action by the
stockholders, if the Company shall be the surviving corporation in any merger or
consolidation, any Option granted hereunder shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to the
Option would have been entitled in such merger or consolidation.
13.3 OTHER TRANSACTIONS. A dissolution or a liquidation of the Company
or a merger and consolidation in which the Company is not the surviving
corporation shall cause every Option outstanding hereunder to terminate as of
the effective date of the dissolution, liquidation, merger or consolidation.
However, the Optionee either (i) shall be offered a firm commitment whereby the
resulting or Surviving corporation in a merger or consolidation will tender to
the Optionee an option (the "Substitute Option" to purchase its shares on terms
and conditions both as to number of share and other-wise, which will
substantially preserve to the Optionee the rights and benefits of the Option
outstanding hereunder granted by the Company, or (ii) shall have the night
immediately prior to such dissolution, liquidation, merger, or consolidation to
exercise any unexercised Options whether or not then exercisable, subject to the
provisions of this Plan. The Board shall have absolute and uncontrolled
discretion to determine whether the Optionee has been offered a firm commitment
and whether the tendered Substitute option will substantially preserve to the
Optionee the rights and benefits of the Option outstanding hereunder. In any
10.
<PAGE> 11
event, any Substitute Option for an Incentive Stock Option shall comply with the
requirements of Code section 425(a).
ARTICLE 14
SECURITIES REGISTRATION
14.1 SECURITIES REGISTRATION. In the event that the Company shall deem
it necessary or desirable to register under the Securities Act of 1933, as
amended, or any other applicable statute, any Options or any Stock with respect
to which an Option may be or shall have been granted or exercised, or to qualify
any such Options or Stock under the Securities Act of 1933, as amended, or any
other statute, then the Optionee shall cooperate with the Company and take such
action as IS necessary to permit registration or qualification of such Options
or Stock.
Unless the Company has determined that the following representation is
unnecessary, each person exercising an Option under the Plan may be required by
the Company, as a condition to the issuance of the shares pursuant to exercise
of the Option, to make a representation in writing (a) that he is acquiring such
shares for his own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof, (b) that before any
transfer in connection with the resale of such shares, he will obtain the
written opinion of counsel for the Company, or other counsel acceptable to the
Company, that such shares may be transferred. The Company may also require that
the Certificates representing such shares contain legends reflecting the
foregoing.
ARTICLE 15
15.1 TAX WITHHOLDING. Whenever shares of Stock are to be issued in
satisfaction of Options exercised under this Plan, the Company shall have the
power to require the recipient of the Stock to remit to the Company an amount
sufficient to satisfy federal, state and local withholding tax requirements.
ARTICLE 16
INDEMNIFICATION
16.1 INDEMNIFICATION. To the extent permitted by law, each person who
is or shall have been a member of the Board shall be indemnified and held
harmless by the Company against and from any loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by him in connection with or
resulting from any claim, action, suit, or proceeding to which he may be a party
or in which he may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him in
settlement thereof, with the Company's approval, or paid by him in satisfaction
of judgment in any such action, suit or proceeding against him, provided he
shall give the Company an opportunity, at its own expense, to handle and defend
it on his own behalf. The foregoing night of indemnification shall not be
exclusive of any other rights of indemnification to which such persons ma be
entitled under the Company's articles of incorporation or bylaws, as a matter of
law, or otherwise, or any power that the Company or any Subsidiary Corporation
may have to indemnify them or hold them harmless.
11.
<PAGE> 12
ARTICLE 17
REQUIREMENTS OF LAW
17.1 REQUIREMENTS OF LAW. The granting of Options and the issuance of
shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
17.2 GOVERNING LAW. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the state of Colorado.
ARTICLE 18
EFFECTIVE DATE OF PLAN
18.1 EFFECTIVE DATE. The Plan shall be effective on February 1, 1996,
subject to ratification by the Company's stockholders.
ARTICLE 19
COMPLIANCE WITH CODE
19.1 COMPLIANCE-WITH CODE. Incentive Stock Options granted hereunder
are intended to qualify as "incentive stock options" under Code section 422. If
any provision of this Plan is susceptible to more than one interpretation, such
interpretation shall be given thereto as is consistent with Incentive Stock
Options granted under this Plan being treated as incentive stock options under
the Code.
ARTICLE 20
20.1 NO OBLIGATION TO EXERCISE. The granting of an Option shall impose
no obligation upon the holder thereof to exercise such Option.
Dated at Denver, Colorado, February 1, 1996.
MERCURY MAIL, INC.
By: /s/ John Funk
----------------------------------
John Funk, President
12.
<PAGE> 13
EXACTIS.COM, INC.
STOCK OPTION AGREEMENT
UNDER THE 1996 STOCK OPTION PLAN
This Agreement is entered into as of the _____ day of ____________,
1996 between Exactis.com, Inc. (the "Company") and __________ (the "Employee").
The Company hereby grants to the Employee an option (the "Option") to
purchase ______ shares of the Company's common stock under the 1996 Stock Option
Plan (the "Plan") upon the following terms and conditions:
1. PURCHASE PRICE. The purchase price of the stock shall be ____ per
share.
2. STOCK OPTION. The Option shall be a Nonstatutory Option, as defined
in the Plan.
3. PERIOD OF EXERCISE. The Option will expire 10 years from the date of
this Agreement. The Option may be exercised for up to, but not in excess of, the
amounts of shares subject to the Option specified below, based on the provision
of paragraph 7.3(b) of the Plan unless otherwise provided in a written addendum
to this Agreement. This Option may not be exercised for less than 50 shares at
any time unless the number of shares purchased is the total number purchasable
at the time under the Option.
4. TRANSFERABILITY. This Option is not transferable except by will or
the laws of descent and distribution and may be exercised during the lifetime of
the Employee only by him or her.
5. TERMINATION OF EMPLOYMENT. In the event that employment of the
Employee with the Company is terminated, the Option may be exercised (to the
extent exercisable at the date of his/her termination) by the Employee within
three months after the date of termination; provided, however, that:
(a) If the Employee's employment is terminated for cause, this
Option shall terminate immediately.
(b) If the Employee's employment is terminated by Employee for
the reason of accepting employment with another entity engaged in the business
of information services via electronic means, this Option shall terminate
immediately,
(c) In no event (including death of the Employee) may this
Option be exercised more than ten years from the date hereof
6. NO GUARANTEE OF EMPLOYMENT. This Agreement shall in no way restrict
the night of the Company or any Subsidiary Corporation to terminated Employee's
employment at any time.
1.
<PAGE> 14
7. INVESTMENT REPRESENTATION, LEGEND. The Employee (and any other
purchaser under paragraphs 6(a) or 6(b) hereof) represents and agrees that all
shares of common stock purchased by him/her under this Agreement will be
purchased for investment purposes only and not with a view to distribution or
resale. The Company may require that an appropriate legend be inscribed on the
face of any certificate issued under this Agreement indicating that transfer of
the shares is restricted, and may place an appropriate stop transfer order with
the Company's transfer agent with respect to such shares.
8. METHOD OF EXERCISE. The Option may be exercised, subject to the
terms and conditions of this Agreement by written notice to the Company. The
notice shall be in the form attached to this Agreement and will be accompanied
by payment (in such form as the Company may specify) of the full purchase price
of the shares to be issued. The Company will issue and deliver certificates
representing the number of shares purchased under the Option, registered in the
name of the Employee as soon as practicable after receipt of the notice.
9. WITHHOLDING. In any case where withholding is required or advisable
under federal, state or local law in connection with any exercise by Employee
hereunder, the Company is authorized to withhold appropriate amounts payable to
Employee, or may require Employee to remit to the Company an amount equal to
such appropriate amounts.
10. INCORPORATION OF PLAN. This Agreement is made pursuant to the
provisions of the Plan, which Plan is incorporated by reference herein. Terms
used herein shall have the same meaning employed in this Plan, unless the
context clearly requires otherwise. In the event of a conflict between the
provisions of the Plan and the provisions of this Agreement, the provisions of
the Plan shall govern.
11. INCORPORATION OF EMPLOYMENT AGREEMENT. This Agreement, as it
relates to the exercise dates of the stock options granted under this Agreement,
is made pursuant to the provisions of the Employment Agreement between the
Company and the Employee dated ______________ incorporated by reference herein.
EXACTIS.COM, INC.
By:
---------------------------------
John Funk, President
ACCEPTED:
- ----------------------------------
Employee
Date:
-----------------------------
2.
<PAGE> 15
EXACTIS.COM, INC.
NOTICE OF EXERCISE OF STOCK OPTION ISSUED
UNDER THE 1996 STOCK OPTION PLAN
To: Compensation Committee
Exactis.com, Inc.
I hereby exercise my option dated _________ to purchase ________ shares
of the $.01 value common stock of the Company at the option exercise price of
$_____ per share. Enclosed is a certified or cashier's check in the total amount
of $________, or payment in such other form as the Company has specified.
I represent to you that I am acquiring such shares for investment
purposes and not with a view to any distribution thereof I understand that my
stock certificate may bear an appropriate legend restricting the transfer of my
shares and that a stock transfer order may be placed with the Company's transfer
agent with respect to such share.
I request that my shares be issued in my name as follows:
-----------------------------------------------------------------
(Print your name in the form in which you wish to have the shares
registered)
-----------------------------------------------------------------
(Social Security Number)
-----------------------------------------------------------------
(Street and Number)
-----------------------------------------------------------------
(City) (State) (Zip Code)
Dated:_______________, 199__.
Signature:
--------------------------
Printed Name:
-----------------------
<PAGE> 16
EXACTIS.COM, INC.
STOCK OPTION AGREEMENT
UNDER THE 1996 STOCK OPTION PLAN
This Agreement is entered into as of the _____ day of ____________,
1996 between Exactis.com, Inc. (the "Company") and _________ (the "Employee").
The Company hereby grants to the Employee an option (the "Option") to
purchase _______ shares of the Company's common stock under the 1996 Stock
Option Plan (the "Plan") upon the following terms and conditions:
1. PURCHASE PRICE. The purchase price of the stock shall be
$_____ per share, which is not less than the fair market value of the stock on
the date of this Agreement.
2. STOCK OPTION. The Option shall be an Incentive Stock Option,
as defined in the Plan.
3. PERIOD OF EXERCISE. The Option will expire 10 years from the
date of this Agreement. The Option may be exercised by an Employee only while
the Employee is actively employed by the Company and as provided in Section 6,
dealing with termination of employment or by a Consultant only while the
Consultant is providing services to the Company as set forth in the Plan.
The Option may be exercised for up to, but not in excess of, the
amounts of shares subject to the Option specified below, based on the provision
of paragraph 7.3(b) of the Plan unless otherwise provided in a written addendum
to this Agreement. This Option may not be exercised for less than 50 shares at
any time unless the number of shares purchased is the total number purchasable
at the time under the Option.
Where the Employee holds (whether under this Option alone or under this
Option in conjunction with other stock options) stock options upon shares of the
Company's common stock having an aggregate fair market value (determined at the
time of grant of each option) exceeding $100,000, the $100,000 Limitation set
forth in Section 4 below shall apply. The Company may impose additional
limitations upon the exercisability of this Option and any other stock options
granted to the Employee. Such limitations are in addition to, and not in lieu
of, the limitations set forth in this Section 3.
4. $100,000 LIMITATION. Notwithstanding anything to the contrary
contained herein, the total fair market value (determined as of the date of
grant of an Option) of shares of stock with respect to which this Option (and
any other stock options granted by the Company) shall become exercisable for the
first time during any calendar year shall not exceed $100,000. (This limitation
is sometimes referred to as the "$100,000 Limitation.") If, in any calendar year
shares of stock having a fair market value of more than $100,000 first would
become exercisable, but for the limitations of this section, this Option shall
be exercisable in such calendar year only for shares having a fair market value
not exceeding $100,000. (Shares with respect to which this Option are not
1.
<PAGE> 17
exercisable in a calendar year due to the $100,000 Limitation are referred to as
"Excess Shares.")
This Option shall become exercisable with respect to Excess Shares from
a calendar year in the next succeeding calendar year (subject to any other
restrictions on exercise which may be contained herein), provided that the
$100,000 limitation shall also be applied to such succeeding calendar year.
Subject to the ten-n of this Option, such carryovers of Excess Shares shall be
made to succeeding calendar years, including carryovers of any Excess Shares
from previous calendar years, without limitation.
If as of the date of this Agreement the Employee already holds stock
options granted by the Company ("Prior Options"), and the fair market value
(determined as of the date of grant of each option) of the shares subject to
this Option and the Prior Options held by the Employee is such that the $100,000
Limitation must be imposed, the $100,000 Limitation shall be applied as follows
unless a special provision is made on Exhibit A attached hereto. If no special
provision is made on Exhibit A, the $100,000 Limitation shall be applied by
giving priority to options which first become exercisable during a calendar year
under the Prior Options. Thus, in applying the $100,000 Limitation under this
Option, the fair market value (determined as of the date of grant) of the shares
of stock with respect to which options first become exercisable under the Prior
Options during the calendar year shall first be determined. Only the balance
remaining for the calendar year of the $100,000 Limitation, if any, may be
exercisable under this Option for the calendar year, with any excess to be
carried over as provided in the preceding paragraph, but with such carryover
also to be subject to the provisions of this paragraph.
Employee acknowledges that it is possible that he or she may be granted
stock options by the Company after the date of this Agreement ("Subsequent
Options"). If the exercise price of a Subsequent Option is less than the
exercise price of this Option, and if permitted under the regulations and
decisions applicable to the $100,000 Limitation, Employee agrees that the
Company may reduce the number of shares of stock for which this Option is
exercisable in specified calendar years, so that all or part of the $100,000
Limitation for such calendar years may be applied to such Subsequent Option,
permitting earlier exercise of such Subsequent Option that would otherwise be
possible. Where such reductions are made, Employee agrees to enter into any
appropriate documentation to implement such reductions.
Employee acknowledges that, as provided in the Plan, in certain
circumstances connected with a dissolution or liquidation of the Company, or a
merger, consolidation or other form of reorganization in which the Company is
not the surviving corporation, the imposition of the $100,000 Limitation may
result in the termination of all or part of this Option or other stock options.
5. TRANSFERABILITY. This Option is not transferable except by
will or the laws of descent and distribution and may be exercised during the
lifetime of the Employee only by him or her.
6. TERMINATION OF EMPLOYMENT. In the event that employment of the
Employee with the Company is terminated, the Option may be exercised (to the
extent exercisable at the date of his/her termination) by the Employee within
three months after the date of termination; provided, however, that:
2.
<PAGE> 18
(a) If the Employee's employment is terminated because
he/she is disabled within the meaning of Internal Revenue Code section 422, the
Employee shall have one year rather than three months to exercise the Option (to
the extent exercisable at the date of his/her termination).
(b) If the Employee dies, the Option may be exercised (to
the extent exercisable by the Employee at the date of his/her death) by his/her
legal representative or by a person who acquired the right to exercise such
option by bequest or inheritance or by reason of the death of the Employee, but
the Option must be exercised within one year after the date of the Employee's
death.
(c) If the Employee's employment is terminated for cause,
this Option shall terminate immediately.
(d) If the Employee's employment is terminated by
Employee for the reason of accepting employment with another entity engaged in
the business of disseminating information through electronic means, this Option
shall terminate immediately.
(e) In no event (including death of the Employee) may
this Option be exercised more than ten years from the date hereof.
7. NO GUARANTEE OF EMPLOYMENT. This Agreement shall in no way
restrict the night of the Company or any Subsidiary Corporation to terminate
Employee's employment at any time.
8. INVESTMENT REPRESENTATION; LEGEND. The Employee (and any other
purchaser under paragraphs 6(a) or 6(b) hereof) represents and agrees that all
shares of common stock purchased by him/her under this Agreement will be
purchased for investment purposes only and not with a view to distribution or
resale. The Company may require that an appropriate legend be inscribed on the
face of any certificate issued under this Agreement, indicating that transfer of
the shares is restricted, and may place an appropriate stop transfer order with
the Company's transfer agent with respect to such shares.
9. METHOD OF EXERCISE. The Option may be exercised, subject to
the terms and conditions of this Agreement, by written notice to the Company.
The notice shall be in the form attached to this Agreement and will be
accompanied by payment (in such form as the Company may specify) of the full
purchase price of the shares to be issued, and in the event of an exercise under
the terms of paragraphs 6(a) or 6(b) hereof, appropriate proof of the night to
exercise the Option. The Company will issue and deliver certificates
representing the number of shares purchased under the Option, registered in the
name of the Employee (or other purchaser under paragraph 6 hereof) as soon as
practicable after receipt of the notice.
10. WITHHOLDING. In any case where withholding is required or
advisable under federal, state or local law in connection with any exercise by
Employee hereunder, the Company is authorized to withhold appropriate amounts
3.
<PAGE> 19
payable to Employee, or may require Employee to remit to the Company an amount
equal to such appropriate amounts.
11. INCORPORATION OF PLAN. This Agreement is made pursuant to the
provisions of the Plan, which Plan is incorporated by reference herein. Terms
used herein shall have the same meaning employed in this Plan, unless the
context clearly requires otherwise. In the event of a conflict between the
provisions of the Plan and the provisions of this Agreement, the provisions of
the Plan shall govern.
12. INCORPORATION OF EMPLOYMENT AGREEMENT. This Agreement, as it
relates to the exercise dates of the stock options granted under this Agreement,
is made pursuant to the provisions of the Employment Agreement between the
Company and the Employee dated ________________________________, which Agreement
is incorporated by reference herein.
EXACTIS.COM, INC.
By:
---------------------------------
John Funk, President
ACCEPTED:
- ------------------------------------
Employee
Date:
-------------------------------
4.
<PAGE> 20
EXACTIS.COM, INC.
NOTICE OF EXERCISE OF STOCK OPTION ISSUED
UNDER THE 1996 STOCK OPTION PLAN
To: Compensation Committee
Exactis.com, Inc.
I hereby exercise my option dated _______________ to purchase shares of
the $.01 value common stock of the Company at the option exercise price of
$_________ per share. Enclosed is a certified or cashier's check in the total
amount of $__________ or payment in such other form as the Company has
specified.
I represent to you that I am acquiring such shares for investment
purposes and not with a view to any distribution thereof I understand that my
stock certificate may bear an appropriate legend restricting the transfer of my
shares and that a stock transfer order may be placed with the Company's transfer
agent with respect to such share.
I request that my shares be issued in my name as follows:
-----------------------------------------------------------------
(print your name in the form in which you wish to have the shares
registered)
-----------------------------------------------------------------
(Social Security Number)
-----------------------------------------------------------------
(Street and Number)
-----------------------------------------------------------------
(city) (State) (Zip Code)
Dated:_______________, 199__.
Signature:
---------------------------------
Printed Name:
------------------------------
<PAGE> 1
EXHIBIT 10.3
EXACTIS.COM, INC.
1999 EQUITY INCENTIVE PLAN
ADOPTED AUGUST 11, 1999
APPROVED BY STOCKHOLDERS AUGUST 11, 1999
TERMINATION DATE: AUGUST 10, 2009
1. PURPOSES.
(a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and
its Affiliates.
(b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to
retain the services of the group of persons eligible to receive Stock Awards,
to secure and retain the services of new members of this group and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined
in Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means Exactis.com, Inc., a Delaware corporation.
(g) "CONSULTANT" means any person, including an advisor, (i) engaged
by the Company or an
1
<PAGE> 2
Affiliate to render consulting or advisory services and who is compensated for
such services or (ii) who is a member of the Board of Directors of an
Affiliate. However, the term "Consultant" shall not include either Directors
who are not compensated by the Company for their services as Directors or
Directors who are merely paid a director's fee by the Company for their
services as Directors.
(h) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the
case of any leave of absence approved by that party, including sick leave,
military leave or any other personal leave.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board of Directors of the
Company.
(k) "DISABILITY" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as
2
<PAGE> 3
reported in THE WALL STREET JOURNAL or such other source as the Board deems
reliable.
(ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.
(iii) Prior to the Listing Date, the value of the Common
Stock shall be determined in a manner consistent with Section 260.140.50 of
Title 10 of the California Code of Regulations.
(o) "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.
(p) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its
parent or a subsidiary for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as to which disclosure would not
be required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(s) "OFFICER" means (i) before the Listing Date, any person designated
by the Company as an officer and (ii) on and after the Listing Date, a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(t) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of
the Plan.
(v) "OPTIONHOLDER" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.
3
<PAGE> 4
(w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an "affiliated
corporation" at any time and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in
any capacity other than as a Director or (ii) is otherwise considered an
"outside director" for purposes of Section 162(m) of the Code.
(x) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(y) "PLAN" means this Exactis.com, Inc. 1999 Equity Incentive Plan.
(z) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor to Rule 16b-3, as in effect from time to time.
(aa) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(bb) "STOCK AWARD" means any right granted under the Plan, including
an Option, a stock bonus and a right to acquire restricted stock.
(cc) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.
(dd) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed
to own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan
unless and until the Board delegates administration to a Committee, as provided
in subsection 3(c). Any interpretation of the Plan by the Board and any
decision by the Board under the Plan shall be final and binding on all persons.
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type or combination of types of Stock Award shall
be granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with
4
<PAGE> 5
respect to which a Stock Award shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in
Section 12.
(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the
Plan to a Committee or Committees of one (1) or more members of the Board, and
the term "Committee" shall apply to any person or persons to whom such
authority has been delegated. If administration is delegated to a Committee,
the Committee shall have, in connection with the administration of the Plan,
the powers theretofore possessed by the Board, including the power to delegate
to a subcommittee any of the administrative powers the Committee is authorized
to exercise (and references in this Plan to the Board shall thereafter be to
the Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY
TRADED. At such time as the Common Stock is publicly traded, in the discretion
of the Board, a Committee may consist solely of two or more Outside Directors,
in accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate one million four
hundred thousand (1,400,000) shares of Common Stock.
5
<PAGE> 6
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan.
(c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.
(d) SHARE RESERVE LIMITATION. Prior to the Listing Date and to the
extent then required by Section 260.140.45 of Title 10 of the California Code
of Regulations, the total number of shares of Common Stock issuable upon
exercise of all outstanding Options and the total number of shares of Common
Stock provided for under any stock bonus or similar plan of the Company shall
not exceed the applicable percentage as calculated in accordance with the
conditions and exclusions of Section 260.140.45 of Title 10 of the California
Code of Regulations, based on the shares of Common Stock of the Company that
are outstanding at the time the calculation is made.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.
(b) TEN PERCENT STOCKHOLDERS.
(i) A Ten Percent Stockholder shall not be granted an
Incentive Stock Option unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of the Common Stock at the
date of grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.
(ii) Prior to the Listing Date, a Ten Percent Stockholder
shall not be granted a Nonstatutory Stock Option unless the exercise price of
such Option is at least (i) one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant or (ii) such lower percentage of
the Fair Market Value of the Common Stock at the date of grant as is permitted
by Section 260.140.41 of Title 10 of the California Code of Regulations at the
time of the grant of the Option.
(iii) Prior to the Listing Date, a Ten Percent Stockholder
shall not be granted a restricted stock award unless the purchase price of the
restricted stock is at least (i) one hundred percent (100%) of the Fair Market
Value of the Common Stock at the date of grant or (ii) such lower percentage of
the Fair Market Value of the Common Stock at the date of grant as is permitted
by Section 260.140.41 of Title 10 of the California Code of Regulations at the
time of the grant of the Option.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than seven hundred
thousand (700,000) shares of Common Stock during any calendar year. This
subsection 5(c) shall not apply prior to the Listing Date and,
6
<PAGE> 7
following the Listing Date, this subsection 5(c) shall not apply until (i) the
earliest of: (1) the first material modification of the Plan (including any
increase in the number of shares of Common Stock reserved for issuance under
the Plan in accordance with Section 4); (2) the issuance of all of the shares
of Common Stock reserved for issuance under the Plan; (3) the expiration of the
Plan; or (4) the first meeting of stockholders at which Directors are to be
elected that occurs after the close of the third calendar year following the
calendar year in which occurred the first registration of an equity security
under Section 12 of the Exchange Act; or (ii) such other date required by
Section 162(m) of the Code and the rules and regulations promulgated
thereunder.
(d) CONSULTANTS.
(i) Prior to the Listing Date, a Consultant shall not be
eligible for the grant of a Stock Award if, at the time of grant, either the
offer or the sale of the Company's securities to such Consultant is not exempt
under Rule 701 of the Securities Act ("Rule 701") because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by Rule 701,
unless the Company determines that such grant need not comply with the
requirements of Rule 701 and will satisfy another exemption under the
Securities Act as well as comply with the securities laws of all other relevant
jurisdictions.
(ii) From and after the Listing Date, a Consultant shall not
be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act ("Form S-8") is not available
to register either the offer or the sale of the Company's securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.
(iii) As of April 7, 1999 Rule 701 and Form S-8 generally are
available to consultants and advisors only if (i) they are natural persons;
(ii) they provide bona fide services to the issuer, its parents, its
majority-owned subsidiaries or majority-owned subsidiaries of the issuer's
parent; and (iii) the services are not in connection with the offer or sale of
securities in a capital-raising transaction, and do not directly or indirectly
promote or maintain a market for the issuer's securities.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on
7
<PAGE> 8
exercise of each type of Option. The provisions of separate Options need not be
identical, but each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:
(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Option granted prior to the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was
granted, and no Incentive Stock Option granted on or after the Listing Date
shall be exercisable after the expiration of ten (10) years from the date it
was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on
the date the Option is granted. Notwithstanding the foregoing, an Incentive
Stock Option may be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of
Section 424(a) of the Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. The
exercise price of each Nonstatutory Stock Option granted on or after the
Listing Date shall be not less than eighty-five percent (85%) of the Fair
Market Value of the Common Stock subject to the Option on the date the Option
is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section 424(a) of
the Code.
(d) CONSIDERATION. The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (i) in cash at the time the Option is
exercised or (ii) at the discretion of the Board at the time of the grant of
the Option (or subsequently in the case of a Nonstatutory Stock Option) (1) by
delivery to the Company of other Common Stock, (2) according to a deferred
payment or other similar arrangement with the Optionholder or (3) in any other
form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated
8
<PAGE> 9
to be interest under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory
Stock Option granted prior to the Listing Date shall not be transferable except
by will or by the laws of descent and distribution and, to the extent provided
in the Option Agreement, to such further extent as permitted by Section
260.140.41(d) of Title 10 of the California Code of Regulations at the time of
the grant of the Option, and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on
or after the Listing Date shall be transferable to the extent provided in the
Option Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable
in periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board
may deem appropriate. The vesting provisions of individual Options may vary.
The provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option
may be exercised.
(h) MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection 6(g), to the extent that the following restrictions on
vesting are required by Section 260.140.41(f) of Title 10 of the California
Code of Regulations at the time of the grant of the Option, then:
(i) Options granted prior to the Listing Date to an Employee
who is not an Officer, Director or Consultant shall provide for vesting of the
total number of shares of Common Stock at a rate of at least twenty percent
(20%) per year over five (5) years from the date the Option was granted,
subject to reasonable conditions such as continued employment; and
(ii) Options granted prior to the Listing Date to Officers,
Directors or Consultants may be made fully exercisable, subject to reasonable
conditions such as continued
9
<PAGE> 10
employment, at any time or during any period established by the Company.
(i) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent
that the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement, which period shall not be less than thirty (30) days for Options
granted prior to the Listing Date unless such termination is for cause), or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionholder does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate.
(j) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination
of the Optionholder's Continuous Service (other than upon the Optionholder's
death or Disability) would be prohibited at any time solely because the
issuance of shares of Common Stock would violate the registration requirements
under the Securities Act, then the Option shall terminate on the earlier of (i)
the expiration of the term of the Option set forth in subsection 6(a) or (ii)
the expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(k) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement, which period shall not be
less than six (6) months for Options granted prior to the Listing Date) or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or her Option
within the time specified herein, the Option shall terminate.
(l) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (2) the expiration of the term of
such Option as set forth in the
10
<PAGE> 11
Option Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
(m) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Subject to the "Repurchase Limitation" in subsection 10(h), any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.
(n) RIGHT OF REPURCHASE. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase all or any part of
the vested shares of Common Stock acquired by the Optionholder pursuant to the
exercise of the Option.
(o) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares of Common Stock received
upon the exercise of the Option. Except as expressly provided in this
subsection 6(o), such right of first refusal shall otherwise comply with any
applicable provisions of the Bylaws of the Company.
(p) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option
Agreement a provision entitling the Optionholder to a further Option (a
"Re-Load Option") in the event the Optionholder exercises the Option evidenced
by the Option Agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option shall (i) provide for a number of
shares of Common Stock equal to the number of shares of Common Stock
surrendered as part or all of the exercise price of such Option; (ii) have an
expiration date which is the same as the expiration date of the Option the
exercise of which gave rise to such Re-Load Option; and (iii) have an exercise
price which is equal to one hundred percent (100%) of the Fair Market Value of
the Common Stock subject to the Re-Load Option on the date of exercise of the
original Option. Notwithstanding the foregoing, a Re-Load Option shall be
subject to the same exercise price and term provisions heretofore described for
Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred
thousand dollar ($100,000) annual limitation on the exercisability of Incentive
Stock Options described in subsection 10(d) and in Section 422(d) of the Code.
There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
11
<PAGE> 12
shall be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions
as the Board may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change from
time to time, and the terms and conditions of separate stock bonus agreements
need not be identical, but each stock bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:
(i) CONSIDERATION. A stock bonus may be awarded in
consideration for past services actually rendered to the Company or an
Affiliate for its benefit.
(ii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share repurchase option in favor
of the Company in accordance with a vesting schedule to be determined by the
Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE.
Subject to the "Repurchase Limitation" in subsection 10(h), in the event a
Participant's Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the stock bonus agreement.
(iv) TRANSFERABILITY. For a stock bonus award made before the
Listing Date, rights to acquire shares of Common Stock under the stock bonus
agreement shall not be transferable except by will or by the laws of descent
and distribution and shall be exercisable during the lifetime of the
Participant only by the Participant. For a stock bonus award made on or after
the Listing Date, rights to acquire shares of Common Stock under the stock
bonus agreement shall be transferable by the Participant only upon such terms
and conditions as are set forth in the stock bonus agreement, as the Board
shall determine in its discretion, so long as Common Stock awarded under the
stock bonus agreement remains subject to the terms of the stock bonus
agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but
each restricted stock purchase agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the
12
<PAGE> 13
following provisions:
(i) PURCHASE PRICE. Subject to the provisions of subsection
5(b) regarding Ten Percent Stockholders, the purchase price under each
restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement. For
restricted stock awards made prior to the Listing Date, the purchase price
shall not be less than eighty-five percent (85%) of the Common Stock's Fair
Market Value on the date such award is made or at the time the purchase is
consummated. For restricted stock awards made on or after the Listing Date, the
purchase price shall not be less than eighty-five percent (85%) of the Common
Stock's Fair Market Value on the date such award is made or at the time the
purchase is consummated.
(ii) CONSIDERATION. The purchase price of Common Stock
acquired pursuant to the restricted stock purchase agreement shall be paid
either: (i) in cash at the time of purchase; (ii) at the discretion of the
Board, according to a deferred payment or other similar arrangement with the
Participant; or (iii) in any other form of legal consideration that may be
acceptable to the Board in its discretion; provided, however, that at any time
that the Company is incorporated in Delaware, then payment of the Common
Stock's "par value," as defined in the Delaware General Corporation Law, shall
not be made by deferred payment.
(iii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock acquired under the restricted stock
purchase agreement may, but need not, be subject to a share repurchase option
in favor of the Company in accordance with a vesting schedule to be determined
by the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject
to the "Repurchase Limitation" in subsection 10(h), in the event a
Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.
(v) TRANSFERABILITY. For a restricted stock award made before
the Listing Date, rights to acquire shares of Common Stock under the restricted
stock purchase agreement shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime
of the Participant only by the Participant. For a restricted stock award made
on or after the Listing Date, rights to acquire shares of Common Stock under
the restricted stock purchase agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the restricted stock purchase
agreement remains subject to the terms of the restricted stock purchase
agreement.
8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
13
<PAGE> 14
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to
any such Stock Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
Common Stock under the Plan, the Company shall be relieved from any liability
for failure to issue and sell Common Stock upon exercise of such Stock Awards
unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have
the power to accelerate the time at which a Stock Award may first be exercised
or the time during which a Stock Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.
(b) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
of Common Stock subject to such Stock Award unless and until such Participant
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of
a Consultant pursuant to the terms of such Consultant's agreement with the
Company or an Affiliate or (iii) the service of a Director pursuant to the
Bylaws of the Company or an Affiliate, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to
14
<PAGE> 15
which Incentive Stock Options are exercisable for the first time by any
Optionholder during any calendar year (under all plans of the Company and its
Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the
Participant is acquiring Common Stock subject to the Stock Award for the
Participant's own account and not with any present intention of selling or
otherwise distributing the Common Stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (1) the
issuance of the shares of Common Stock upon the exercise or acquisition of
Common Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (2) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Common
Stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by
the Company) or by a combination of such means: (i) tendering a cash payment;
(ii) authorizing the Company to withhold shares of Common Stock from the shares
of Common Stock otherwise issuable to the Participant as a result of the
exercise or acquisition of Common Stock under the Stock Award; provided,
however, that no shares are withheld with a value exceeding the minimum amount
of tax required to be withheld by law; or (iii) delivering to the Company owned
and unencumbered shares of Common Stock.
(g) INFORMATION OBLIGATION. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.
(h) REPURCHASE LIMITATION. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or
15
<PAGE> 16
at not less than the original purchase price. To the extent required by Section
260.140.41 and Section 260.140.42 of Title 10 of the California Code of
Regulations at the time a Stock Award is made, any repurchase option contained
in a Stock Award granted prior to the Listing Date to a person who is not an
Officer, Director or Consultant shall be upon the terms described below:
(i) FAIR MARKET VALUE. If the repurchase option gives the
Company the right to repurchase the shares of Common Stock upon termination of
employment at not less than the Fair Market Value of the shares of Common Stock
to be purchased on the date of termination of Continuous Service, then (i) the
right to repurchase shall be exercised for cash or cancellation of purchase
money indebtedness for the shares of Common Stock within ninety (90) days of
termination of Continuous Service (or in the case of shares of Common Stock
issued upon exercise of Stock Awards after such date of termination, within
ninety (90) days after the date of the exercise) or such longer period as may
be agreed to by the Company and the Participant (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
of Common Stock become publicly traded.
(ii) ORIGINAL PURCHASE PRICE. If the repurchase option gives
the Company the right to repurchase the shares of Common Stock upon termination
of Continuous Service at the original purchase price, then (i) the right to
repurchase at the original purchase price shall lapse at the rate of at least
twenty percent (20%) of the shares of Common Stock per year over five (5) years
from the date the Stock Award is granted (without respect to the date the Stock
Award was exercised or became exercisable) and (ii) the right to repurchase
shall be exercised for cash or cancellation of purchase money indebtedness for
the shares of Common Stock within ninety (90) days of termination of Continuous
Service (or in the case of shares of Common Stock issued upon exercise of
Options after such date of termination, within ninety (90) days after the date
of the exercise) or such longer period as may be agreed to by the Company and
the Participant (for example, for purposes of satisfying the requirements of
Section 1202(c)(3) of the Code regarding "qualified small business stock").
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt
of consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of Common Stock subject to such outstanding Stock Awards.
The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be
16
<PAGE> 17
treated as a transaction "without receipt of consideration" by the Company.)
(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.
(c) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common
Stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
or continue any Stock Awards outstanding under the Plan or shall substitute
similar stock awards (including an award to acquire the same consideration paid
to the stockholders in the transaction described in this subsection 11(c)) for
those outstanding under the Plan. In the event any surviving corporation or
acquiring corporation refuses to assume or continue such Stock Awards or to
substitute similar stock awards for those outstanding under the Plan, then with
respect to Stock Awards held by Participants whose Continuous Service has not
terminated, the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated in full,
and the Stock Awards shall terminate if not exercised (if applicable) at or
prior to such event. With respect to any other Stock Awards outstanding under
the Plan, such Stock Awards shall terminate if not exercised (if applicable)
prior to such event.
(d) CHANGE IN CONTROL--SECURITIES ACQUISITION. After the Listing Date,
in the event of an acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or an Affiliate) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act,
or comparable successor rule) of securities of the Company representing at
least fifty percent (50%) of the combined voting power entitled to vote in the
election of Directors, then with respect to Stock Awards held by Participants
whose Continuous Service has not terminated, the vesting of such Stock Awards
(and, if applicable, the time during which such Stock Awards may be exercised)
shall be accelerated in full.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective
unless approved by the stockholders of the Company to the extent stockholder
approval is necessary to satisfy the requirements of Section 422 of the Code,
Rule 16b-3 or any Nasdaq or securities exchange listing requirements.
(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion,
submit any
17
<PAGE> 18
other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted
before amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on the day before the
tenth (10th) anniversary of the date the Plan is adopted by the Board or
approved by the stockholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Stock Award granted while the
Plan is in effect except with the written consent of the Participant.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Stock Award shall be exercised (or, in the case of a stock bonus, shall be
granted) unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.
15. CHOICE OF LAW.
The law of the State of Colorado shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.
18
<PAGE> 19
EXACTIS.COM, INC.
1999 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, Exactis.com, Inc. (the "Company") has granted you an
option under its 1999 Equity Incentive Plan (the "Plan") to purchase the number
of shares of the Company's Common Stock indicated in your Grant Notice at the
exercise price indicated in your Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option
will vest as provided in your Grant Notice, provided that vesting will cease
upon the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in your
Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise" of
your option is permitted) and subject to the provisions of your option, you may
elect at any time that is both (i) during the period of your Continuous Service
and (ii) during the term of your option, to exercise all or part of your
option, including the nonvested portion of your option; provided, however,
that:
(a) a partial exercise of your option shall be deemed to
cover first vested shares of Common Stock and then the earliest vesting
installment of unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments
that have not vested as of the date of exercise shall be subject to the
purchase option in favor of the Company as described in the Company's form of
Early Exercise Stock Purchase Agreement;
(c) you shall enter into the Company's form of Early Exercise
Stock Purchase Agreement with a vesting schedule that will result in the same
vesting as if no early exercise had occurred; and
(d) if your option is an incentive stock option, then, as
provided in the Plan, to the extent that the aggregate Fair Market Value
(determined at the time of grant) of the shares of Common Stock with respect to
which your option plus all other incentive stock options you hold are
exercisable for the first time by you during any calendar year (under all plans
of the Company and its
1
<PAGE> 20
Affiliates) exceeds one hundred thousand dollars ($100,000), your option(s) or
portions thereof that exceed such limit (according to the order in which they
were granted) shall be treated as nonstatutory stock options.
4. METHOD OF PAYMENT. Payment of the exercise price is due in full
upon exercise of all or any part of your option. You may elect to make payment
of the exercise price in cash or by check or in any other manner PERMITTED BY
YOUR GRANT NOTICE, which may include one or more of the following:
(a) In the Company's sole discretion at the time your option
is exercised and provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the
receipt of cash (or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company from the sales
proceeds.
(b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in THE WALL STREET JOURNAL, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the
time you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption
of the Company's stock.
5. WHOLE SHARES. You may exercise your option only for whole shares of
Common Stock.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the
registration requirements of the Securities Act. The exercise of your option
must also comply with other applicable laws and regulations governing your
option, and you may not exercise your option if the Company determines that
such exercise would not be in material compliance with such laws and
regulations.
7. TERM. The term of your option commences on the Date of Grant and
expires upon the EARLIEST of the following:
(a) three (3) months after the termination of your Continuous
Service for any reason other than your Disability or death, provided that if
during any part of such three (3) month period your option
2
<PAGE> 21
is not exercisable solely because of the condition set forth in the preceding
paragraph relating to "Securities Law Compliance," your option shall not expire
until the earlier of the Expiration Date or until it shall have been
exercisable for an aggregate period of three (3) months after the termination
of your Continuous Service;
(b) twelve (12) months after the termination of your
Continuous Service due to your Disability;
(c) eighteen (18) months after your death if you die either
during your Continuous Service or within three (3) months after your Continuous
Service terminates;
(d) the Expiration Date indicated in your Grant Notice; or
(e) the tenth (10th) anniversary of the Date of Grant.
If your option is an incentive stock option, note that, to obtain the
federal income tax advantages associated with an "incentive stock option," the
Code requires that at all times beginning on the date of grant of your option
and ending on the day three (3) months before the date of your option's
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or Disability. The Company has provided for extended
exercisability of your option under certain circumstances for your benefit but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you continue to provide services to the Company or an
Affiliate as a Consultant or Director after your employment terminates or if
you otherwise exercise your option more than three (3) months after the date
your employment terminates.
8. EXERCISE.
(a) You may exercise the vested portion of your option (and
the unvested portion of your option if your Grant Notice so permits) during its
term by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition
to any exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.
(c) If your option is an incentive stock option, by
exercising your option you agree that you will notify the Company in writing
within fifteen (15) days after the date of any disposition of any of the shares
of the Common Stock issued upon exercise of your option that occurs within two
(2) years after the date of your option grant or within one (1) year after such
shares of Common Stock are transferred upon exercise of your option.
3
<PAGE> 22
(d) By exercising your option you agree that the Company (or
a representative of the underwriter(s)) may, in connection with the first
underwritten registration of the offering of any securities of the Company
under the Securities Act, require that you not sell, dispose of, transfer, make
any short sale of, grant any option for the purchase of, or enter into any
hedging or similar transaction with the same economic effect as a sale, any
shares of Common Stock or other securities of the Company held by you, for a
period of time specified by the underwriter(s) (not to exceed one hundred
eighty (180) days) following the effective date of the registration statement
of the Company filed under the Securities Act. You further agree to execute and
deliver such other agreements as may be reasonably requested by the Company
and/or the underwriter(s) that are consistent with the foregoing or that are
necessary to give further effect thereto. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to
your shares of Common Stock until the end of such period.
9. TRANSFERABILITY. Your option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
10. RIGHT OF FIRST REFUSAL. Shares of Common Stock that you acquire
upon exercise of your option are subject to any right of first refusal that may
be described in the Company's bylaws in effect at such time the Company elects
to exercise its right. The Company's right of first refusal shall expire on the
Listing Date.
11. RIGHT OF REPURCHASE. To the extent provided in the Company's
bylaws as amended from time to time, the Company shall have the right to
repurchase all or any part of the shares of Common Stock you acquire pursuant
to the exercise of your option.
12. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or
an Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
13. WITHHOLDING OBLIGATIONS.
(a) At the time you exercise your option, in whole or in
part, or at any time thereafter as requested by the Company, you hereby
authorize withholding from payroll and any other amounts payable to you, and
otherwise agree to make adequate provision for (including by means of a
"cashless exercise" pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign
tax withholding obligations of the Company or an Affiliate, if any, which
4
<PAGE> 23
arise in connection with your option.
(b) Upon your request and subject to approval by the Company,
in its sole discretion, and compliance with any applicable conditions or
restrictions of law, the Company may withhold from fully vested shares of
Common Stock otherwise issuable to you upon the exercise of your option a
number of whole shares of Common Stock having a Fair Market Value, determined
by the Company as of the date of exercise, not in excess of the minimum amount
of tax required to be withheld by law. If the date of determination of any tax
withholding obligation is deferred to a date later than the date of exercise of
your option, share withholding pursuant to the preceding sentence shall not be
permitted unless you make a proper and timely election under Section 83(b) of
the Code, covering the aggregate number of shares of Common Stock acquired upon
such exercise with respect to which such determination is otherwise deferred,
to accelerate the determination of such tax withholding obligation to the date
of exercise of your option. Notwithstanding the filing of such election, shares
of Common Stock shall be withheld solely from fully vested shares of Common
Stock determined as of the date of exercise of your option that are otherwise
issuable to you upon such exercise. Any adverse consequences to you arising in
connection with such share withholding procedure shall be your sole
responsibility.
(c) You may not exercise your option unless the tax
withholding obligations of the Company and/or any Affiliate are satisfied.
Accordingly, you may not be able to exercise your option when desired even
though your option is vested, and the Company shall have no obligation to issue
a certificate for such shares of Common Stock or release such shares of Common
Stock from any escrow provided for herein.
14. NOTICES. Any notices provided for in your option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by mail by the Company to you, five (5) days
after deposit in the United States mail, postage prepaid, addressed to you at
the last address you provided to the Company.
15. GOVERNING PLAN DOCUMENT. Your option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your
option, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of your option
and those of the Plan, the provisions of the Plan shall control.
5
<PAGE> 24
EXACTIS.COM, INC.
STOCK OPTION GRANT NOTICE
(1999 EQUITY INCENTIVE PLAN)
Exactis.com, Inc. (the "Company"), pursuant to its 1999 Equity Incentive Plan
(the "Plan"), hereby grants to Optionholder an option to purchase the number of
shares of the Company's Common Stock set forth below. This option is subject to
all of the terms and conditions as set forth herein and in the Stock Option
Agreement, the Plan and the Notice of Exercise, all of which are attached
hereto and incorporated herein in their entirety.
Optionholder:
Date of Grant:
Vesting Commencement Date:
Number of Shares Subject to Option:
Exercise Price (Per Share):
Total Exercise Price:
Expiration Date:
TYPE OF GRANT: [ ] Incentive Stock Option
[ ] Nonstatutory Stock Option
EXERCISE SCHEDULE: [ ] Same as Vesting Schedule
VESTING SCHEDULE: 1/4th of the shares vest one year after the Vesting
Commencement Date.
1/48th of the shares vest monthly thereafter over the
next three years.
PAYMENT: By one or a combination of the following items (described
in the Stock Option Agreement):
By cash or check
Pursuant to a Regulation T Program if the Shares
are publicly traded
ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionholder further acknowledges that as of the Date
of Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth
the entire understanding between Optionholder and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted
and delivered to Optionholder under the Plan, and (ii) the following agreements
only:
OTHER AGREEMENTS:
<TABLE>
<S> <C>
EXACTIS.COM, INC. OPTIONHOLDER:
By:
Signature Signature
Title: Date:
Date:
</TABLE>
ATTACHMENTS: Stock Option Agreement, 1999 Equity Incentive Plan and Notice of
Exercise
<PAGE> 25
ATTACHMENT I
STOCK OPTION AGREEMENT
<PAGE> 26
ATTACHMENT II
1999 EQUITY INCENTIVE PLAN
<PAGE> 27
ATTACHMENT III
NOTICE OF EXERCISE
<PAGE> 1
EXHIBIT 10.4
EXACTIS.COM, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED AUGUST 11, 1999
APPROVED BY THE STOCKHOLDERS ON AUGUST 12, 1999
EFFECTIVE DATE:
1. PURPOSE.
(a) The purpose of this 1999 Employee Stock Purchase Plan (the "Plan")
is to provide a means by which employees of Exactis.com, Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
committee as provided in subparagraph 2(c). Whether or not the Board has
delegated administration the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the
1
<PAGE> 2
exercise of this power, may correct any defect, omission or inconsistency in the
Plan, in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such
acts as the Board or the Committee deems necessary or expedient to promote the
best interests of the Company and its Affiliates and to carry out the intent
that the Plan be treated as an "employee stock purchase plan" within the meaning
of Section 423 of the Code.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate five hundred thousand (500,000)
shares of the Company's common stock (the "Common Stock"). If any right granted
under the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(a) The Board or the Committee may from time to time grant or provide
for the grant of rights to purchase Common Stock of the Company under the Plan
to eligible employees (an "Offering") on a date or dates (the "Offering
Date(s)") selected by the Board or the Committee. Each Offering shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all employees granted rights to purchase stock under
the Plan shall have the same rights and privileges. The terms and conditions of
an Offering shall be incorporated by reference into the Plan and treated as part
of the Plan. The provisions of separate Offerings need not be identical, but
each Offering shall include (through incorporation of the provisions of this
Plan by reference in the document comprising the Offering or otherwise) the
period during which the Offering shall be effective, which period shall not
exceed twenty-seven (27) months beginning with the Offering Date, and the
substance of the provisions contained in paragraphs 5 through 8, inclusive.
2
<PAGE> 3
(b) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
(ii) the period of the Offering with respect to such right
shall begin on its Offering Date and end coincident with the end of such
Offering; and
(iii) the Board or the Committee may provide that if such
person first becomes an eligible employee within a specified period of time
before the end of the Offering, he or she will not receive any right under that
Offering.
(c) No employee shall be eligible for the grant of any rights
under the Plan if, immediately after any such rights are granted, such employee
owns stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or of any Affiliate. For
purposes of this subparagraph 5(c), the rules of Section 424(d) of the Code
shall apply in determining the stock ownership of any employee, and stock which
such
3
<PAGE> 4
employee may purchase under all outstanding rights and options shall be treated
as stock owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at the
time such rights are granted) for each calendar year in which such rights are
outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board or the Committee may provide in an Offering that certain employees who are
highly compensated employees within the meaning of Section 423(b)(4)(D) of the
Code shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined by the Board for each Offering) during the
period which begins on the Offering Date (or such later date as the Board or the
Committee determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no later than the end of the Offering. The
Board or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or
the Committee may specify a maximum number of shares that may be purchased by
any employee as well as a maximum aggregate number of shares that may be
purchased by all eligible employees pursuant to such Offering. In addition, in
connection with each Offering that contains more than one Purchase Date, the
Board or the Committee may specify a maximum aggregate number of shares which
may be purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.
4
<PAGE> 5
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant
to an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings (as defined
by the Board for each Offering) during the Offering. The payroll deductions made
for each participant shall be credited to an account for such participant under
the Plan and shall be deposited with the general funds of the Company. A
participant may reduce (including to zero) or increase such payroll deductions,
and an eligible employee may begin such payroll deductions, after the beginning
of any Offering only as provided for in the Offering. A participant may make
additional payments into his or her account only if specifically provided for in
the Offering and only if the participant has not had the maximum amount withheld
during the Offering.
(b) At any time during an Offering, a participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering. Upon
such withdrawal from the Offering by a participant, the Company shall distribute
to such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's right
to acquire Common Stock under that Offering shall be automatically terminated. A
participant's withdrawal from an Offering will have no effect upon such
participant's eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of a participant's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the Offering, without
interest.
(d) Rights granted under the Plan shall not be transferable by a
participant other than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14, and during a participant's
lifetime, shall be exercisable only by such participant.
8. EXERCISE.
(a) On each date specified therefor in the relevant Offering ("Purchase
Date"), each participant's accumulated payroll deductions and any other
additional payments specifically provided for in the Offering (without any
increase for interest) will be applied to the purchase of whole shares of stock
of the Company, up to the maximum number of shares permitted pursuant to the
terms of the Plan and the applicable Offering, at the purchase price specified
in the Offering. Unless otherwise provided for in the applicable Offering, no
fractional shares shall be
5
<PAGE> 6
issued upon the exercise of rights granted under the Plan. The amount, if any,
of accumulated payroll deductions remaining in each participant's account after
the purchase of shares which is less than the amount required to purchase one
share of stock on the final Purchase Date of an Offering shall be held in each
such participant's account for the purchase of shares under the next Offering
under the Plan, unless such participant withdraws from such next Offering, as
provided in subparagraph 7(b), or is no longer eligible to be granted rights
under the Plan, as provided in paragraph 5, in which case such amount shall be
distributed to the participant after such final Purchase Date, without interest.
The amount, if any, of accumulated payroll deductions remaining in any
participant's account after the purchase of shares which is equal to the amount
required to purchase whole shares of Common Stock on the final Purchase Date of
an Offering shall be distributed in full to the participant after such Purchase
Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent
unless the shares to be issued upon such exercise under the Plan (including
rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the "Securities Act") and
the Plan is in material compliance with all applicable state, foreign and other
securities and other laws applicable to the Plan. If on a Purchase Date in any
Offering hereunder the Plan is not so registered or in such compliance, no
rights granted under the Plan or any Offering shall be exercised on such
Purchase Date, and the Purchase Date shall be delayed until the Plan is subject
to such an effective registration statement and such compliance, except that the
Purchase Date shall not be delayed more than twelve (12) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Purchase Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered and in such compliance,
no rights granted under the Plan or any Offering shall be exercised then all
payroll deductions accumulated during the Offering (reduced to the extent, if
any, such deductions have been used to acquire stock) shall be distributed to
the participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall at all times make reasonable efforts to keep available the number of
shares of stock required to satisfy such rights, provided that this section
shall not require the Company to take any action that would result in adverse
tax, accounting or financial consequences to the Company.
(b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
6
<PAGE> 7
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock to participants pursuant to rights
granted under the Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shares acquired upon exercise
of rights hereunder are recorded in the books of the Company (or its transfer
agent).
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) the acquisition by any person,
entity or group within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then, as determined by the Board in its
sole discretion (i) any surviving or acquiring corporation may assume
outstanding rights or substitute similar rights for those under the Plan, (ii)
such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board or the Committee at any time, and from time to time, may
amend the Plan. However, except as provided in paragraph 12 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company
7
<PAGE> 8
within twelve (12) months before or after the adoption of the amendment if such
amendment requires stockholder approval in order for the Plan to obtain employee
stock purchase plan treatment under Section 423 of the Code or to comply with
the requirements of Rule 16b-3 promulgated under the Exchange Act.
(b) The Board or the Committee may amend the Plan in any respect the
Board or the Committee deems necessary or advisable to provide eligible
employees with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder relating to
employee stock purchase plans and/or to bring the Plan and/or rights granted
under it into compliance therewith.
(c) Rights and obligations under any rights granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.
14. 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 the end of an
Offering but prior to delivery to the 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 during an Offering.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice in the form prescribed by the Company. 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 sole 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.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board or the Committee in its discretion, may suspend or
terminate the Plan at any time. No rights may be granted under the Plan while
the Plan is suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation, or except as necessary to ensure
8
<PAGE> 9
that the Plan and/or rights granted under the Plan comply with the requirements
of Section 423 of the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon the effective date of the initial
public offering of the Common Stock of the Company (the "Effective Date"), but
no rights granted under the Plan shall be exercised unless and until the Plan
has been approved by the stockholders of the Company within twelve (12) months
before or after the date the Plan is adopted by the Board, which date may be
prior to the Effective Date.
9
<PAGE> 1
EXHIBIT 10.5
THIRD AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
EXACTIS.COM, INC.
JULY 15, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
CERTAIN DEFINITIONS............................................................................................ 1
ARTICLE 2 REGISTRATION RIGHTS.........................................................................3
2.1 Demand Registrations............................................................................3
2.2 Piggyback Registration..........................................................................5
2.3 Expenses of Registration........................................................................6
2.4 Registration Procedures.........................................................................6
2.5 Indemnification.................................................................................7
2.6 Other Obligations...............................................................................9
2.7 Hold-Back Agreements...........................................................................10
2.8 Termination of Registration Rights.............................................................10
ARTICLE 3 TRANSFER AND BUY-BACK RESTRICTIONS.........................................................10
3.1 Prohibition on Transfer........................................................................10
3.2 Right of First Offer...........................................................................10
3.3 Exempt Transactions............................................................................11
3.4 Termination of Rights..........................................................................11
ARTICLE 4 COVENANTS OF THE COMPANY...................................................................11
4.1 Basic Financial Information....................................................................11
4.2 Additional Information Rights..................................................................12
4.3 Prompt Payment of Taxes, etc...................................................................13
4.4 Maintenance of Properties and Leases...........................................................13
4.5 Insurance......................................................................................13
4.6 Accounts and Records...........................................................................13
4.7 Independent Accountants........................................................................13
4.8 Compliance with Laws...........................................................................14
4.9 Maintenance of Corporate Existence, etc........................................................14
4.10 Preemptive Rights..............................................................................14
4.11 Proprietary Information and Inventions Agreement...............................................15
4.12 Controls.......................................................................................15
4.13 Termination of Covenants.......................................................................15
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 5 CORPORATE GOVERNANCE.......................................................................15
5.1 Board of Directors.............................................................................15
5.2 Meetings of the Board..........................................................................16
5.3 Committees.....................................................................................16
5.4 Reimbursement of Expenses......................................................................17
5.5 Termination....................................................................................17
ARTICLE 6 MISCELLANEOUS..............................................................................17
6.1 Governing Law..................................................................................17
6.2 Successors and Assigns.........................................................................17
6.3 Entire Agreement; Amendment and Waiver.........................................................17
6.4 Notices, etc...................................................................................17
6.5 Delays or Omissions............................................................................17
6.6 Severability...................................................................................18
6.7 Counterparts...................................................................................18
6.8 Termination....................................................................................18
6.9 Specific Enforcement...........................................................................18
6.10 Amendment and Restatement of Prior Agreement...................................................18
</TABLE>
ii.
<PAGE> 4
THIRD AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
THIS THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this
"Agreement") dated as of July 15, 1999 by and among (i) EXACTIS.COM, INC., a
Delaware corporation (the "COMPANY"), (ii) THE HOLDERS OF THE COMPANY'S SERIES E
PREFERRED STOCK AND WARRANTS TO PURCHASE SHARES OF SERIES E PREFERRED STOCK
identified on Exhibit A hereto (the "SERIES E HOLDERS"), (iii) THE HOLDERS OF
THE COMPANY'S SERIES D PREFERRED STOCK AND WARRANTS TO PURCHASE SHARES OF SERIES
D PREFERRED STOCK identified on Exhibit A hereto (the "SERIES D HOLDERS"), (iv)
THE HOLDERS OF THE COMPANY'S SERIES C PREFERRED STOCK AND WARRANTS TO PURCHASE
SHARES OF SERIES C PREFERRED STOCK identified on Exhibit A hereto (the "SERIES C
HOLDERS"), (v) THE HOLDERS OF THE COMPANY'S SERIES B PREFERRED STOCK AND
WARRANTS TO PURCHASE SERIES B PREFERRED STOCK identified on Exhibit A hereto
(the "SERIES B HOLDERS" and, collectively with the Series C Holders, Series D
Holders and the Series E Holders, the "INVESTORS" and each individually an
"INVESTOR") and (v) THE HOLDERS OF THE COMPANY'S SERIES A PREFERRED STOCK
identified on Exhibit A hereto (the "SERIES A HOLDERS"). The Series E Holders,
the Series D Holders, the Series C Holders, the Series B Holders and the Series
A Holders are referred to collectively as the "STOCKHOLDERS."
RECITALS
A. The Company, the Series D Holders, the Series C Holders, the Series
B Holders, John Funk and the Series A Holders are parties to that certain Second
Amended and Restated Stockholders Agreement, dated as of June 8, 1998 (the
"STOCKHOLDERS AGREEMENT").
B. The Series E Holders purchased from the Company shares of Series E
Preferred Stock and warrants to purchase Series E Preferred Stock pursuant to
that certain Series E Preferred Stock and Warrant Purchase Agreement, dated as
of the date hereof (the "SERIES E PURCHASE AGREEMENT"). In connection therewith,
the Company and the Stockholders have entered into this Agreement to amend and
restate the prior Stockholders Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
1.1 "AFFILIATE" of a person means any other person that controls, is
controlled by, or is under common control with, such person.
1
<PAGE> 5
1.2 "COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
1.3 "COMMON STOCK" shall mean the Company's Common Stock, $.01 par
value per share.
1.4 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 (or
any similar successor federal statute), as amended, and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
1.5 "INITIATING HOLDERS" shall have the meaning provided in Section
2.1(a)(ii).
1.6 "INVESTOR STOCK" shall mean (i) shares of Common Stock owned by the
Series B Holders, the Series C Holders, the Series D Holders and the Series E
Holders or any transferee thereof; (ii) shares of Common Stock issued or
issuable upon the conversion or exercise of any stock (including, without
limitation, the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock),
warrants (including, without limitation, those certain warrants to purchase
Series B Preferred Stock held by Silicon Valley Bank and MMC/GATX Partnership
No. 1, those certain warrants to purchase Series C Preferred Stock held by the
Series C Holders, those certain warrants to purchase Series D Preferred Stock
held by Sony Music, a Group of Sony Music Entertainment Inc. and those certain
warrants to purchase Series E Preferred Stock held by the Series E Holders),
options or other securities of the Company owned by the Investors or any
transferee thereof; and (iii) any shares of Common Stock issued as a dividend or
other distribution with respect to or in exchange for or in replacement of the
shares referenced in (i) and (ii) above.
1.7 "PERMITTED TRANSFEREE" shall mean, with respect to a holder of
Investor Stock, any Affiliate of such Stockholder, any partner, shareholder or
other equity owner of such Stockholder or any affiliated investment funds.
1.8 "QUALIFIED PUBLIC OFFERING" shall mean an underwritten public
offering of Common Stock resulting in proceeds to the Company of not less than
$20 million (prior to expenses and underwriting commissions) and at an offering
price per share equal to at least $19.50 (as appropriately adjusted for future
stock splits, stock dividends, recapitalizations and similar transactions
affecting the Common Stock).
1.9 "REGISTRABLE SECURITIES" shall mean the Investor Stock and the
shares of Common Stock issuable upon conversion of the Series A Preferred Stock
held by the Series A Holders; provided, however, that Registrable Securities
shall not include any shares that have previously been registered under the
Securities Act or that have otherwise been sold to the public in an open-market
transaction under Rule 144.
1.10 The terms "REGISTERS," "REGISTERED" and "REGISTRATION" shall refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement by the Commission.
2
<PAGE> 6
1.11 "REGISTRATION EXPENSES" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, expenses of any regular or special audits incident to or required
by any such registration and the fees and expenses of one counsel for the
selling holders of Registrable Securities, but excluding Selling Expenses.
1.12 "RULE 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
1.13 "SECURITIES ACT" shall mean the Securities Act of 1933 (or any
similar successor federal statute), as amended, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
1.14 "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities.
1.15 "SERIES A PREFERRED STOCK" shall mean the Company's Series A
Preferred Stock, $.01 par value per share.
1.16 "SERIES B PREFERRED STOCK" shall mean the Company's Series B
Preferred Stock, $.01 par value per share.
1.17 "SERIES C PREFERRED STOCK" shall mean the Company's Series C
Preferred Stock, $.01 par value per share.
1.18 "SERIES D PREFERRED STOCK" shall mean the Company's Series D
Preferred Stock, $.01 par value per share.
1.19 "SERIES E PREFERRED STOCK" shall mean the Company's Series E
Preferred Stock, $.01 par value per share.
ARTICLE 2
REGISTRATION RIGHTS
2.1 DEMAND REGISTRATIONS.
(a) REQUEST FOR REGISTRATION. At any time or times after the
earlier of (x) July 24, 2000 or (y) the effective date of the first registration
statement filed by the Company under the Securities Act, (i) holders of
Registrable Securities representing not less than a majority of the
then-outstanding Registrable Securities (the "LONG-FORM HOLDERS") may require
that the Company effect a registration under the Securities Act in the case of a
requested registration on Form S-1 or any similar form (a "LONG FORM
REGISTRATION"), with respect to at least twenty-five percent (25%) of the
Registrable Securities then outstanding, or (ii) any holder of Registrable
Securities (each a "SHORT-FORM HOLDER" and, together with the Long-Form Holders,
the
3
<PAGE> 7
"INITIATING HOLDERS") may require that the Company effect a registration under
the Securities Act in the case of a requested registration on Form S-3 or any
similar form, if available (a "SHORT-FORM REGISTRATION"), with respect to
Registrable Securities with an anticipated offering price of $1,000,000 or more
(each a "DEMAND REGISTRATION"). Upon receipt of written notice of such demand,
the Company will promptly give written notice of the proposed registration to
all other holders of Registrable Securities and will include in such
registration all Registrable Securities specified in such demand, together with
all Registrable Securities of any other holder of Registrable Securities joining
in such demand as are specified in a written request received by the Company
within twenty (20) days after delivery of the Company's notice. No Demand
Registration may be requested within 180 days after the date of consummation of
any previous registration under the Securities Act relating to an underwritten
offering of Common Stock without the Company's consent, which will not be
unreasonably withheld. The Company shall not be obligated to effect any such
Demand Registration in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service or
process in effecting such registration.
(b) DEFERRAL OF DEMAND REGISTRATION. The Company shall file a
registration statement with respect to each Demand Registration requested
pursuant to Section 2.1(a) as soon as practicable after receipt of the demand of
the Initiating Holders; provided, however, that if in the good faith judgment of
the Board of Directors of the Company, deferral of such Demand Registration
would be in the best interests of the Company in that such registration would
interfere with a proposed primary registration of securities by the Company or
any other material corporate transaction (as evidenced by an appropriate
resolution of the Board), then the Company shall have the right to defer such
filing in order to effect such primary registration or other material corporate
transaction; provided, however, that (i) the Company may not defer the filing
for a period of more than one hundred eighty (180) days after receipt of the
demand of the Initiating Holders, (ii) the Company shall not exercise its right
to defer a Demand Registration more than once in any 24-month period and (iii)
if the Company undertakes a primary registration within 180 days following an
exercise of its deferral right, the holders of Registrable Securities shall have
"piggyback" rights under Section 2.2 hereof with respect to not less than
one-third (1/3) of the number of shares of Common Stock to be sold in such
offering.
(c) UNDERWRITING. If the Initiating Holders intend to distribute
the Registrable Securities covered by a Demand Registration by means of an
underwriting, they shall so advise the Company as a part of their demand made
pursuant to Section 2.1 and the Company shall include such information in its
written notice to holders of Registrable Securities. The Initiating Holders
shall have the right to select the managing underwriter(s) for an underwritten
Demand Registration, subject to the approval of the Company's Board of Directors
(which will not be unreasonably withheld or delayed). The right of any holder of
Registrable Securities to participate in an underwritten Demand Registration
shall be conditioned upon such holder's participation in such underwriting in
accordance with the terms and conditions thereof, and the Company and such
holders will enter into an underwriting agreement in customary form.
(d) PRIORITIES. The holders of Registrable Securities will have
absolute priority over any other securities included in a Demand Registration.
If other securities are included in any Demand Registration that is not an
underwritten offering, all Registrable Securities included
4
<PAGE> 8
in such offering shall be sold prior to or concurrently with the sale of any of
such other securities. If other securities are included in any Demand
Registration that is an underwritten offering, and the managing underwriter for
such offering advises the Company that in its opinion the amount of securities
to be included exceeds the amount of securities which can be sold in such
offering without adversely affecting the marketability thereof, the Company will
include in such registration all Registrable Securities requested to be included
therein prior to the inclusion of any other securities. If the number of
Registrable Securities requested to be included in such registration exceeds the
amount of securities which in the opinion of such underwriter can be sold
without adversely affecting the marketability of such offering, such Registrable
Securities shall be included pro rata among the holders thereof based on the
percentage of the outstanding Common Stock held by each such Stockholder
(assuming the conversion of the Series A, Series B, Series C, Series D and
Series E Preferred Stock and the exercise of all options, warrants and similar
rights held by such Stockholder).
2.2 PIGGYBACK REGISTRATION.
(a) REQUEST FOR INCLUSION. If the Company shall determine to
register any Common Stock for its own account or for the account of other
security holders of the Company on any registration form (other than Form S-4 or
S-8) which permits the inclusion of Registrable Securities (a "PIGGYBACK
REGISTRATION"), the Company will promptly give each holder of Registrable
Securities written notice thereof and, subject to Section 2.2(c), shall include
in such registration all the Registrable Securities requested to be included
therein pursuant to the written requests of holders of Registrable Securities
received within twenty (20) days after delivery of the Company's notice.
(b) UNDERWRITING. If the Piggyback Registration relates to an
underwritten public offering, the Company shall so advise the holders of
Registrable Securities as a part of the written notice given pursuant to Section
2.2(a). In such event, the right of any holder of Registrable Securities to
participate in such registration shall be conditioned upon such holder's
participation in such underwriting in accordance with the terms and conditions
thereof. All holders of Registrable Securities proposing to distribute their
securities through such underwriting shall (together with the Company) enter
into an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
(c) PRIORITIES. If such proposed Piggyback Registration is an
underwritten offering and the managing underwriter for such offering advises the
Company that the securities requested to be included therein exceeds the amount
of securities that can be sold in such offering, except as provided in Section
2. l(b), any securities to be sold by the Company in such offering shall have
priority over any Registrable Securities, and the number of shares to be
included by a holder of Registrable Securities in such registration shall be
reduced pro rata on the basis of the percentage of the outstanding Common Stock
held by such Stockholder (assuming the conversion of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock and the exercise of all options, warrants and
similar rights held by such Stockholder) and all other holders exercising
similar registration rights.
5
<PAGE> 9
2.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with up to two (2) Long-Form Registrations and five (5) Short-Form
Registrations and all Piggyback Registrations shall be borne by the Company;
provided, however, that (x) no registration shall count as one of the
Company-paid Long Form Registrations unless the holders of Registrable
Securities are able to register and sell at least 90% of the Registrable
Securities requested to be included therein, (y) the holders of Registrable
Securities shall be entitled to up to two (2) additional Long-Form Registrations
and five additional Short-Form Registrations so long as such holders agree to
bear all Registration Expenses associated therewith, and (z) no Short-Form
Holder shall be entitled to request more than one Company-paid Short-Form
Registration. All Selling Expenses relating to Registrable Securities included
in any Demand or Piggyback Registration shall be borne by the holders of such
securities pro rata on the basis of the number of shares sold by them.
2.4 REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to this Article II, the Company will keep each holder of
Registrable Securities advised in writing as to the initiation of such
registration and as to the completion thereof. At its expense, the Company will
use its best efforts to:
(a) cause such registration to be declared effective by the
Commission and, in the case of a Demand Registration, keep such registration
effective for a period of one hundred eighty (180) days or until the holders of
Registrable Securities included therein have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement (including post-effective amendments) as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement;
(c) obtain appropriate qualifications of the securities covered by
such registration under state securities or "blue sky" laws in such
jurisdictions as may be requested by the holders of Registrable Securities;
provided, however, that the Company shall not be required to file a general
consent to service of process in any jurisdiction in which it is not otherwise
subject to service in order to obtain any such qualification;
(d) furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a holder of Registrable Securities from time to time may reasonably request;
(e) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such holder, prepare and
furnish to such holder a reasonable number of copies of a supplement to
6
<PAGE> 10
or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
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 or
incomplete in the light of the circumstances then existing;
(f) cause all Registrable Securities covered by such registration
to be listed on each securities exchange or inter-dealer quotation system on
which similar securities issued by the Company are then listed;
(g) provide a transfer agent and registrar for all Registrable
Securities covered by such registration and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration;
(h) otherwise comply with all applicable rules and regulations of
the Commission, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
twelve months, but not more than 18 months, beginning with the first month after
the effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act; and
(i) in connection with any underwritten Demand Registration, the
Company will enter into an underwriting agreement reasonably satisfactory to the
Initiating Holders containing customary underwriting provisions, including
indemnification and contribution provisions.
2.5 INDEMNIFICATION.
(a) The Company will indemnify each holder of Registrable
Securities, each of such holders' officers, directors, partners, agents,
employees and representatives, and each person controlling such holder within
the meaning of Section 15 of the Securities Act, and each underwriter, if any,
of such Registrable Securities and each person who controls any such
underwriter, with respect to each registration, qualification or compliance
effected pursuant to this Article II, against all expenses, claims, losses,
damages and liabilities (or actions, proceedings or settlements in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such indemnified person for
any legal and any other expenses reasonably incurred in connection with
investigating and defending or settling any such claim, loss, damage, liability
or action; provided, however, that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by such holder of Registrable Securities
and stated to be specifically for use therein. It is agreed that the indemnity
7
<PAGE> 11
agreement contained in this Section 2.5(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld).
(b) Each holder of Registrable Securities included in any
registration effected pursuant to this Article II shall indemnify the Company,
each of its directors, officers, agents, employees and representatives, and each
person who controls the Company within the meaning of Section 15 of the
Securities Act, each other such holder of Registrable Securities and each of
their officers, directors and partners, and each person controlling such
holders, and each underwriter, if any, of such Registrable Securities and each
person who controls any such underwriter, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse such indemnified persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in strict
conformity with written information furnished to the Company by such holder of
Registrable Securities and stated to be specifically for use therein; provided,
however, that (x) no holder of Registrable Securities shall be liable hereunder
for any amounts in excess of the net proceeds received by such holder pursuant
to such registration, and (y) the obligations of such holder of Registrable
Securities hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such holder (which consent shall
not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 2.5
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "A") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnified Party,
who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.5 to the extent such
failure is not prejudicial. No Indemnifying Party in the defense of any such
claim or litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include an unconditional release of such Indemnified Party from all liability in
respect to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
8
<PAGE> 12
(d) If the indemnification provided for in this Section 2.5 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in an underwriting
agreement entered into in connection with an underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
2.6 OTHER OBLIGATIONS. With a view to making available the benefits of
certain rules and regulations of the Commission which may effectuate the
registration of Registrable Securities or permit the sale of Registrable
Securities to the public without registration, the Company agrees to:
(a) after its initial registration under the Securities Act,
exercise best efforts to cause the Company to be eligible to utilize Form S-3
(or any similar form) for the registration of Registrable Securities;
(b) at such time as any Registrable Securities are eligible for
transfer under Rule 144(k), upon the request of the holder of such Registrable
Securities, remove any restrictive legend from the certificates evidencing such
securities at no cost to such holder;
(c) make and keep available public information as defined in Rule
144 under the Securities Act at all times from and after ninety (90) days
following its initial registration under the Securities Act;
(d) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements; and
(e) furnish any holder of Registrable Securities upon request a
written statement by the Company as to its compliance with the reporting
requirements of Rule 144 (at any time from and after ninety (90) days following
the effective date of the first registration statement filed by the Company for
an offering of its securities to the general public), and of the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such
9
<PAGE> 13
other reports and documents as a holder of Registrable Securities may reasonably
request in availing itself of any rule or regulation of the Commission
(including Rule 144A) allowing a holder of Registrable Securities to sell any
such securities without registration.
2.7 HOLD-BACK AGREEMENTS. If requested by the Company or any
underwriter of Common Stock of the Company, a holder of Registrable Securities
shall not sell or otherwise transfer or dispose of any Common Stock (other than
pursuant to such registration) during (a) in the case of the Company's initial
public offering of Common Stock for its own account, the one hundred eighty
(180) day period following the effective date of such registration statement (or
such longer period as may be agreed to by the holders of not less than
two-thirds of the Registrable Securities), and (b) in the case of all subsequent
registrations of the Company's Common Stock, the ninety (90) day period
following the effective date of such registration statement; provided, however,
that if holders of Registrable Securities representing at least five percent
(5%) of the then-outstanding Common Stock are subjected to hold-back
restrictions of shorter duration or are released from such restrictions
entirely, such shorter periods or such release, as the case may be, shall apply
to all holders of Registrable Securities. The obligations described in this
Section 2.7 shall not apply to a registration on Form S-4 or Form S-8 or similar
forms which may be promulgated in the future and, except in the case of the
Company's initial public offering, shall not apply to a holder of Registrable
Securities representing less than one percent (1%) of the then-outstanding
Common Stock.
2.8 TERMINATION OF REGISTRATION RIGHTS. The right of any holder of
Registrable Securities to request inclusion of Registrable Securities in any
registration pursuant to this Article II shall survive until (i) all Registrable
Securities beneficially owned by such holder of Registrable Securities may
immediately be sold under Rule 144(k) without restriction as to volume and (ii)
the Company's Common Stock is listed on a national securities exchange or traded
in The Nasdaq Stock Market; provided, however, that the registration rights of
any holder of Registrable Securities representing more than five percent (5%) of
the Company's then-outstanding Common Stock shall survive until the tenth (10th)
anniversary of the date of this Agreement.
ARTICLE 3
TRANSFER AND BUY-BACK RESTRICTIONS
3.1 PROHIBITION ON TRANSFER. No Stockholder shall sell, transfer,
assign, pledge or otherwise dispose of any interest in any Investor Stock (a
"TRANSFER") other than in compliance with this Article III. Each Stockholder
agrees not to consummate any transfer (other than a transfer to a Permitted
Transferee pursuant to Section 3.3) until the expiration of a 30-day period (the
"ELECTION PERIOD") following delivery by such Stockholder of an Offer Notice
pursuant to Section 3.2.
3.2 RIGHT OF FIRST OFFER. Prior to any transfer of Investor Stock, the
transferring Stockholder shall deliver a written notice (the "OFFER NOTICE") to
the Company and the other holders of Investor Stock disclosing in reasonable
detail the number of shares of Investor Stock proposed to be transferred (the
"OFFERED SHARES") and the terms and conditions of such proposed transfer. Each
other holder of Investor Stock shall have the right, exercisable by delivery of
10
<PAGE> 14
written notice to the transferring Stockholder within 20 days after delivery of
the Offer Notice, to purchase all (but not less than all) of its pro rata share
(equal to such electing holder's percentage interest in the outstanding Investor
Stock) of the Offered Shares on the terms and conditions set forth in the Offer
Notice. In the event that any holder of Investor Stock declines to exercise its
right of first offer, the remaining unpurchased portion of the Offered Shares
shall be reoffered to the electing holders of Investor Stock on a pro rata basis
for a period of 10 days following the expiration of such 20-day period. To the
extent that the holders of Investor Stock have not elected to purchase all of
the Offered Shares prior to the expiration of the Election Period, the
transferring Stockholder may, within 90 days after the expiration of the
Election Period, transfer such Offered Shares to one or more third parties at a
price not less that 95% of the price per share specified in the Offer Notice.
Any Offered Shares not transferred during such 90-day period shall again be
subject to the provisions of this Section 3.2 upon subsequent transfer.
3.3 EXEMPT TRANSACTIONS. Any purported transfer of Investor Stock in
violation of the restrictions of this Article III shall be void, and the Company
shall not be obligated to give effect to such transfer on the books and records
of the Company. The restrictions set forth in this Article III shall not apply
to transfers of Investor Stock to a Permitted Transferee of the transferring
Stockholder or to transfers of Investor Stock made in connection with the
liquidation of a Stockholder; provided, however, that such Permitted Transferee
shall agree in writing to be bound by such restrictions in connection with
subsequent transfers.
3.4 TERMINATION OF RIGHTS. The rights of first offer of each holder of
Investor Stock under this Section 3 shall not apply to and shall terminate upon
the closing of a Qualified Public Offering.
ARTICLE 4
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, so long as any Registrable
Securities are outstanding, as follows:
4.1 BASIC FINANCIAL INFORMATION. The Company will furnish the following
reports to each holder of Registrable Securities:
(a) As soon as practicable after the end of each fiscal year of
the Company, and in any event within ninety (90) days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of such
fiscal year, and consolidated statements of income and cash flow of the Company
and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles consistently applied and setting forth
in each case in comparative form the figures for the previous fiscal year, all
in reasonable detail and certified by independent public accountants of
recognized national standing selected by the Company.
(b) As soon as practicable after the end of each quarterly
accounting period in each fiscal year of the Company, and in any event within
forty-five (45) days thereafter, a consolidated balance sheet of the Company and
its subsidiaries, if any, as of the end of each such
11
<PAGE> 15
quarterly period and consolidated statements of income and cash flow of the
Company and its subsidiaries, if any, for such period and for the current fiscal
year to date, prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in comparative form the
figures for the corresponding periods of the previous fiscal year, subject to
changes resulting from normal year-end audit adjustments, all in reasonable
detail and certified by the chief financial officer of the Company (or the
president if no CFO is in place), except that such statements need not contain
the notes required by generally accepted accounting principles.
(c) As soon as practicable after the end of each monthly
accounting period and in any event within thirty (30) days thereafter, a
consolidated balance sheet of the Company and its subsidiaries, if any, as of
the end of such month and consolidated statements of income and of cash flow of
the Company and its subsidiaries, if any, for each month and for the current
fiscal year of the Company to date, all subject to normal year-end audit
adjustments, prepared in accordance with generally accepted accounting
principles consistently applied and certified by the chief financial officer of
the Company (or the president if no CFO is in place), except that such
statements need not contain the notes required by generally accepted accounting
principles.
4.2 ADDITIONAL INFORMATION RIGHTS.
(a) The Company will permit each holder of Registrable Securities
representing at least seven and one-half percent (7.5%) of the fully-diluted
Common Stock (a "SIGNIFICANT HOLDER") to visit and inspect any of the properties
of the Company, including its books of account and other records (and make
copies thereof and take extracts therefrom), and to discuss its affairs,
finances and accounts with the Company's officers and its independent public
accountants, all at such reasonable times and as often as any such person may
reasonably request.
(b) The Company will deliver the reports described below in this
Section 4.2(b) to each Significant Holder:
(i) Annually (but in any event at least thirty (30) days
prior to the commencement of each fiscal year of the Company) the financial plan
of the Company, in such manner and form as approved by the Board of Directors of
the Company, which financial plan shall include an operating budget for such
fiscal year and an updated five-year strategic plan for the Company.
(ii) Concurrently with delivery thereof, copies of all
reports and other written material submitted to the Board of Directors.
(iii) Concurrently with delivery thereof, copies of any
reports or communications delivered to the financial community, including all
press releases.
(c) Each Significant Holder hereby agrees to hold in confidence
and trust and not to misuse or disclose any confidential information provided
pursuant to this Section 4.2; provided, however, that an Investor shall not be
prohibited from using any such information for the purpose of generating and
delivering portfolio valuation information to its investors.
12
<PAGE> 16
4.3 PROMPT PAYMENT OF TAXES, ETC. The Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto; and provided, further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefor. The Company will promptly pay or cause to be paid when due, in
conformance with customary trade terms, all other obligations incident to the
operations of the Company.
4.4 MAINTENANCE OF PROPERTIES AND LEASES. The Company will keep its
properties and those of its subsidiaries, if any, in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its subsidiaries will at all times comply with each
material provision of all leases to which any of them is a party or under which
any of them occupies property if the breach of such provision might have a
material and adverse effect on the condition, financial or otherwise, or
operations of the Company.
4.5 INSURANCE. The Company will keep its assets and those of its
subsidiaries which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company's line of business, and
the Company will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated.
4.6 ACCOUNTS AND RECORDS. The Company will keep true records and books
of which full, true and correct entries will be made of all dealings or
transactions in its business and affairs in accordance with generally accepted
accounting principles a consistent basis.
4.7 INDEPENDENT ACCOUNTANTS. The Company will retain a "Big Five"
national accounting firm as its independent public accountants who shall certify
the Company's financial statements at the end of each fiscal year. In the event
the services of the independent public accountants so selected are terminated,
the Company will promptly thereafter notify the holders of Investor Stock and
will request the firm of independent public accountants whose services are
terminated to deliver to the Investors a letter from such firm setting forth the
reasons for the termination of their services. In the event of such termination,
the Company will promptly thereafter engage another "Big Five" national
accounting firm as its independent public accountants. In its notice to the
holders of Investor Stock the Company shall state whether the change of
accountants was recommended or approved by the Board of Directors of the Company
or any committee thereof.
4.8 COMPLIANCE WITH LAWS. The Company and all its subsidiaries shall
duly observe and conform to all applicable laws and valid requirements of
governmental authorities relating to the conduct of their businesses or to their
properties or assets.
13
<PAGE> 17
4.9 MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Company shall maintain
in full force and effect its corporate existence, rights and franchises and all
licenses and other rights in or to use patents, processes, licenses, trademarks,
trade names or copyrights owned or possessed by it or any subsidiary and deemed
by the Company to be necessary to the conduct of their business.
4.10 PREEMPTIVE RIGHTS. In the event that the Company proposes to issue
any Common Stock or any other equity securities or securities convertible into
equity securities (excluding options to purchase Common Stock pursuant to the
Company's Stock Option Plan), the Company shall give not less than 30 days'
prior written notice to the Investors setting forth the terms and conditions of
such proposed issuance (the "ISSUANCE NOTICE"). The Investors shall have the
preemptive right to purchase up to 80% of the securities so offered on the terms
and conditions set forth in the Issuance Notice by giving written notice to the
Company within fifteen days after receipt of the Issuance Notice (the
"PREEMPTIVE RIGHTS ELECTION PERIOD"). Each electing Investor shall have the
right to purchase its pro rata share of the offered securities (determined by
dividing such Investor's percentage interest in the Common Stock on a
fully-diluted basis by the aggregate percentage interest of all electing
Investors and multiplying such quotient by 80% of the offered securities);
provided, however, that if any Investor declines to exercise its preemptive
right in full, the remaining electing Investors shall be entitled to purchase
such Investor's unpurchased portion of the offered securities on a pro rata
basis. The Company may issue and sell all offered securities not purchased by
the Investors on the terms and conditions set forth in the Issuance Notice
within 90 days after the expiration of the Preemptive Rights Election Period;
provided, however, that any offered securities not sold within such 90-day
period or any offered securities that are proposed to be sold on terms and
conditions less favorable to the Company than those set forth in the Issuance
Notice shall again be subject to the procedure set forth in this Section 4.10
prior to issuance. The provisions of this Section 4.10 shall not apply to any
Permitted Issuance (as defined in Section 6 of Article IV of the Company's
Certificate of Incorporation), any issuance of equity securities for non-cash
consideration to non-Affiliates of the Company on commercially reasonable terms,
issuances in connection with a Qualified Public Offering or to the issuance of
shares of Series E Preferred Stock pursuant to the Series E Purchase Agreement.
An Investor may assign its rights pursuant to this Section 4.10 to one or more
of its Affiliates, subject only to compliance with applicable securities laws.
4.11 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company
shall cause each key employee and consultant to execute and deliver a
Proprietary Information and Inventions Agreement in the form set forth as
Exhibit F to the Series E Purchase Agreement.
4.12 CONTROLS. The Company currently maintains and will maintain a
system of accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles; (iii) access to assets is permitted only in accordance
with management's general or specific authorizations; 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.
14
<PAGE> 18
4.13 TERMINATION OF COVENANTS. Each of the covenants of the Company
contained in Sections 4.1, 4.2 and 4.10 of this Agreement shall expire and
terminate as to each Stockholder on the closing date of the Qualified Public
Offering.
ARTICLE 5
CORPORATE GOVERNANCE
5.1 BOARD OF DIRECTORS.
(a) Effective January 20, 1999, and at all times thereafter, each
Stockholder agrees to vote all securities of the Company over which such
Stockholder has voting control and to take all other necessary or desirable
actions within its control (whether as a stockholder, director or officer of the
Company or otherwise, and including without limitation attendance at meetings in
person or by proxy for purposes of obtaining a quorum and execution of written
consents in lieu of meetings), and the Company shall take all necessary and
desirable actions within its control (including, without limitation, calling
special board and stockholder meetings). so that:
(i) the Company shall have a Board of Directors comprised of
no more than six (6) members;
(ii) the following persons shall be elected to the Board of
Directors:
(A) two (2) representatives of management who shall
consist of the following persons: (1) the person serving as the Company's chief
executive officer and (2) a person who shall be acceptable to a majority of the
Investor Directors (as defined in Section 5.1(a)(ii)(B) below); and
(B) four (4) representatives designated by the holders
of the outstanding Preferred Stock of the Company (the "INVESTOR DIRECTORS"),
one of whom shall be designated by Centennial Fund IV, L.P. ("CENTENNIAL"), one
of whom shall be designated by American Express Travel Related Services Company,
Inc., one of whom shall be designated by Tribune Company and one of whom shall
be designated by Global Retail Partners, L.P., in each case (1) so long as such
designating entity and/or its Affiliates continue to hold at least 50% of the
Registrable Securities held by such entity on the date hereof, and (2) upon
approval of the Board of Directors (such approval not to be unreasonably
withheld) such designating entity and/or its Affiliates may transfer the right
to designate its respective Investor Director to a transferee of more than 50%
of the Registrable Securities held by such entity on the date hereof, provided,
however, that the designating entity transferring such Registrable Securities
holds at least five percent (5%) of the fully-diluted Common Stock immediately
prior to such transfer and that the transferee is an Affiliate of the
transferor;
(iii) in the event that any director for any reason ceases to
serve as a member of the Board during his term of office, the resulting vacancy
on the Board shall be
15
<PAGE> 19
filled by a majority vote of the Stockholders entitled to elect such director as
provided in this Section 5.1; and
(iv) if the Stockholders fail to designate a representative
to fill a directorship pursuant to the terms of this Section 5.1, except as
otherwise provided in the Company's Restated Certificate of Incorporation, as
amended, the election of such director shall be accomplished in accordance with
the Company's Restated Certificate of Incorporation, as amended, and bylaws and
applicable law.
(b) To the extent that such Stockholder does not have a
representative on the Board of Directors, each Significant Holder shall have the
right to designate a non-voting observer to attend all meetings of the Board.
(c) To the extent that any provision of the Company's Restated
Certificate of Incorporation, as amended, or bylaws is inconsistent with the
provisions of this Agreement, the Stockholders agree to take all actions
necessary to effect such amendments to the Restated Certificate of
Incorporation, as amended, or bylaws as may be necessary and appropriate to give
full effect to the provisions of this Agreement.
5.2 MEETINGS OF THE BOARD. The Board of Directors will meet at least
six times each year in accordance with an agreed-upon schedule. One such meeting
will be held at the same time and place that a national trade conference is held
for the Company's industry. In the event that the Company's principal executive
offices are located outside of the Denver/Boulder, Colorado metropolitan area,
the Company will implement video teleconferencing (specifically, one which is
compatible with Centennial's video teleconferencing system) to facilitate board,
committee and other meetings with the Investors.
5.3 COMMITTEES. The Board of Directors will maintain audit, nominating
and compensation committees and shall delegate to such committees those duties
and powers as are customarily performed by committees of such type. The audit
committee shall not include any representatives of the Company's management.
Centennial's representative on the Board of Directors shall be a member of the
nominating committee.
5.4 REIMBURSEMENT OF EXPENSES. The reasonable travel expenses of each
Investor Director incurred in attending or observing Board or committee meetings
shall be reimbursed by the Company. If following the Company's initial public
offering the Company maintains any plan or arrangement to compensate its
directors generally for service as a director with stock options, then such
options shall be freely transferable by the Investor Directors to their
respective firms.
5.5 TERMINATION. The provisions of Sections 5.1, 5.2 and 5.3 shall
expire and terminate on the closing date of the Qualified Public Offering.
16
<PAGE> 20
ARTICLE 6
MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Colorado as such laws are applied to agreements between
Colorado residents entered into and performed entirely in Colorado, except that
the General Corporation Law of the State of Delaware shall govern as to matters
of corporate law.
6.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
6.3 ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement and the
Series B, Series C, Series D and Series E Purchase Agreements, together with any
amendments to such agreements, constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
except by a written instrument signed by the Company and the holders of at least
two-thirds of the outstanding Investor Stock, and any such amendment, waiver,
discharge or termination shall be binding on all the Stockholders; provided,
however, that an amendment to Section 5.1 hereof may not be made to affect a
party's right to designate a director without the prior approval of such party
in writing.
6.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally addressed by hand or
special courier (a) if to a Stockholder, to the address reflected in the
Company's stock ledger, or at such other address as such Stockholder shall have
furnished to the Company in writing or (b) if to the Company, at 707 Seventeenth
Street, Suite 2850, Denver, Colorado 80202, or at such other address as the
Company shall have furnished to each Stockholder in writing. All such notices
and other written communications shall be effective (i) if mailed, five (5) days
after mailing and (ii) if delivered, upon delivery.
6.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any Stockholder under this Agreement shall impair
any such right, power or remedy of such Stockholder nor shall it be construed to
be a waiver of any such breach or default, or an acquiescence therein, or of or
in any similar breach or default thereafter occurring; nor shall any waiver of
any single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any Stockholder of any breach or default
under this Agreement or any waiver on the part of any Stockholder of any
provisions or conditions of this Agreement must be made in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
Stockholder, shall be cumulative and not alternative.
6.6 SEVERABILITY. Unless otherwise expressly provided herein, a
Stockholder's rights hereunder are several rights, not rights jointly held with
any of the other Stockholders. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
17
<PAGE> 21
6.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.8 TERMINATION. Except where otherwise specified elsewhere in this
Agreement, the provisions of this Agreement shall terminate upon consummation of
a Qualified Public Offering.
6.9 SPECIFIC ENFORCEMENT. Any holder of Investor Stock shall be
entitled to specific enforcement of its rights under this Agreement. The parties
acknowledge that money damages would be an inadequate remedy for a breach of
this Agreement and consent to an action for specific performance or other
injunctive relief in the event of any such breach.
6.10 AMENDMENT AND RESTATEMENT OF PRIOR AGREEMENT. Effective and
contingent upon execution of this Agreement and upon the closing of the
transactions contemplated by the Series E Purchase Agreement, the Stockholders
Agreement is hereby amended and restated as set forth herein, and the Company
and the Stockholders hereby agree to be bound by the provisions hereof as the
sole agreement of the Company and the Stockholders with respect to registration
rights and the other rights and obligations set forth herein. Additionally, the
undersigned parties agree that any application of preemptive rights (including
the notice requirements) set forth in Section 4.10 of the Stockholders'
Agreement as to the issuance of the Series E Preferred Stock and warrants under
the Series E Purchase Agreement, including the issuance of Series E Preferred
Stock and warrants in the Rights Offering (as defined in the Series E Purchase
Agreement) pursuant to Section 2.2 of the Series E Purchase Agreement, is
waived.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY:
EXACTIS.COM, INC.
By:
-------------------------------------
Title:
---------------------------------
STOCKHOLDERS:
---------------------------------------
Name of Stockholder
By:
------------------------------------
Title:
---------------------------------
<PAGE> 23
EXHIBIT A
SERIES E HOLDERS
- ----------------
Global Retail Partners, L.P.
DLJ Diversified Partners, L.P.
DLJ Diversified Partners-A, L.P.
GRP Partners, L.P.
Global Retail Partners Funding, Inc.
DLJ ESC II L.P.
Centennial Funds IV, L.P.
Tribune Company
Boulder Ventures II, L.P.
SERIES D HOLDERS
- ----------------
Boulder Ventures Ltd.
Global Retail Partners, L.P.
DLJ Diversified Partners, L.P.
DLJ Diversified Partners-A, L.P.
GRP Partners, L.P.
Global Retail Partners Funding, Inc.
DLJ ESC II L.P.
Raymond H. Van Wagener, Jr.
Sony Music, a Group of Sony Music Entertainment Inc.
SERIES C PREFERRED HOLDERS
- --------------------------
Centennial Fund IV, L.P.
Telecom Partners, L.P.
Boulder Ventures Ltd.
Tribune Company
Flatiron Partners LLC
AMEX Travel Related Services Company
<PAGE> 24
SERIES B HOLDERS
- ----------------
Centennial Fund IV, L.P.
Telecom Partners, L.P.
Boulder Ventures Ltd.
Softven No.2 Investment Enterprise Partnership
Tribune Company
Silicon Valley Bank
MMC/GATX Partnership No.1
SERIES A HOLDERS
- ----------------
Gus Bigos
Kenneth Cook
Michael Stake
Douglas Schneider
Centennial Fund IV, L.P.
Telecom Partners, L.P.
Boulder Ventures Ltd.
<PAGE> 1
EXHIBIT 10.6
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of _________,
1999 by and between EXACTIS.COM, INC. a Delaware corporation (the
"Corporation"), and ____________ ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in
his/her capacity as _______________ of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as
______________ of the Corporation, the Corporation has determined and agreed to
enter into this Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as
_______________ after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
______________ of the Corporation or as a director, officer or other fiduciary
of an affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
1.
<PAGE> 2
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to
Agent by the Corporation under the non-exclusivity provisions of the Code and
Section 43 of the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(b) on account of Agent's conduct that was knowingly
fraudulent or deliberately dishonest or that constituted willful misconduct;
(c) on account of Agent's conduct that constituted a breach of
Agent's duty of loyalty to the Corporation or resulted in any personal profit or
advantage to which Agent was not legally entitled;
(d) for which payment is actually made to Agent under a valid
and collectible insurance policy or under a valid and enforceable indemnity
clause, bylaw or agreement, except in respect of any excess beyond payment under
such insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect,
both the Corporation and Agent have been advised that the Securities and
Exchange Commission believes that indemnification for liabilities arising under
the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof)
initiated by Agent, or any proceeding by Agent against the Corporation or its
directors, officers, employees or other agents, unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the Corporation, (iii) such indemnification is
provided by the Corporation, in its sole discretion, pursuant to the powers
2.
<PAGE> 3
vested in the Corporation under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Agent becomes legally obligated to
pay in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount
thereof, and the Corporation shall indemnify Agent for the portion thereof to
which Agent is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at
its own expense;
(b) except as otherwise provided below, the Corporation may,
at its option and jointly with any other indemnifying party similarly notified
and electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded that there may be a conflict of interest
between the Corporation and Agent in the conduct of the defense of such action
or (iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of Agent's
separate counsel shall be at the expense of the Corporation. The Corporation
shall not be entitled to assume the defense of any action, suit or proceeding
brought by or on behalf of the Corporation or as to which Agent shall have made
the conclusion provided for in clause (ii) above; and
3.
<PAGE> 4
(c) the Corporation shall not be liable to indemnify Agent
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by
this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request therefor. Agent, in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof that Agent is not entitled to
indemnification because of the limitations set forth in Section 4 hereof.
Neither the failure of the Corporation (including its Board of Directors or its
stockholders) to have made a determination prior to the commencement of such
enforcement action that indemnification of Agent is proper in the circumstances,
nor an actual determination by the Corporation (including its Board of Directors
or its stockholders) that such indemnification is improper shall be a defense to
the action or create a presumption that Agent is not entitled to indemnification
under this Agreement or otherwise. In any such enforcement action, the burden of
proof shall be on the Corporation to prove that Agent is not entitled to such
indemnification or advance, as the case may be.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
4.
<PAGE> 5
12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Agent by this Agreement shall
continue after Agent has ceased to be a director, officer, employee or other
agent of the Corporation or to serve at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and shall inure
to the benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.
17. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature
page hereof.
5.
<PAGE> 6
(b) If to the Corporation, to
Exactis.com, Inc.
707 17th Street, Suite 2850
Denver, CO 80202
or to such other address as may have been furnished to Agent by the Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
EXACTIS.COM, INC.
By:
----------------------------------------------
Title:
-------------------------------------------
AGENT
-------------------------------------------------
Address:
-------------------------------------------------
-------------------------------------------------
6
<PAGE> 1
EXHIBIT 10.7
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT is entered into as of the 7th day of August
1996, by and between Atlantic Richfield Company, a Delaware corporation, acting
by and through its division, ARCO Coal Company, 555 Seventeenth Street, Denver,
Colorado 80202, ("Sublessor") and Mercury Mail, Inc., a Delaware corporation,
("Sublessee").
R E C I T A L S:
A. On or about June 22, 1979, City Center Associates, successor in
interest to U.I.D.C. - Denver, Inc., a Colorado corporation ("and their
successors in interest, hereinafter "Landlord") and Sublessor entered into a
written lease agreement, as amended by First Amendment to Lease dated April 30,
1980, Second Amendment to Lease dated July 31, 1980, Third Amendment to Lease
dated December 22, 1981, Fourth Amendment to Lease dated March 4, 1982, Fifth
Amendment to Lease dated June 7, 1982, and Sixth Amendment to Lease dated June
7, 1982, and Seventh Amendment to Lease dated August 18, 1992, attached hereto
as Exhibit A (the "Master Lease") pertaining to approximately 399,000 square
feet of space located on the 26th through the 42nd floors (the "Premises") of
the MCI Tower building, located at Denver, Colorado, (the "Building"). Crescent
Real Estate Equities Limited Partnership is the present successor in interest to
City Center Associates.
B. Sublessor desires to sublease to Sublessee approximately 9,064
rentable square feet (as determined on the basis of the current method of
measuring office space as referenced by the American National Standards
Institute, Inc., in effect as of the date of this Sublease) of the Premises (the
"Sublet Premises") consisting of a part of the 28th floor as delineated on the
attached Exhibit B ("Office Space").
C. BOTH PARTIES UNDERSTAND THAT THE PRIOR WRITTEN CONSENT OF LANDLORD
IS REQUIRED TO PERMIT SUCH SUBLETTING. THE PARTIES AGREE TO CONTEMPORANEOUSLY
EXECUTE THE CONSENT TO SUBLEASE FORM ATTACHED HERETO AS EXHIBIT C.
A G R E E M E N T:
In consideration of the rent to be paid hereunder, the terms and
conditions hereof, and the mutual benefits to be derived, the parties agree as
follows:
ARTICLE 1. TERM
1.1 Sublessor, subject to the prior written consent of Landlord,
hereby sublets the Sublet Premises, consisting of 9,064 rentable
square feet, to Sublessee for a term commencing on August 1,
1996, and terminating on December 31, 2001 ("Term").
1
<PAGE> 2
ARTICLE 2. RIGHT OF FIRST REFUSAL TO SUBLEASE ADDITIONAL SPACE
2.1 Sublessor shall grant to Sublessee the right of first refusal on
any space which becomes available on the 28th floor, subject to
pre-existing encumbrances, during the Term of the Sublease.
Sublessor shall submit to Sublessee any bona fide offer it
receives from an arms-length third party to sublease space on the
28th floor in the form of a letter of intent, and Sublessee shall
have three (3) business days, after receiving written notice of
such offer, to submit its written acceptance to sublease the
space on the same terms as the offer. If Sublessee fails to
accept such offer within said three (3) business days from its
receipt, its first right of refusal on said space shall
terminate, provided, however, that within 60 days following such
notice, Sublessor subleases such space to such other sublessee on
the terms and conditions no more favorable to such third party
that were contained in the notice to Sublessee. The space will be
offered to Sublessee under the same terms and conditions it is
being offered to the third party. The expiration date for any
sublease of additional space shall be the same as the primary
Sublease Term.
ARTICLE 3. BASE RENT AND SERVICES
3.1 A Base Rent of $8.50 per rentable square foot, per year, shall be
paid by Sublessee for the Sublet Premises. Rent is payable
monthly, in advance, in the amount of Six Thousand Four Hundred
Twenty Dollars and Thirty Three Cents ($6,420.33), beginning
August 1, 1996, through the end of the Sublease Term.
3.2 In addition to the Base Rent, Sublessee shall pay Additional
Rent, which is the amount by which the annual Operating Expenses,
defined under Paragraph 11 A(8) of the Master Lease, allocable to
the Sublet Premises on a pro rata basis, exceeds the 1996 actual
Operating Expenses allocable to the Sublet Premises. Sublessee
shall pay the estimated Additional Rent based on Landlord's
estimate as required under Paragraph 11B of the Master Lease.
The Landlord's notice of accounting of the Operating Expenses
shall be sufficient accounting under the Sublease.
3.4 Sublessee shall be entitled, without charge except as provided
therein, to the services provided by Landlord pursuant to
Paragraph 7 and Paragraph 39 of the Master Lease.
3.4 This rent will be payable to Sublessor at 555 Seventeenth Street,
Suite 2220, Denver, Colorado 80202, or at such other address as
Sublessor may designate in writing, on or before the first day of
each calendar month for that calendar month.
2
<PAGE> 3
ARTICLE 4. SECURITY DEPOSIT
Sublessee has deposited with Sublessor the sum of Seventy Seven Thousand and
Forty Four Dollars $(77,044.00) as security for the full and faithful
performance of every provision of this Sublease to be performed by Sublessee. If
Sublessee defaults with respect to any provision of this Sublease, including but
not limited to the provisions relating to the payment of rent, Sublessor may
use, apply or retain all or any part of this security deposit for the payment of
any rent or any other sum in default or before the payment of any other amount
which Sublessor may spend or become obligated to spend by reason of Sublessee's
default, or to compensate Sublessor for any other loss, cost or damage which
Sublessor may suffer by reason of Sublessee's default. If any portion of said
deposit is so used or applied, Sublessee shall, within five (5) days after
written demand therefor, deposit cash with Sublessor in an amount sufficient to
restore the security deposit to its original amount, and Sublessee's failure to
do so shall be a breach of this Sublease. Sublessor shall not be required to
keep this security deposit separate from its general funds nor to pay interest
thereon to Sublessee. If Sublessee shall fully and faithfully perform every
provision of this Sublease to be performed by it, the security deposit or any
balance thereof shall be returned to Sublessee at the expiration of Sublease
Term and upon Sublessee's vacation of the Sublet Premises.
ARTICLE 5. SUBLET PREMISES
The Sublet Premises is described in Exhibit B, attached hereto and made a part
hereof. Sublessee will occupy the Sublet Premises in its "as is" condition.
Sublessee shall, at its own cost and expense, arrange with Landlord for all
cabling to other floors and for all rooftop dish requirements, and by its
execution of this Sublease, Sublessee acknowledges that such arrangements have
been concluded to Sublessee's satisfaction.
ARTICLE 6. SUBLESSEE'S DEFAULT
6.1 It shall be an "Event of Default" if (i) Sublessee fails to pay
Rent or any other charge or payment required of Sublessee
hereunder when due and such failure continues for ten (10) days
after written notice thereof to Sublessee by Sublessor; (ii)
Sublessee violates or fails to perform any of the other
conditions, covenants, or agreements herein made by Sublessee,
and such violation or failure continues for fifteen (15) days
after written notice thereof to Sublessee by Sublessor; (iii)
Sublessee makes a general assignment for the benefit of its
creditors or files a petition for bankruptcy or other
reorganization, liquidation, dissolution, or similar relief; (iv)
a proceeding is filed against Sublessee seeking any relief
mentioned in (iii) above that is not dismissed within sixty (60)
days after Sublessee receives notice of such proceeding; (v) a
trustee, receiver, or liquidator is appointed.
3
<PAGE> 4
for Sublessee or a substantial part of its property; (vi)
Sublessee's interest under this Sublease is taken upon execution
or by other process of law directed against Sublessee or shall be
made subject to any attachment by or on behalf of any creditor of
Sublessee; or (vii) Sublessee mortgages, assigns (except as
expressly permitted in this Sublease) or otherwise encumbers
Sublessee's interest under this Sublease.
6.2 If an Event of Default occurs, Sublessor may: (i) without
obligation to do so and without releasing Sublessee from any
obligation under this Sublease, make any payment or take any
action Sublessor may deem necessary or desirable to cure such
Event of Default, and the cost thereof shall be reimbursed by
Sublessee to Sublessor within ten (10) days after demand; (ii)
terminate this Sublease by written notice to Sublessee as of the
date such notice is given or as of any other date specified in
such notice; (iii) with or without terminating this Sublease,
reenter and take possession of the Sublet Premises by legal
proceedings; (iv) with or without terminating this Sublease, if
Sublessee has abandoned the Sublet Premises, reenter and take
possession of the Sublet Premises, or any part thereof, and
remove the effects therein without liability for any damages
thereto and without being deemed guilty of any manner of trespass
and without prejudice to any other remedies of Sublessor
hereunder; and (v) exercise any other legal remedy, including,
without limitation, any applicable equitable remedies, on account
of such Event of Default. All remedies of Sublessor under this
Sublease shall be cumulative, and the exercise of any of such
remedies shall not prevent the concurrent or subsequent exercise
of any other remedy, either provided for in this Sublease or
available to Sublessor at law or in equity.
6.3 Should Sublessor elect to reenter or take possession of the
Sublet Premises pursuant to legal proceedings or otherwise,
Sublessor shall, from time to time, without terminating this
Sublease, use reasonable efforts to re-sublet the Sublet Premises
or any part thereof on behalf of Sublessee for such term or terms
and at such rent or rents, and upon such other terms and
conditions, as Sublessor may deem reasonably advisable
(including, without limitation, giving any concessions, free
rent, and any other concessions that may be reasonably necessary
under the circumstances), with the right to make alterations and
repairs to the Sublet Premises. No such reentry or taking of
possession of the Sublet Premises by Sublessor shall be construed
as an election on Sublessor's part to terminate this Sublease,
unless a written notice of termination is given to Sublessee by
Sublessor, nor shall it preclude Sublessor from terminating this
Sublease at a later time by giving written notice to Sublessee.
However, if Sublessor is unable to re-sublet the Sublet Premises,
Sublessor shall in no manner whatsoever be responsible or liable
for such failure to re-sublet the Sublet Premises.
4
<PAGE> 5
6.4 If Sublessor elects to take possession without terminating this
Sublease, then such repossession shall not relieve Sublessee of
its obligations and liabilities under this Sublease, all of which
shall survive such repossession. In the event of such
repossession, Sublessee shall pay to Sublessor, as Rent, all Rent
that would be payable hereunder if such repossession had not
occurred, less the net proceeds, if any, of any re-subletting of
the Sublet Premises, after deducting all of Sublessor's
reasonable expenses in connection with such re-subletting and any
reasonable rental concessions. Sublessee shall pay such Rent to
Sublessor on the days on which such Rent would have been payable
hereunder if possession had not been retaken.
6.5 If, however, this Sublease is terminated by Sublessor, Sublessor
shall be entitled to recover as damages from Sublessee, in
addition to all other damage suffered by Sublessor on account of
any Event of Default, the sum of (i) the present value of all of
the Rent that would have been due for the remainder of the
Sublease Term had this Sublease not been terminated, plus all of
Sublessor's costs of re-subletting the Sublet Premises,
including, but not limited to, repossession costs, repair,
alteration, and preparation of the Sublet Premises for
re-subletting, brokerage commissions, attorneys' fees, and rental
concessions. Said amount shall be immediately due and payable by
Sublessee to Sublessor, minus (ii) the present value of the fair
rental value of the Sublet Premises from the effective date of
such termination through the date on which the Sublease Term
would have expired had the Sublease not been terminated. Any
amount due to Sublessor hereunder may be collected after
termination. For purposes of calculating present values under
this Paragraph 7.5, the applicable discount rate shall be equal
to the sum of 2% plus the prime lending rate in effect as of the
date of the Event of Default as quoted in the Wall Street Journal
(the "WSJ"), or, if the WSJ ceases to be published, a similar
national daily business publication identified by Sublessor.
ARTICLE 7. SUBLEASE AGREEMENT SUBJECT TO MASTER LEASE
7.1 This Sublease Agreement is subject and subordinate to the Master
Lease. Except as may be inconsistent with, inapplicable to, or
expressly modified by the terms of this Sublease Agreement, all
the terms, covenants and conditions in the Master Lease shall be
applicable to this Sublease Agreement with the same force and
effect as if Sublessor were the Landlord under the Master Lease
and Sublessee were the Tenant thereunder, and in case of any
breach hereof by Sublessee, Sublessor shall have all the rights
against Sublessee as would be available to the Landlord against
the Tenant under the Master Lease if the breach were by the
Tenant thereunder. Sublessee hereby acknowledges receipt of a
copy
5
<PAGE> 6
of the Master Lease documents. Notwithstanding the foregoing,
Sublessee shall not have any of the rights granted to Sublessor
under the Master Lease in Paragraphs 4, 5, 6, 14, 17, 22, 23, 27,
29, 31, 32, 33, 34, and 37. The preceding paragraphs are
identified for purposes of illustration and not limitation.
7.2 The Master Lease is an agreement solely between Landlord and
Sublessor, and any and all rights and remedies of Sublessee, if
any, shall be solely against Sublessor. However, if Landlord
fails to perform its obligations under the Master Lease,
entitling Sublessor as Tenant thereunder to self help remedy,
Sublessor shall fulfill those obligations of Landlord to the
Sublessee. Neither Landlord's Consent to the Sublease Agreement
nor this Sublease Agreement itself shall give Sublessee any
rights under the Master Lease except those expressly granted by
the Sublease Agreement.
7.3 On matters relating to this Sublease Agreement and subject to
Sublessor's prior approval, which will not be unreasonably
withheld or delayed, Sublessor shall cooperate with Sublessee in
obtaining the consent or approval of Landlord whenever such
consent or approval is required.
7.4 If the Master Lease is terminated the Landlord shall have the
option to treat the termination either as a termination of this
Sublease or as an assignment to the Landlord of the Sublease.
7.5 As between Sublessor and Sublessee only, and in no way involving
Landlord, Sublessor hereby agrees that, if Sublessor were ever to
voluntarily terminate, surrender, or relinquish the Master Lease
to Landlord (in a situation not involving a Default by Sublessor,
but rather, for example a buy-out of the Master Lease by
Landlord), Sublessor shall, prior to or concurrent with such
termination, surrender, or relinquishment to Landlord, agree to
protect the Sublessee's rights under the Sublease so that
Sublessee's right to quiet, peaceful use and enjoyment of the
Sublet Premises and the right not to be dispossessed, evicted or
moved within the MCI Tower Building containing the Sublet
Premises, subject to the other terms and conditions of this
Sublease, are not prejudiced, without fair and just compensation
to Sublessee, and with the same result intended and benefits
accruing to Sublessee as if a non-disturbance agreement had been
executed by Sublessor in favor of the Sublessee, covering the
Sublet Premises.
ARTICLE 8. INDEMNIFICATION AND LIMITATION ON LIABILITY
8.1 Sublessor and Sublessee, each for itself, covenant and agree (a)
that they shall not do or suffer or permit anything to be done
which would constitute
6
<PAGE> 7
a default under the Master Lease or would cause the Master Lease
to be canceled, terminated or forfeited by virtue of any rights
of cancellation, termination or forfeiture reserved or vested in
the Landlord under the Master Lease, and (b) that each of them
will indemnify and hold harmless the other of them from and
against all claims, liabilities, losses, and damages of any kind
whatsoever incurred by reason of, resulting from or arising out
of any such dispute, cancellation, termination, or forfeiture
referred to in (a) above and caused by the indemnifying party.
Notwithstanding the foregoing however, neither party hereto shall
be liable to the other for any indirect or consequential
damages.
8.2 Sublessee hereby indemnifies and holds harmless Sublessor and
Landlord and their respective employees, agents, and invitees
from and against any liability arising directly or indirectly out
of Sublessee's use and occupancy of the Sublet Premises, except
liability arising out of the sole negligence or willful
misconduct of Sublessor or Landlord.
ARTICLE 9. REPAIRS AND ALTERATIONS BY SUBLESSEE
9.1 Sublessee shall not make any alterations in or additions to the
Sublet Premises without first obtaining written consent of
Sublessor and to the extent required under the Master Lease, of
the Landlord. By execution hereof, Sublessor acknowledges
acceptance of Sublessee's initial plans, dated July 31, 1996, for
alterations and additions to the Sublet Premises. All alterations
onto the Sublet Premises, including, by way of illustration and
not by limitation, all partitions, paneling, carpeting, drapes or
other window coverings and light fixtures, except as specifically
set forth hereinafter (but not including movable office furniture
not attached to the Building or special decorative light
fixtures), shall be deemed a part of the real estate and the
property of Sublessor and shall remain upon and be surrendered
with the Sublet Premises as a part thereof without molestation,
disturbance or injury at the end of the Sublease term, whether by
lapse of time or otherwise. If Sublessee is not in default,
Sublessee shall have the right to remove telephone, computer,
cooling equipment and related devices upon termination hereof,
provided that Sublessee restores the Sublet Premises to its
condition at the time of Initial possession.
9.2 Sublessee shall keep the Sublet Premises in as good order,
condition and repair and in an orderly state, as when they were
entered upon, ordinary wear and tear and damage from casualty not
the fault of Sublessee, its agents, employees and invitees
excepted. Except for any repairs or replacements which are
required as the result of Landlord's or Sublessor's negligence or
misconduct, or latent defects which are discovered by Sublessee
and of which Sublessor is notified within two (2) months after
the commencement of the term hereof, Sublessor shall have no
obligation
7
<PAGE> 8
for the repair or replacement of any portion of the Sublet
Premises which wears out during the term hereof, regardless of
the cause therefor, or which requires replacement or repair for
any other reason, including, but not limited to, carpeting,
draperies, wall coverings, painting or any of Sublessee's
property, Sublessee finish work or Sublessee's improvements in
the Sublet Premises, except as otherwise set forth.
9.3 All repair and maintenance work required to be performed by
Sublessee and any Alterations or additions by Sublessee for which
Sublessee has obtained Sublessor's and Landlord's' approval
hereunder may be performed by Sublessee's employees. All such
repair and maintenance work and any other Alterations which
Sublessee has the right to make hereunder, or any other
Alterations permitted by Sublessor pursuant to the provisions of
subparagraph 9.1 above, shall be done at Sublessee's sole cost
and expense; provided, however if Sublessee employs any
contractors or other persons who are not employees of Sublessee
to perform any such work, Sublessee shall have obtained
Sublessor's and Landlord's approval, which shall not be
unreasonably withheld, of such contractor or other person not
later than ten (10) days prior to commencement of any such work.
In all events the performance of such work by any of Sublessee's
employees or any third parties shall not be permitted if it will
materially interfere with any of Landlord's labor relations with
third parties performing any work in the Building. Sublessee, at
its expense, shall obtain all necessary governmental permits and
certificates for the commencement and prosecution of Alterations
and for final approval thereof upon completion, and shall cause
Alterations to be performed in compliance therewith and with all
applicable laws and requirements of public authorities and with
all reasonable applicable requirements of Landlord's and
Sublessor's insurance carriers. Alterations shall be performed in
a good and workmanlike manner, using materials and equipment at
least equal in quality and class to the original installations in
the Office Portion as Office Portion is defined in the Master
Lease. Further, if any such Alterations involve installments with
respect to Sublessee's telephonic, telegraphic or electrical
connections, such Alterations shall be performed by parties
either designated or approved in writing by Sublessor. In all
events, any such work performed by Sublessee shall be done in
such a manner so as not to interfere with the mechanical or
electrical systems or affect the structural integrity of the
Building.
9.4 If Sublessee utilizes third parties to perform such work, with
Landlord's or Sublessor's prior consent, Sublessee shall on
request deliver to Sublessor and Landlord certificates issued by
insurance companies qualified to do business in the State of
Colorado, evidencing that workmen's compensation and public
liability insurance and property damage insurance all in the
amounts and with companies, and on forms satisfactory
8
<PAGE> 9
to Sublessor and Landlord, are in force and effect and maintained
by all contractors and subcontractors engaged by Sublessee to
perform such work. All such policies shall name Sublessor and
Landlord as additional insured. Each such certificate shall
provide that the insurance may not be canceled or modified
without ten (10) days prior written notice to Sublessor and
Landlord.
9.5 Sublessee shall keep the Sublet Premises free and clear of all
liens and encumbrances of third parties or contractors who
perform alterations or repairs or other work on the Sublet
Premises, and if any are filed, shall cause them to be removed
promptly or shall indemnify and hold harmless Sublessor from and
against any such lien or encumbrance.
ARTICLE 10. FIRE: RESTORATION OF PREMISES
10.1 If the Sublet Premises, the Premises or the Building shall be so
damaged by fire or other casualty as to render the Sublet
Premises wholly untenantable, and if the damage shall be so great
that a competent architect, in good standing, selected by
Landlord shall certify in writing to Landlord and Sublessor that
the Building or the Premises (as Building and Premises are
defined in the Master Lease), or the Sublet Premises, with the
exercise of reasonable diligence, cannot be made fit for
occupancy within one hundred fifty (150) working days from the
happening thereof, then this Sublease shall cease and terminate
from the date of the occurrence of the damage; and Sublessee
thereupon shall surrender to Sublessor the Sublet Premises and
all interest therein hereunder, and Sublessor may reenter and
take possession of the Sublet Premises and remove Sublessee
therefrom. Sublessee shall pay rent, duly apportioned, up to the
time of the termination of this Sublease. If, however, the damage
shall be such that the architect shall certify that the Sublet
Premises can be made tenantable within the one hundred fifty
(150) day period, then repairs will be made as provided in
Paragraph 22 of the Master Lease with all reasonable speed.
10.2 If the Sublet Premises shall be slightly damaged by fire or other
casualty, but not so as to render them untenantable, Sublessor,
after receiving notice in writing of the occurrence of the
injury, shall cause them to be repaired by the Landlord with
reasonable promptness; provided, however, Sublessee shall be
solely responsible for all repairs and replacements to
Sublessee's improvements in the Sublet Premises.
10.3 During any period of restoration or repair of the Sublet Premises
resulting from a fire or other casualty, Sublessee's rent shall
abate during the period the Sublet Premises or any portion
thereof are rendered untenantable in the same proportion which
such part of the Sublet Premises which are
9
<PAGE> 10
untenantable bears to the whole, provided that in the event more
than fifty percent (50%) of the Sublet Premises are rendered
untenantable the entire Sublet Premises shall be deemed
untenantable to the extent not occupied by Sublessee.
10.4 In case the Building throughout shall be so injured or damaged,
whether by fire or otherwise, (though the Sublet Premises may not
be affected, or if affected, can be repaired within the one
hundred fifty (150) days) that Landlord, within sixty (60) days
after the happening of the injury, shall decide not to
reconstruct or rebuild the Building, then, notwithstanding
anything contained herein to the contrary, upon notice in writing
to that effect given by Sublessor to Sublessee within seventy
(70) days from the date of the casualty, a) Sublessee shall pay
the rent, properly apportioned up to the date of termination of
the Sublease, b) this Sublease shall terminate from the date of
delivery of the written notice, c) and both parties hereto shall
be freed and discharged of all further obligations hereunder.
ARTICLE 11. CONDEMNATION
If the Sublet Premises or the Premises or the Building shall be taken by right
of eminent domain or by condemnation, or shall be conveyed in lieu of any such
taking, this Sublease, at the option of either Sublessor or Sublessee exercised
by either party giving notice to the other of such termination within thirty
(30) days after such taking or conveyance, shall forthwith cease and terminate
and the rent shall be duly apportioned as of the date of such taking or
conveyance. Sublessee thereupon shall surrender to Sublessor the Sublet Premises
and all interest therein under this Sublease, and Sublessor may reenter and take
possession of the Sublet Premises or remove Sublessee therefrom. In the event of
any such taking or conveyance, Sublessee shall have the right at its own cost to
make a separate claim from the condemning authority, and not from Sublessor or
Landlord, for relocation expenses, the costs of Sublessee's improvements taken,
and the value of any portion of the leasehold so terminated, so long as the
claim shall not directly or indirectly result in costs or delays to Sublessor or
Landlord and so long as any award to Sublessee does not diminish Landlord's or
Sublessor's award. Sublessor shall give Sublessee written notice of any
condemnation proceedings or negotiations with any governmental body or as to the
possibility of such proceeding within five (5) days after it receives the notice
from Landlord.
ARTICLE 12. INSURANCE
12.1 Sublessee shall maintain in effect the following types and
amounts of insurance with insurance companies satisfactory to
Sublessor:
10
<PAGE> 11
12.1.1 Worker's Compensation Insurance, including Occupational
Disease and Employer's Liability Insurance in the limit
of not less than $500,000 per person and $1,000,000 per
accident.
12.1.2 Comprehensive General Liability Insurance, including
contractual liability with limits of not less than
$1,000,000 applicable to bodily injury, sickness or
death in any one occurrence and $500,000 for loss of or
damage to property in any one occurrence.
12.2 All policies shall be endorsed to provide that the underwriters
and insurance company of Sublessee shall not have any right of
subrogation against Sublessor or Landlord, or any of their
respective subsidiaries, agents, employees, invitees, servants,
contractors, insurers, or underwriters, or against such other
parties as Sublessor may designate from time to time. Any
insurance policy or policies of Sublessor relating to the
Premises will provide a Waiver of Subrogation in favor of
Sublessee, its agents and employees, and other persons and
entities occupying or using the Sublet Premises in accordance
with the terms of the Sublease and Master Lease.
12.3 Upon request, Sublessee shall furnish Certificates of Insurance
to Sublessor evidencing the insurance required hereunder. Each
certificate shall provide that thirty (30) days prior written
notice shall be given Sublessor in the event of cancellation or
material change in the policies.
12.4 Each party shall have its insurance underwriter waive any right
of subrogation it may have against the other party on account of
any loss or damage that is insured against under any insurance
policy (to the extent that the loss or damage is recoverable
under the insurance policy) that covers the Building, the
Premises, the Sublet Premises or Sublessor's or Sublessee's
fixtures, personal property, leasehold improvements or business
and names Sublessor or Sublessee, as the case may be, as a party
insured. Nothing contained in this section shall derogate from
otherwise affect any other releases of either party for claims.
ARTICLE 13. PARKING
Sublessee shall have the right initially, upon execution of this Sublease, to
lease up to nine (9) parking spaces in the City Center Garage for $105 each per
month for the initial Term of this Sublease, and subject to the terms and
conditions of the City Center Garage Parking Agreement ("Parking Lease"). The
parties shall execute the Parking Lease attached hereto as Exhibit D.
11
<PAGE> 12
ARTICLE 14. MISCELLANEOUS
14.1 Sublessee shall, during ordinary business hours as referenced in
the Master Lease, be allocated electric current for the Sublet
Premises as provided in this 14.1. Sublessee shall use the
electric current only for building standard lighting and business
machines described below, and standard HVAC, which term shall not
include required cooling or heating for any of Sublessee's
special equipment or computers. To the extent that electric
current is used for any other purpose, including heating or
cooling required for any of Sublessee's special equipment,
computers, or computer rooms, Sublessee's rent may be increased
from time-to-time by Sublessor as hereafter described. The amount
of electrical current to which Sublessee is entitled hereunder
without additional charge for general office uses (e.g.,
typewriters, calculators, small copying machines, incandescent
lighting, task ambient lighting, dwyer units, water coolers,
CRT's, personal computers and coffee machines) shall be
calculated in accordance with the following formula: five (5)
watts per rentable square foot multiplied by the rentable square
footage of the Sublet Premises multiplied by ordinary business
hours per year as referenced in the Master Lease, with the
resultant figure divided by twelve (12) (hereinafter the "monthly
allowance"). The monthly allowance will be compared with the
actual monthly consumption of electric current utilized by
Sublessee (except for standard building lighting and standard
HVAC) to determine the excess usage by Sublessee, if any. Such
excess will be multiplied by Sublessor's actual costs for such
energy as reasonably determined by Sublessor's or Landlord's
engineers (the resulting figure shall hereinafter be referred to
as "Sublessee's monthly usage"). Sublessor shall have the right,
not more frequently than monthly, to make an adjustment in each
monthly rental payment then being made by Sublessee based upon
Sublessee's monthly usage multiplied by the average cost incurred
by the Building per kilowatt hour for power for the previous
month. To assist Sublessor in making the rental adjustment
described herein, Sublessor shall have the right to require
installation by Sublessee of such electric meters as Sublessor
reasonably deems necessary to assist it in making the adjustment
and the cost of the meters and their installation shall be borne
by Sublessee. Sublessee shall also pay the labor cost of
replacing light bulbs or tubes used in non-standard lighting, and
Sublessee shall pay for the purchase of bulbs and tubes used in
non-standard lighting of the Sublet Premises; provided, however,
Sublessee shall have the right to change its own light bulbs or
tubes so long as Sublessee does not interfere with the Building's
mechanical or electrical systems.
12
<PAGE> 13
14.2 All prior understandings and agreements between the parties are
merged within this Sublease Agreement, which alone fully and
completely sets forth the understanding of the parties; and this
Sublease Agreement may not be changed or terminated orally or in
any manner other than by an amendment in writing signed by
authorized agents of each of the parties and subject to the prior
written consent of Landlord.
14.3 Any notice or demand which either party may or must give to the
other hereunder shall be in writing and sent by registered or
certified mail postage prepaid addressed if to Sublessor:
ATLANTIC RICHFIELD COMPANY,
Acting by and through its division,
ARCO Coal Company
555 Seventeenth Street, Suite 1713
Denver, Colorado 80202
ATTENTION: RAYMOND L. ALVEY
MANAGER, PROPERTY MANAGEMENT
or if to Sublessee:
MERCURY MAIL, INC.
707 Seventeenth Street, Suite 2850
Denver, Colorado 80202
ATTENTION: BLAIR WHITAKER
VICE PRESIDENT OF FINANCE
Either party may, by notice in writing, direct that future
notices or demands be sent to a different address.
Sublessor agrees, upon receipt of any notice which may affect or
relate to the tenancy or operation of business in the Sublet
Premises, to forward within five (5) days a copy of such notice
to Sublessee. Sublessor also agrees within such time to give to
Landlord a copy or the substance of each notice or demand which
Sublessor has received from Sublessee.
14.4 The covenants and agreements of this Sublease Agreement shall
bind and inure to the benefit of Sublessor, Sublessee and their
respective successors and assigns, however Sublessee may not
sub-sublet or assign any of its interest in the Sublet Premises
or under this Sublease Agreement, without the prior written
consent of Sublessor and Landlord, which consent, as to
Sublessor, shall not be unreasonably
13
<PAGE> 14
withheld; and any such purported assignment or subletting shall
be unauthorized and of no force or effect.
14.5 Each party represents that the only brokers that each dealt with
in respect to this Sublease Agreement are Office Leasing
Advantage, Cushman Realty, and Michael O'Brien Commercial Real
Estate, according to any applicable terms and conditions
Sublessor or Sublessee may have with those brokers.
Each party shall hold harmless the other party from all damages
resulting from any claims that may be asserted against one party
by any broker, finder, or other person with whom the other party
has or purportedly has dealt.
14.6 Notwithstanding any other provision of this Sublease, all of
Sublessor's obligations hereunder shall be subject to Sublessor's
rights and obligations under the Master Lease and in the event of
conflict between Sublessor's obligations hereunder and
Sublessor's rights and obligations under the Master Lease, the
latter shall control. Neither Sublessee nor Sublessor is aware of
any such conflict.
IN WITNESS WHEREOF, the parties hereto have executed this Sublease
Agreement as of the day and year first above written.
ATLANTIC RICHFIELD COMPANY, MERCURY MAIL, INC.
Acting by and through its division,
ARCO Coal Company
By: /s/ RAYMOND L. ALVEY By: /s/ JOHN T. FUNK
-------------------------------------- ------------------------------
Raymond L. Alvey, Property Manager John T. Funk, President
ARCO Coal Company, a Division
of Atlantic Richfield Company
[STAMP]
14
<PAGE> 15
EXHIBIT A
"MASTER LEASE"
15
<PAGE> 16
EXHIBIT B
[FLOOR PLAN]
<PAGE> 17
CONSENT TO SUBLEASE
(EXHIBIT C TO SUBLEASE AGREEMENT)
This Consent to Sublease (this "Consent") is entered in to effective as
of the 10th day of October, 1996, by and among CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), ATLANTIC
RICHFIELD COMPANY, a Delaware corporation, acting by and through its
division ARCO Coal Company ("Sublessor"), and MERCURY MAIL, INC., a Delaware
corporation ("Sublessee").
A. Sublessor is the tenant under that certain Lease Agreement dated
June 22, 1979, (as amended, the "Primary Lease"), wherein Landlord leased
to Sublessor approximately 399,382 rentable square feet (the "Premises")
located on the 26th through the 42nd floors of the building located at 707
17th Street, Denver, Colorado, and commonly known as MCI Tower (the
"Building").
B. Sublessor desires to sublease to Sublessee a portion of the
Premises, which portion consists of approximately 9,064 rentable square feet
(the "Subleased Premises").
C. The terms of the Primary Lease require the consent of Landlord to
any such subletting and Landlord has agreed to grant such consent, subject
to the terms and provisions of this Consent.
NOW, THEREFORE, Landlord hereby consents to the sublease of the
Subleased Premises from Sublessor to Sublessee pursuant to that certain
Sublease Agreement dated as of August 7, 1996 (the "Sublease"), to which
this Consent is attached as Exhibit C and made a part thereof.
1. Definitions. All capitalized terms used herein shall have the same
meanings as set forth in the Primary Lease, unless otherwise provided
herein.
2. Review of Primary Lease. Sublessee acknowledges that it has examined
and is familiar with all of the terms and provisions of the Primary Lease.
3. Sublease Subordination. The Sublease shall be subject and
subordinate at all times to all of the covenants, agreements, terms,
provisions and conditions of the Primary Lease and of this Consent. Neither
Sublessor nor Sublessee shall do or permit anything to be done in connection
with the Sublease or Sublessee's occupancy of the Subleased Premises which
will violate the Primary Lease or this Consent.
4. Further Transfers; Sublease Amendments. Sublessee will not without
the prior written consent of Landlord in each instance, assign the Sublease
or sublet the Subleased Premises or any part thereof. Sublessor and
Sublessee agree, in conformity with the Primary Lease, not to amend the
Sublease without the prior consent of Landlord.
5. Alterations. Sublessee agrees that no alterations, additions or
physical changes will be made in or to the Subleased Premises or any part
thereof without Landlord's prior written consent in each instance.
6. No Release. This Consent by Landlord shall not be deemed in any way
or manner a release of Sublessor from the responsibility and liability for
the payment of rent under the Primary Lease and for compliance with any and
all obligations to be performed by Sublessor as the tenant under the Primary
Lease. The parties hereto agree that Landlord may, after an event of default
by Sublessor under the Primary Lease, in addition to any other remedies
under the Primary Lease or at law, collect directly from Sublessee all rents
due and owing from Sublessee and apply any such rent against sums due to
Landlord by Sublessor as a tenant under the Primary Lease. Further,
Sublessor hereby authorizes and directs Sublessee to make such payments of
rent directly to Landlord upon its receipt of written notice of default from
Landlord.
<PAGE> 18
Such collection of any such rents shall not be deemed a waiver of any rights
and remedies of Landlord against Sublessor as the tenant under the Primary
Lease or constitute a novation or release of Sublessor as tenant from the
further performance of its obligations under the Primary Lease. The receipt
by Landlord from Sublessee of any such rents shall be a full and complete
release, discharge and acquittance to such Sublessee to the extent of any
such amount of rent so paid to Landlord.
7. Landlord's Obligations. Notwithstanding anything to the contrary
contained in the Sublease, neither the Sublease nor this Consent shall
enlarge or increase Landlord's obligations or liability under the Primary
Lease or otherwise, and in the event of a default under the Primary Lease
which results in a termination thereof, the Sublease and Sublessee's rights
in the Subleased Premises shall also be terminated.
8. Excess Rents. In the event that circumstances of the Sublease
trigger and make applicable the provisions of Paragraph 17.C. of the Primary
Lease with regard to excess rental payable by Tenant (Sublessor under the
Sublease) to Landlord under the Primary Lease, then Sublessor and Landlord
agree to act in accordance with those provisions of the Primary Lease.
9. Options. Sublessee hereby acknowledges and agrees that Sublessee
shall not have the right to exercise any renewal, expansion or other options
afforded to Sublessor as tenant under the terms and conditions of the
Primary Lease.
10. Brokerage. Sublessor and Sublessee each hereby agree to indemnify,
defend and hold Landlord harmless from and against any and all damage, loss,
cost or expense, including, without limitation, all attorneys' fees and
disbursements, incurred by reason of any claim of or liability to any broker
or other person for commissions or other compensation or charges with
respect to the negotiation, execution and delivery of the Sublease. The
obligations of Sublessor and Sublessee under this paragraph shall survive
the expiration or sooner termination of the Sublease.
11. Amendments. This Consent shall not be amended orally, but only by
an agreement in writing signed by all parties hereto.
12. Binding Effect. This Consent and the provisions hereof shall be
binding on and inure to the benefit of the parties hereto and their
successors and permitted assigns.
13. Recording. Neither this Consent nor the Sublease may be recorded,
without Landlord's prior written consent.
14. Conflicts. In the event of any conflicts between the provisions
of this Consent and the provisions of the Sublease, the provisions of this
Consent shall control.
IN WITNESS WHEREOF, the parties have executed this Consent to be duly
executed as of the day and year first above written.
LANDLORD:
CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP
By: CRESCENT REAL ESTATE EQUITIES,
LTD., its General Partner
By /s/ JAMES S. WASSEL
-----------------------------
Name: James S. Wassel
-----------------------------
Title: Sr. Vice Pres.
-----------------------------
<PAGE> 19
SUBLESSOR:
ATLANTIC RICHFIELD COMPANY
By: ATLANTIC RICHFIELD COMPANY, a Delaware
corporation, acting by and through its
division ARCO Coal Company
By: /s/ R. L. ALVEY
---------------------------------
Name: R. L. Alvey
---------------------------------
Title: Property Manager
---------------------------------
SUBLESSEE:
MERCURY MAIL, INC.
By: MERCURY MAIL, INC. a Delaware corporation
By: /s/ JOHN FUNK
------------------------------------
Name: John Funk
------------------------------------
Title: President & CEO
----------------------------------
<PAGE> 20
EXHIBIT D
CITY CENTER GARAGE PARKING AGREEMENT
This Agreement (sometimes hereinafter, "Parking Lease") is made
effective as of August 1, 1996, between Atlantic Richfield Company, a
Delaware corporation ("ARCO"), acting by and through its division, ARCO Coal
Company, 555 Seventeenth Street, Denver, Colorado 80202, and Mercury Mail,
Inc., a Delaware corporation ("Tenant").
ARCO is the owner of Condominium Unit I of the Block 142 City Center
Garage, City and County of Denver, Colorado, comprising of four (4) levels
of below ground parking spaces.
This Agreement covers the terms and conditions under which ARCO will
lease to Tenant nine (9) parking spaces in Unit I.
The parties agree as follows:
1. Lease of Space. ARCO leases to Tenant and Tenant leases from ARCO
nine (9) passenger car parking spaces in Unit I, spaces numbered 106 through
114 (the "Spaces"). In addition, ARCO leases to Tenant the non-exclusive
right to use the entrance, exits and passageways of Unit I for passenger and
automobile ingress to and egress from the Spaces.
2. Term. The term of the Parking Lease shall commence on August 1,
1996, and end at midnight December 31, 2001, provided that if for any reason
whatsoever the Sublease Agreement commencing August 1, 1996, between ARCO
and Tenant ("Sublease") is terminated at any date earlier than December 31,
2001, this Parking Lease shall be terminated on the date of termination of
the Sublease.
3. Rental. The monthly rental for the Spaces shall be $105 per space
for the Term set forth in Paragraph 2 above. Any extension of that Term will
be at a fair
1
<PAGE> 21
market rental rate at the time of extension, determined in the manner set
forth in the Sublease.
4. Permitted Users. Tenant shall be entitled to have the Spaces used by
its employees, officers and directors, and by its agents and business
invitees (all permitted users of the Spaces are called "Users"). For all
purposes of this Parking Lease, "Business Invitees" shall mean only persons
with whom Tenant has business dealings arising in connection with its
primary business activities.
5. Rules. Tenant and each of the Users shall comply with the rules and
regulations attached as Attachment A and incorporated by reference (as
periodically amended by written notice to Tenant and ARCO).
6. Pass Cards. ARCO shall promptly initially issue to Tenant nine (9)
cards enabling ingress to and egress from Unit I. Also, ARCO may provide
identification emblems, stickers or permits confirming authorization to park
in the areas designated by ARCO. Tenant shall issue to its Users the pass
cards and any other identification issued by ARCO to Tenant.
7. Availability. ARCO shall assure that the Spaces, which are leased to
Tenant hereunder, shall be available for use 24 hours a day, seven (7) days
a week with the use of computerized parking cards. If space(s) are not
required by Tenant and relinquished to ARCO, this Parking Lease will be
amended to reflect the new lesser number of spaces. If relinquished space(s)
are needed by Tenant thereafter, ARCO will return the space(s), if then
available for Tenant's use, within ninety days of written notification by
Tenant.
8. Risk of Loss. Tenant shall neither hold nor attempt to hold ARCO
liable for any injury or damage, caused by fire, water or steam, or by any
repairs, alterations or accident or by any other cause (either proximate or
remote) to any User or to any User's automobile or other personal property
located in Unit I, whether or not the injury or damage was caused by
negligence, except that ARCO shall not be relieved from
2
<PAGE> 22
liability for any injury or damage resulting from and, to the extent of, the
negligence or willful misconduct of ARCO or its agents or employees.
9. Indemnity to ARCO. Tenant shall indemnify, defend, and hold harmless
ARCO and its employees from any and all claims resulting from personal
injury or death or damage to property (including the property of ARCO)
related to the Tenant's use of Unit I under this Parking Lease or resulting
from any act or omission or the negligence or misconduct of Tenant,
Tenant's agents, servants or employees, the Users or any other person
entering Unit I under express or implied invitation of Tenant or resulting
from the violation of the provisions of this Parking Lease by any of such
persons and against and from all costs, expenses (including attorney's
fees), damages and other liabilities related to any such claims or their
prosecution but the indemnities in this Paragraph 9 shall not apply to any
liability resulting from, and to the extent of, the willful misconduct or
negligence of ARCO or its employees.
10. No Transfer, Sublease, License, or Assignment. Tenant shall not
sublease, license, or assign any interest in the Parking Lease or transfer
the right to use any of the Spaces except in connection with a permitted
sublease or assignment under the Sublease. Any improper sublease, license,
or assignment or transfer of this Parking Lease by Tenant or of any of
Tenant's rights and privileges hereunder shall cause a termination of this
Parking Lease and a default on the part of Tenant.
11. Surrender. Within five (5) days after expiration or other
termination of this Parking Lease, Tenant shall not allow any use of the
Spaces by its Users and shall promptly return all pass cards for the Spaces
and any other removable identification items issued to it by ARCO. If any of
the pass cards are not returned to ARCO within five (5) days after the
termination of the Parking Lease, ARCO shall be entitled to charge Tenant
for the Spaces that the pass cards represent at the same rate as set forth
in Section 3 until the pass cards are returned.
3
<PAGE> 23
12. Notices. All notices or demands required or permitted to be given
to ARCO hereunder shall be in writing, and shall be deemed duly served when
delivered personally to ARCO Coal Company, Attention: Manager, Property
Management, 555 Seventeenth Street, Denver, Colorado 80202, or when
deposited in the United States mail, postage prepaid, certified or
registered, return receipt requested, addressed to ARCO at ARCO's office at
the above address, or at the most recent address of which ARCO has notified
Tenant in writing. All notices or demands required to be given to Tenant
shall be in writing, and shall be deemed duly served when mailed to Tenant
by certified mail, return receipt requested, to Tenant's office at 707
Seventeenth Street, Suite 2850, Denver, Colorado 80202. Either party shall
have the right to designate, in writing, served as above provided, a
different address to which notice is to be mailed.
This Lease shall be deemed executed as of its effective date.
ATLANTIC RICHFIELD COMPANY MERCURY MAIL, INC.
ACTING BY AND THROUGH ITS DIVISION,
ARCO COAL COMPANY
By: /s/ RAYMOND L. ALVEY By /s/ JOHN T. FUNK
-------------------------- --------------------------
Raymond L. Alvey, Property Manager John T. Funk, President
ARCO Coal Company, a Division
of Atlantic Richfield Company
[STAMP]
4
<PAGE> 24
ATTACHMENT A
RULES AND REGULATIONS
CITY CENTER GARAGE PARKING AGREEMENT
1. Use of the Garage will be restricted to passenger cars, vans (3/4 ton)
and such other vehicles as ARCO, by special arrangements, will permit.
2. The Garage may not be used for dead storage, bulk storage, or for
storage of damaged automobiles, and ARCO shall have the right upon not
less than three (3) days written notice, to engage a tow service for
removal of any vehicle which, without prior written approval of ARCO,
remains in the Garage for a continuous period in excess of five (5)
days. The vehicle owner and/or the vehicle User will be responsible
for all costs associated with such removal and shall indemnify ARCO
against all loss, expenses, or liability in connection therewith.
3. Vehicles shall be carefully parked within and parallel to the striped
lines of each parking stall.
4. Users shall only be permitted to park a vehicle in the Spaces
designated in Paragraph 1 of the City Center Garage Parking Agreement
in which this Attachment A is incorporated by reference. No person
shall be permitted to park a vehicle in any other part of the Garage.
5. Each vehicle parked in the Garage shall prominently display, in such
manner as ARCO shall reasonably direct, the identification emblem,
sticker, or ticket provided by ARCO to the User thereof.
6. If a Pass Card is lost, stolen, or damaged, User or Tenant shall
promptly notify ARCO in writing upon discovery of such loss, theft or
damage, and ARCO will cancel or deprogram it. A new Pass Card will then
be issued to User or Tenant upon payment by User or Tenant of a
twenty-five dollar ($25) replacement fee.
7. IN THE EVENT USER HAS LOST OR FORGOTTEN THE PASS CARD, AN HOURLY TICKET
MAY BE TAKEN FOR ENTRANCE TO THE GARAGE. USER MUST PARK IN UPPER LEVELS
OF THE GARAGE AND WILL BE CHARGED AT THE REGULAR HOURLY RATE TO EXIT
THE GARAGE.
8. User shall drive carefully while in the Garage and comply with all
signs, instructions, and directions posted therein. The Garage entrance
and exit located at California Street is the most accessible to the
ARCO parking area from 6:00 a.m. to 8:00 p.m., Monday through Friday.
5
<PAGE> 25
9. User shall assure that his vehicle is locked at all times while it is
parked in the Garage, and shall be solely responsible for all contents
therein.
10. User shall promptly and accurately complete and return the attached
Parker Information Sheets (Exhibit B) thus enabling ARCO to identify
User's vehicle and to contact User when necessary. Any change in the
information supplied thereon shall be promptly reported to ARCO and, on
request, User shall then complete a new one.
11. ANY VEHICLE PARKED IN AN UNAUTHORIZED AREA WILL BE TICKETED BY THE
DENVER POLICE DEPARTMENT. IF A VEHICLE CANNOT BE IDENTIFIED FROM THE
PARKER INFORMATION SHEETS ON FILE, IT WILL BE REMOVED FROM THE GARAGE
BY A TOW SERVICE THREE DAYS AFTER IT HAS BEEN TICKETED.
12. The Garage shall be open and operational for Pass Card access 24 hours
per day, seven (7) days per week.
13. Use of Pass Card for entrance to or exit from Garage is restricted to
registered vehicles only.
14. Only one vehicle is permitted in the Garage at any one time per Pass
Card.
15. ARCO SHALL NOT BE LIABLE AT ANY TIME OR UNDER ANY CIRCUMSTANCES FOR
ANY MALFUNCTION, FAILURE, OR UNAVAILABILITY OF ANY ELECTRICAL,
MECHANICAL, OR OTHER FACILITIES OR EQUIPMENT IN THE GARAGE, OR FOR ANY
LOSS, DAMAGE, EXPENSE, OR INCONVENIENCE OF ANY NATURE (WHETHER DIRECT
OR INDIRECT) RESULTING THEREFROM OR RELATED THERETO. Notwithstanding
the foregoing, ARCO shall be liable for ARCO's gross negligence in
connection with the installation or operation of facilities which
results in loss or damage to any User.
16. All notices required or desired to be given hereunder at any time shall
be deemed sufficient if delivered in writing either personally or by
ordinary mail to the party sought to be notified, or to any duly
authorized representative thereof.
17. THE CITY CENTER GARAGE IS DESIGNATED NO-SMOKING.
6
<PAGE> 26
FIRST AMENDMENT TO SUBLEASE AGREEMENT
This First Amendment to Sublease Agreement is entered into and effective
as of the 13th day of December, 1996, by ATLANTIC RICHFIELD COMPANY, a
Delaware corporation, acting by and through its division, ARCO Coal Company,
555 Seventeenth Street, Denver, Colorado 80202 ("Sublessor") and MERCURY
MAIL, INC., a Delaware corporation, ("Sublessee").
R E C I T A L S:
Under Sublease Agreement dated August 7, 1996, ("Sublease"), Sublessor
sublet to Sublessee approximately 9,064 rentable square feet located on the
28th floor (the "Sublet Premises") in the MCI Tower.
Sublessor and Sublessee desire to amend the Sublease to add approximately
7,392 rentable square feet of contiguous space ("Expansion Space") to the
Sublet Premises, as delineated on the attached Exhibit B-1.
AGREEMENT:
In consideration of the rent to be paid hereunder, the terms and
conditions hereof, and the mutual benefits to be derived, the parties agree
that the Sublease shall be amended as follows:
ARTICLE 1. TERM
1.1 The term for the Expansion Space will be December 9, 1996, through the
end of the Sublease Term.
ARTICLE 3. BASE RENT AND SERVICES
3.1 The monthly rent payment will be increased in the amount of Five
Thousand Two Hundred Thirty-Six Dollars ($5,236.00) to include the
Expansion Space. The increased Base Rent is payable monthly, in
advance, for a monthly total for both the original Sublet Premises and
for the Expansion Space, (total rentable square feet = 16,456) in the
amount of Eleven Thousand Six Hundred Fifty-Six Dollars and Thirty-
Three Cents ($11,656.33), beginning February 1, 1997, through the end
of the Sublease Term. Until February 1, 1997, the existing rent in the
amount of $6,420.33, shall be paid.
3.2 In addition to the Base Rent, Sublessee is subject to the additional
Rent provision of Article 3.2 of the Sublease Agreement with regard to
the Expansion Space, to the extent that the future Operating Expenses
allocated to the Sublet Premises, including the Expansion
<PAGE> 27
Space or any portion thereof, exceed the 1996 actual Operating Expenses
allocated to the Sublet Premises, including the Expansion Space.
ARTICLE 4. SECURITY DEPOSIT
4.1 Sublessee, upon execution of this First Amendment, will increase the
security deposit with Sublessor by Twenty-Two Thousand Nine Hundred
Fifty-Six Dollars ($22,956.00), to be held without interest by
Sublessor during the Term of the Sublease.
ARTICLE 5. SUBLET PREMISES
The Expansion Space, consisting of 7,392 rentable square feet, is described
in Exhibit B-1, attached hereto and made a part hereof. Sublessor sublets
the Expansion Space to the Sublessee in its "as is" condition. The Sublet
Premises (9,064 rentable square feet) and the Expansion Space (7,392
rentable square feet) may hereinafter sometimes be referred to collectively
as "Expanded Sublet Premises" (16,456 rentable square feet). Sublessee
shall, at its own cost and expense, make any and all improvements to the
Expansion Space subject to the prior approval of Sublessor and Landlord and
in compliance with the following:
5.1 In connection with the performance of all work by Sublessee's
contractors, Sublessee shall assume full responsibility therefor, and
for all Sublessee's and or Sublessee's contractors' property,
equipment, materials, tools or machinery placed or stored in the Sublet
Premises during the completion of the Sublessee finish work.
5.2 Sublessee shall cause Sublessee's contractors to: (i) conduct their
work in such a manner so as not to interfere with any other
construction occurring on or in the Building or any other sublessees or
tenants of the Building; (ii) comply with all reasonable rules and
regulations relating to the construction activities in or on the
Building, as may be promulgated from time to time by Landlord for the
Building, (iii) maintain such insurance in force and effect as required
by Sublessor, but in any event, not less than that required by
applicable law; (iv) deliver to Sublessor such assurances or
instruments to evidence their compliance or agreement to comply with
the provisions of this paragraph as may be reasonably requested by
Sublessor.
5.3 Sublessee shall keep the Sublet Premises free and clear of all liens,
encumbrances and claims of contractors, subcontractors, materialmen,
laborers and others, and Sublessee shall indemnify and hold harmless
Sublessor and Landlord from and against any and all
<PAGE> 28
losses, damage, costs (including costs of suit and attorney's fees),
liabilities, or causes of action arising out of, or resulting from,
performance of or payment for the Sublessee's finish work by Sublessee's
contractors, including, but not limited to, mechanics', materialmen's,
laborers' or other liens or claims (and all costs or expenses associated
therewith, including reasonable attorneys' fees,) asserted, filed or arising
out of any such work. All materialmen, contractors, artisans, mechanics,
laborers and other parties hereafter contracting with Sublessee for the
furnishing of any labor, services, materials, supplies or equipment with
respect to any portion of the Sublet Premises are hereby charged with notice
that they must look solely to Sublessee for payment for same. Without
limiting the generality of the foregoing, Sublessee shall repair or cause to
be repaired at its expense all damage caused to the Sublet Premises or the
Building by the Sublessee's contractors, their subcontractors or their
employees. Further, Sublessor shall have the right, prior to the date
Sublessee commences any work in the Sublet Premises, to post notices of
nonliability thereon, or to cause Sublessee to post and maintain the same,
all in accordance with Colorado Revised Statues, as the same may be amended.
5.4 Sublessee agrees to submit to Sublessor copies, consisting of one
reverse mylar sepia and two blueprint copies, of the record drawings
with approved changes to the final working drawings shown thereon upon
completion of all work by Sublessee's contractors.
Except as specifically modified or amended herein, all of the other
terms and conditions of the Sublease Agreement shall remain in full force
and effect, and, as hereby amended, the parties hereby ratify and confirm
the Sublease Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Sublease Agreement as of the day and year first above written.
ATLANTIC RICHFIELD COMPANY, MERCURY MAIL, INC.
Acting by and through its division,
ARCO Coal Company
BY: /s/ RAYMOND L. ALVEY BY: /s/ BLAIR WHITAKER,
-------------------------------- -----------------------------
Raymond L. Alvey, Property Manager Blair Whitaker, CFO
ARCO Coal Company, a Division
of Atlantic Richfield Company
[STAMP]
<PAGE> 29
EXHIBIT B-1
[FLOOR PLAN]
<PAGE> 30
SECOND AMENDMENT TO SUBLEASE AGREEMENT
This Second Amendment to Sublease Agreement is entered into as of the 29th
day of June, 1998, by ATLANTIC RICHFIELD COMPANY, a Delaware corporation
("Sublessor") and Mercury Mail, Inc. now known as InfoBeat Inc., a Delaware
corporation, ("Sublessee").
RECITALS:
A. Under the Sublease Agreement dated August 7, 1996 as amended by the First
Amendment to Sublease dated December 13, 1996 (collectively, the "Sublease"),
Sublessor sublet to Sublessee approximately 16,456 rentable square feet (the
"Sublet Premises") located on the 28th floor in the MCI Tower.
B. Sublessor and Sublessee desire to amend the Sublease to add approximately
3,825 rentable square feet of space on the 28th floor ("Additional Space") to
the Sublet Premises, as delineated on the attached Exhibit A. THIS SECOND
AMENDMENT WILL NOT BE EFFECTIVE UNTIL THE CURRENT SUBLESSEE, DUMLER, MEYER,
BUXTON, INC. HAS EXECUTED A TERMINATION AGREEMENT AND SURRENDERED POSSESSION OF
THE ADDITIONAL SPACE TO SUBLESSOR.
C. BOTH PARTIES UNDERSTAND THAT THE PRIOR WRITTEN CONSENT OF LANDLORD IS
REQUIRED TO PERMIT SUCH SUBLETTING. THE PARTIES AGREE TO CONTEMPORANEOUSLY
EXECUTE THE CONSENT TO SUBLEASE FORM ATTACHED HERETO AS EXHIBIT C.
AGREEMENT:
In consideration of the rent to be paid hereunder, the terms and
conditions hereof, and the mutual benefits to be derived, the parties agree
that the Sublease is hereby amended as follows.
ARTICLE 1. TERM
1.1 The term for the Additional Space will be July 20, 1998 through the end of
the Sublease Term.
ARTICLE 2. BASE RENT AND SERVICES
2.1 Effective July 20, 1998 through December 31, 1998, the monthly Base Rent
will be increased in the amount of $2,936.67 so that the total monthly Base
Rent due under the Sublease shall be $14,593.00.
2.2 Effective January 1, 1999 through the end of the Sublease Term, the
monthly Base Rent for the Additional Space will be $3,028.12 so that the
total monthly Base Rent due under the Sublease shall be $14,684.45.
1
<PAGE> 31
2.3 Effective July 20, 1998 through December 31, 1998, Additional Rent shall
be increased in the amount by which annual Operating Expenses, defined
under Paragraph 11 A(8) of the Master Lease, allocable to the Additional
Space on a prorata basis, exceeds the 1993 actual Operating Expenses
allocable to the Additional Space. Sublessee shall pay the estimated
Additional Rent based on Landlord's estimate as required in Paragraph 11 B
of the Master Lease. The Landlord's notice of accounting of the Operating
Expenses shall be sufficient accounting under the Sublease.
2.4 Effective January 1, 1999 through the end of the Sublease Term, Additional
Rent shall be increased in the amount by which the annual Operating
Expenses, defined under Paragraph 11 A(8) of the Master Lease, allocable
to the Additional Space on a prorata basis, exceeds the 1998 actual
Operating Expenses allocable to the Additional Space. Sublessee shall pay
the estimated Additional Rent based on Landlord's estimate as required in
Paragraph 11 B of the Master Lease. The Landlord's notice of accounting of
the Operating Expenses shall be sufficient accounting under the Sublease.
ARTICLE 3. SUBLET PREMISES
The Additional Space, consisting of 3,825 rentable square feet, is described in
Exhibit B-1, attached hereto and made a part hereof. Sublessor sublets the
Additional Space to the Sublessee in its "as is" condition. The Sublet Premises
(16,456 rentable square feet) and the Additional Space (3,825 rentable square
feet) may hereinafter sometimes be referred to collectively as "Expanded Sublet
Premises" (20,281 rentable square feet). Sublessee shall, at its own cost and
expense, make any and all improvements to the Additional Space subject to the
prior approval of Sublessor and Landlord and in compliance with the following:
3.1 In connection with the performance of all work by Sublessee's contractors,
Sublessee shall assume full responsibility therefor, and for all
Sublessee's and or Sublessee's contractors' property, equipment,
materials, tools or machinery placed or stored in the Sublet Premises
during the completion of the Sublessee finish work.
3.2 Sublessee shall cause Sublessee's contractors to: (i) conduct their work
in such a manner so as not to interfere with any other construction
occurring on or in the Building or any other sublessees or tenants of the
Building; (ii) comply with all reasonable rules and regulations relating
to the construction activities in or on the Building, as may be
promulgated from time to time by Landlord for the Building; (iii) maintain
such insurance in force and effect as required by Sublessor, but in any
event, not less than that required by applicable law; (iv) deliver to
Sublessor such assurances or instruments to evidence their compliance or
agreement to comply with the provisions of this paragraph as may be
reasonable requested by Sublessor.
2
<PAGE> 32
3.3 Sublessee shall keep the Sublet Premises free and clear of all liens,
encumbrances and claims of contractors, subcontractors, materialmen,
laborers and others, and sublessee shall indemnify and hold harmless
Sublessor and Landlord from and against any and all losses, damage, costs
(including costs of suit and attorney's fees,) asserted, filed or arising
out of any such work. All materialmen, contractors, artisans, mechanics,
laborers and other parties hereafter contracting with Sublessee for the
furnishing of any labor, services, materials, supplies, or equipment with
respect to any portion of the Sublet Premises are hereby charged with
notice that they must look solely to Sublessee for payment for same.
Without limiting the generality of the foregoing, Sublessee shall repair or
cause to be repaired at its expense, all damage caused to the Sublet
Premises or the Building by the Sublessee's contractors, their
subcontractors, or their employees. Further, Sublessor shall have the
right, prior to the date Sublessee commences any work in the Sublet
Premises, to post notices of nonliability thereon, or to cause Sublessee to
post and maintain the same, all in accordance with Colorado Revised
Statutes, as the same may be amended.
3.4 Sublessee agrees to submit to Sublessor copies, consisting of one reverse
mylar sepia and two blueprint copies, of the record drawings with approved
changes to the final working drawings shown thereon upon completion of all
work by Sublessee's contractors.
Except as specifically modified or amended herein, all of the other terms
and conditions of the Sublease Agreement shall remain in full force and effect,
and, as hereby amended, the parties hereby ratify and confirm the Sublease
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
to Sublease Agreement as of the day and year first above written.
MERCURY MAIL, INC. NOW KNOWN AS
ATLANTIC RICHFIELD COMPANY INFOBEAT INC.
BY: /s/ JAMES T. McCREARY BY: /s/ RAYMOND H. VAN WAGENER JR.
---------------------- ------------------------------
JAMES T. McCREARY Raymond H. Van Wagener Jr. CEO
3
<PAGE> 33
EXHIBIT A
[FLOOR PLAN]
<PAGE> 1
EXHIBIT 10.8
================================================================================
MERCURY MAIL, INC.
SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
================================================================================
<PAGE> 2
MERCURY MAIL, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This Series A Preferred Stock Purchase Agreement (the "Agreement") is
entered into as of February 15, 1996, by and among MERCURY MAIL, INC., a
Colorado corporation (the "Company") and each of those persons and entities,
severally and not jointly, whose names are set forth on the Schedule of
Purchasers attached hereto as Exhibit A (collectively the "Purchasers" and
individually a "Purchaser").
In consideration of the mutual promises hereinafter set forth, the
parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the First Closing (as
defined in Section 2 below), the Company shall have authorized the sale and
issuance to Purchasers of Eight Hundred Eighty Thousand (880,000) shares of
Series A Preferred Stock of the Company (the "Shares") having the rights,
preferences, privileges and restrictions set forth in the Articles of Amendment
to Articles of Incorporation of the Company, in the form attached hereto as
Exhibit B (the "Articles of Amendment").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at
the Closings (as hereinafter defined) the Company hereby agrees to issue and
sell to each Purchaser and each Purchaser agrees to purchase from the Company,
the number of Shares set forth opposite such Purchaser's name on Exhibit A, at a
purchase price of One Dollar and Twenty-Five Cents ($1.25) per Share.
2. CLOSING, DELIVERY AND PAYMENT. The closing of the sale and purchase of the
shares under this Agreement shall take place in two parts (the "Closings"). The
initial closing (the "First Closing") shall take place at 10:00 a.m. on February
15, 1996, at the offices of Cooley Godward Castro Huddleson & Tatum, 2595 Canyon
Blvd., Suite 250, Boulder, Colorado 80302, or at such other time or place as the
Company and Purchasers may mutually agree (such date is hereinafter referred to
as the "First Closing Date"); the second closing (the "Second Closing") shall
take place at 10:00 a.m. on March 15, 1996 at the offices of Cooley Godward
Castro Huddleson & Tatum, or at such other time or place as the Company and
Purchasers may mutually agree (such date is hereinafter referred to as the
"Second Closing Date").
At the First Closing, subject to the terms and conditions hereof, the Company
will deliver to the Purchasers certificates representing the number of Shares to
be purchased at the First Closing by each Purchaser, against payment of the
purchase price therefor by check or wire transfer made payable to the order of
the Company. The Shares to be purchased at the First Closing by each Purchaser
are as follows: 400,000 Shares by Telecom
2
<PAGE> 3
Partners, L.P. ("Telecom") and 200,000 Shares by Centennial Fund IV, L.P.
("Centennial"). At the Second Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchasers certificates representing the
number of Shares to be purchased at the Second Closing by each Purchaser,
against payment of the purchase price therefor by check or wire transfer made
payable to the order of the Company. The Shares to be purchased at the Second
Closing are as follows: 200,000 Shares by Centennial (subject to satisfactory
completion of due diligence) and 80,000 Shares by certain individual investors
whose names are set forth on the Schedule of Purchasers (the "Individual
Investors").
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, to issue and sell the Shares and the Common Stock issuable upon
conversion thereof (the "Conversion Shares") and to carry out the provisions of
this Agreement and the Articles of Amendment and to carry on its business as
presently conducted and as presently proposed to be conducted.
3.2 CAPITALIZATION. The authorized capital stock of the Company,
immediately prior to the Closing, will consist of ten million (10,000,000)
shares of Common Stock, one million (1,000,000) shares of which are issued and
outstanding, and five million (5,000,000) shares of Preferred Stock, none of
which are issued and outstanding. All issued and outstanding shares of the
Company's Common Stock have been duly authorized, validly issued, fully paid and
nonassessable. The Conversion Shares have been duly and validly reserved for
issuance. There are no outstanding options, warrants or other rights to purchase
from the Company any of its securities, except for 377,700 outstanding options
which have been granted to employees of the Company and 272,300 options reserved
for issuance to employees of the Company pursuant to the Company's 1996 Stock
Option Plan. The shares of Common Stock subject to the 377,700 options granted
to date will vest according to the following schedule: 25% on February 5, 1997
and the remainder on a monthly, pro-rata basis over the following 36 months.
When issued in compliance with the provisions of this Agreement and the Articles
of Amendment, the Shares and the Conversion Shares will be validly issued, fully
paid and nonassessable.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement, the performance of all obligations of the
Company hereunder
3
<PAGE> 4
and thereunder at the Closings and the authorization, sale, issuance and
delivery of the Shares has been taken or will be taken prior to the Closings.
3.4 PROPRIETARY RIGHTS. The Company has not received any communications
alleging that it has violated or, by conducting its business as proposed would
violate, any proprietary rights of any other person, nor is the Company aware of
any basis for the foregoing.
3.5 ACTIONS PENDING. There is no action, suit or proceeding pending or,
to the best knowledge of the Company, threatened against or affecting the
Company or any of its respective properties or rights before any court or by or
before any governmental body or arbitration board or tribunal.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser hereby
represents and warrants to the Company as follows:
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and to carry out its provisions. All actions on Purchaser's part
required for the lawful execution and delivery of this Agreement have been or
will be effectively taken prior to the Closing.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act.
Purchaser also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:
4.2.1 PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that the Company has no present intention of
registering the Shares, the Conversion Shares or any shares of its Common Stock.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any portion
of the Shares or the Conversion Shares under the circumstances, in the amounts
or at the times Purchaser might propose.
4
<PAGE> 5
4.2.2 ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
4.2.3 PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents
that by reason of its, or of its management's business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement. Further, Purchaser is aware of no
publication of any advertisement in connection with the transactions
contemplated in the Agreement. Purchaser is able to bear the loss of its entire
investment in the Company. Purchaser is not a corporation, partnership or other
entity specifically formed for the purpose of consummating this transaction.
4.2.4 Purchaser has been given access to all Company documents,
records, and other information, has received physical delivery of all documents
which it has requested, and has had adequate opportunity to ask questions of,
and receive answers from, the Company's officers, agents, accountants, and
representatives concerning the Company's business, operations, financial
condition, assets, liabilities, and all other matters relevant to its investment
in the Shares.
4.2.5 Purchaser acknowledges that it is an accredited investor as
that term is defined in Rule 501(a) of Regulation D, promulgated pursuant to the
Securities Act.
4.3 RULE 144. Purchaser acknowledges and agrees that the Shares and the
Conversion Stock must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Purchaser has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act, which permits limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things: the availability of certain current
public information about the Company, the resale occurring not less than two
years after a party has purchased and paid for the security to be sold, the sale
being through an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934, as amended) and the number of shares being sold during any three month
period not exceeding specified limitations.
4.4 All consents, approvals, orders, or authorizations of, or
registration, qualification, designation, declaration or filing with any
governmental or banking authority required on the part of Purchasers in
connection with the consummation of the transactions contemplated in this
Agreement have been or shall have been obtained prior to and shall be effective
as of the First Closing and the Second Closing.
5. CONDITIONS TO THE PURCHASERS' OBLIGATIONS AT CLOSING.
5
<PAGE> 6
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 3 shall be true on and as of the Closings
with the same effect as though such representations and warranties had been made
on and as of the dates of the Closings.
5.2 INVESTORS' RIGHTS AGREEMENT. The Company and each purchaser shall
have executed and delivered the Investors' Rights Agreement in substantially the
form attached as Exhibit C.
5.3 ARTICLES OF AMENDMENT. The Company shall have filed the Articles of
Amendment with the Secretary of State of Colorado on or prior to the First
Closing Date, which shall continue to be in full force and effect as of the
Second Closing Date.
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Colorado as such laws are applied to agreements between
Colorado residents entered into and performed entirely in Colorado.
6.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto and the other
documents delivered expressly hereby constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.
6.5 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
<PAGE> 7
6.6 AMENDMENT AND WAIVER.
6.6.1 This Agreement may be amended or modified only upon the
mutual written consent of the Company and holders of at least a majority of the
Shares (treated as if converted and including any Conversion Shares into which
the Shares have been converted that have not been sold to the public).
6.6.2 The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under the Agreement may be waived only
with the written mutual consent of the holders of at least a majority of the
Shares (treated as if converted and including any Conversion Shares into which
the Shares have been converted that have not been sold to the public).
6.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof and to
Purchasers at the addresses set forth on Exhibit A attached hereto or at such
other address as the Company or Purchasers may designate by ten (10) days
advance written notice to the other parties hereto.
6.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.9 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 6.9 being untrue.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as
of the date set forth in the first paragraph hereof.
COMPANY:
MERCURY MAIL, INC.
1050 17th Street, Suite 1600
Denver, Colorado 80265
By:
------------------------------------
John Funk, President
and Chief Executive Officer
PURCHASERS:
CENTENNIAL FUND IV, L.P.
Name:
----------------------------------
By:
-----------------------------------
Title:
--------------------------------
TELECOM PARTNERS, L.P.
Name:
----------------------------------
By:
-----------------------------------
Title:
--------------------------------
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as
of the date set forth in the first paragraph hereof.
COMPANY:
MERCURY MAIL, INC.
1050 17th Street, Suite 1600
Denver, Colorado 80265
By:
------------------------------------
John Funk, President
and Chief Executive Officer
PURCHASERS:
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
9
<PAGE> 10
SERIES A STOCK PURCHASE AGREEMENT
EXHIBIT A
SCHEDULE OF PURCHASERS
FIRST CLOSING: FEBRUARY 14,1996
Name and Address
----------------
Telecom Partners, L.P.
1999 Broadway, Suite 2100
Denver, CO 80202
Centennial Fund IV, L.P.
1999 Broadway, Suite 2100
Denver, CO 80202
SECOND CLOSING: MARCH 15, 1996
Name and Address
----------------
Centennial Fund IV, L.P.
1999 Broadway, Suite 2100
Denver, CO 80202
Individual Investors:
Boulder Ventures Ltd.
Gus Bigos
Kenneth Cook
Michael Stake
Douglas Schneider
10
<PAGE> 11
SERIES A STOCK PURCHASE AGREEMENT
EXHIBIT B
FORM OF ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION
11
<PAGE> 12
SERIES A STOCK PURCHASE AGREEMENT
EXHIBIT C
FORM OF INVESTORS' RIGHTS AGREEMENT
12
<PAGE> 1
EXHIBIT 10.9
MERCURY MAIL, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Series B Preferred Stock Purchase Agreement (the "Agreement") is
entered into as of July 22, 1996, by and among Mercury Mail, Inc., a Delaware
corporation (the "Company") and each of those persons and entities, severally
and not jointly, whose names are set forth on the Schedule of Purchasers
attached hereto as Exhibit A (collectively the "Purchasers" and individually a
"Purchaser").
In consideration of the mutual promises hereinafter set forth, the
parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined
in Section 2 below), the Company shall have authorized the sale and issuance to
the Purchasers of shares of its Series B Preferred Stock (the "Shares") having
the rights, preferences, privileges and restrictions set forth in the Amended
and Restated Certificate of Incorporation of the Company attached hereto as
Exhibit B.
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof,
at the Closing, the Company hereby agrees to issue and sell to each Purchaser
and each Purchaser severally and not jointly agrees to purchase from the
Company, the number of Shares set forth opposite such Purchaser's name on
Exhibit A, at a purchase price of Three Dollars ($3.00) per Share.
2. CLOSING, DELIVERY AND PAYMENT
The closing of the sale and purchase of the Shares under this
Agreement (the "Closing") shall take place at 10:00 a.m. on July 22, 1996, at
the offices of Brownstein Hyatt Farber & Strickland, P.C., 410 Seventeenth
Street, Suite 2200, Denver, Colorado 80202, or at such other time or place as
the Company and Purchasers may mutually agree (such date is hereinafter referred
to as the "Closing Date"). At the Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchasers certificates representing the
number of Shares to be purchased at the Closing by each Purchaser, against
payment of the purchase price therefor by certified check or wire transfer of
immediately available funds.
<PAGE> 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser as
follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, to issue and sell the Shares and the shares of Common Stock
issuable upon conversion thereof (the "Conversion Shares") and to carry out the
other provisions of this Agreement, and to carry on its business as presently
conducted and as presently proposed to be conducted.
3.2 CAPITALIZATION. The authorized capital stock of the Company,
immediately prior to the Closing, will consist of (i) ten million (10,000,000)
shares of Common Stock, one million (1,000,000) shares of which are issued and
outstanding, and (ii) three million three hundred thirty thousand (3,330,000)
shares of Preferred Stock, eight hundred eighty thousand (880,000) shares of
which are designated as Series A Preferred Stock, all of which are issued and
outstanding, and two million four hundred fifty thousand (2,450,000) of which
are designated as Series B Preferred Stock, none of which are issued and
outstanding. All issued and outstanding shares of the Company's Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable. Except for outstanding employee options to purchase a total of
407,700 shares of Common Stock and a warrant for 525,000 shares of Series B
Preferred Stock issued to Tribune Media Services, there are no outstanding
options, warrants or other rights to purchase from the Company any of its
securities.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement, the performance of all obligations of the
Company hereunder at the Closing and the authorization, sale, issuance and
delivery of the Shares has been taken or will be taken prior to the Closing.
When issued in compliance with the provisions of this Agreement, the Shares will
be validly issued, fully paid and nonassessable. The Conversion Shares have been
duly and validly reserved for issuance and, when issued upon conversion of the
Series B Preferred Stock, will be validly issued, fully paid and nonassessable.
This Agreement has been duly executed by the Company and constitutes the valid
and binding obligation of the Company enforceable in accordance with its terms.
3.4 CONSENTS AND APPROVALS. No filings with, notices to, or
approvals of any governmental or regulatory body are required to be obtained or
made by the Company in connection with the consummation of the transactions
contemplated hereby.
3.5 NO VIOLATIONS. The execution and delivery of this Agreement and
the performance by the Company of its obligations hereunder (i) do not and will
not conflict with or violate any provision of the Certificate of Incorporation
or bylaws of the Company and (ii)
2
<PAGE> 3
do not and will not (a) conflict with or result in a breach of the terms,
conditions or provisions of, (b) constitute a default under, (c) result in the
creation of any encumbrance upon the capital stock or assets of the Company
pursuant to, (d) give any third party the right to modify, terminate or
accelerate any obligation under, (e) result in a violation of, or (f) require
any authorization, consent, approval, exemption or other action by or notice to
any court or administrative or governmental body or other third party pursuant
to, any law, statute, rule or regulation or any material agreement or instrument
or any order, judgment or decree to which the Company is subject or by which any
of its assets are bound.
3.6 FINANCIAL STATEMENTS; INTERIM CHANGES. The Company's unaudited
balance sheet as of June 30, 1996 (the "Latest Balance Sheet") and unaudited
statements of income and cash flows of the Company for the period from inception
to June 30, 1996 delivered to the Purchasers in connection with the investment
contemplated hereby have been prepared in accordance with generally accepted
accounting principles consistently applied (subject to normal year-end
adjustments and the absence of footnote disclosures) and fairly present in all
material respects the financial position and the results of operations of the
Company for the period covered thereby, and the Company has no material
liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise) that are not either reflected or fully reserved against on the Latest
Balance Sheet or incurred in the ordinary course of the business of the Company
subsequent to the date thereof. Since the date of the Latest Balance Sheet,
there has not been any material adverse change in the business, operations,
financial condition or prospects of the Company.
3.7 COMPLIANCE WITH LAWS. The Company's business has been conducted
in compliance with all applicable laws and regulations of governmental
authorities, except for such violations that have been cured or that,
individually or in the aggregate, may not reasonably be expected to have a
material adverse effect on the business, operations, financial condition or
prospects of the Company.
3.8 PROPRIETARY RIGHTS. The Company has not received any
communications alleging that it has violated or, by conducting its business as
proposed would violate, any proprietary rights of any other person, nor is the
Company aware of any basis for the foregoing.
3.9 ACTIONS PENDING. There is no action, suit or proceeding pending
or, to the best knowledge of the Company, threatened in writing against or
affecting the Company or any of its respective properties or rights before any
court or by or before any governmental body or arbitration board or tribunal.
3.10 MATERIAL CONTRACTS. Except as set forth on the Disclosure
Schedule attached hereto, the Company is not a party to (and is not otherwise
bound by) any of the following: (i) any employment or consulting contract, (ii)
any agreement providing for the issuance or repurchase of any securities of the
Company, (iii) any agreement in respect of registration rights, preemptive
rights, rights of first refusal, voting rights or other rights of
3
<PAGE> 4
security holders, (iv) any agreement evidencing or providing for any
indebtedness for borrowed money, or (v) any other agreement that could
reasonably be deemed material to the Company.
3.11 INVESTMENTS IN UNITED STATES REAL PROPERTY INTERESTS. The
Company's capital stock does not constitute a United States real property
interest as that term is defined in Section 897(c)(l)(A)(ii) of the Internal
Revenue Code of 1986, as amended (the "Code"). The preceding representation is
based on a determination by the Company that the Company is not and has not been
a United States real property holding corporation (as that term is defined in
Section 897(c)(2) of the Code) during the five (5) year period preceding the
date of this letter. The Company shall use its best efforts to ensure that it
does not at any time in the future become a United States real property holding
corporation. If at any time in the future the Company should become a United
States real property holding corporation, the Company shall, as promptly as
possible, notify each Purchaser of such change in status.
3.12 UNRELATED BUSINESS TAXABLE INCOME. Any gross income derived by
the Purchasers from the Company shall be in the form of dividends, interest,
capital gains and losses from the disposition of property, and rents and
royalties, but only such rents and royalties as are excluded pursuant to Code
Sections 512(b)(2) and 512(b)(3), respectively, in calculating unrelated
business taxable income and only such dividends, interest, capital gains and
losses, and rents and royalties that are not included under Section 512(b)(4) of
the Code in calculating unrelated business taxable income. This Section 3.12
shall not be deemed to apply to (i) any compensation (in cash, stock or other
form) received by designees of the Purchasers in their capacities as directors
of the Company that is transferred to the Purchasers or (ii) any income included
under Section 512(b)(4) of the Code as a result of acquisition indebtedness
incurred by any Purchaser in connection with the purchase of an interest in the
Company.
3.13 QUALIFIED SMALL BUSINESS. To the best of its knowledge, the
Company qualifies as a "Qualified Small Business" as defined in Section 1202(d)
of the Code and covenants that so long as its shares are held by the Purchasers
(or a transferee in whose hands the shares are eligible to qualify as Qualified
Small Business Stock as defined in Section 1202(c) of the Code), it will use its
reasonable efforts to cause the shares to qualify as Qualified Small Business
Stock; provided that, notwithstanding the foregoing, the Company shall not be
obligated to take any action, or refrain from any action, which in its good
faith judgment is not in the best interests of the Company or its stockholders.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally and not jointly hereby represents and warrants
to the Company as follows:
4.1 REQUISITE POWER AND AUTHORITY. Such Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and to carry out its provisions. All actions on such
Purchaser's part required for the lawful
4
<PAGE> 5
execution and delivery of this Agreement have been or will be effectively taken
prior to the Closing.
4.2 INVESTMENT REPRESENTATIONS. Such Purchaser understands that
neither the Shares nor the Conversion Shares have been registered under the
Securities Act of 1933, as amended (the "Securities Act"). Such Purchaser also
understands that the Shares are being offered and sold pursuant to an exemption
from registration contained in the Securities Act based in part upon the
Purchaser's representations contained in this Agreement.
(a) PURCHASER BEARS ECONOMIC RISK. Such Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. Such Purchaser must bear the
economic risk of this investment indefinitely unless the Shares (or the
Conversion Shares) are registered pursuant to the Securities Act, or an
exemption from registration is available. Such Purchaser understands that the
Company has no present intention of registering the Shares, the Conversion
Shares or any shares of its Common Stock. Such Purchaser also understands that
there is no assurance that any exemption from registration under the Securities
Act will be available and that, even if available, such exemption may not allow
such Purchaser to transfer all or any portion of the Shares or the Conversion
Shares under the circumstances, in the amounts or at the times such Purchaser
might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Such Purchaser is acquiring the
Shares and the Conversion Shares for its own account for investment only, and
not with a view towards their distribution in violation of applicable securities
laws.
(c) PURCHASER CAN PROTECT ITS INTEREST. Such Purchaser
represents that, by reason of its or of its management's business or experience,
such Purchaser has the capacity to protect its own interests in connection with
the transactions contemplated in this Agreement. Further, such Purchaser is
aware of no publication of any advertisement in connection with the transactions
contemplated by the Agreement.
(d) ACCREDITED INVESTOR. Such Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) COMPANY INFORMATION. Such Purchaser has had an opportunity
to discuss the Company's business, management and financial affairs with
directors, officers and management of the Company. Such Purchaser has also had
the opportunity to ask questions of, and receive answers from, the Company and
its management regarding the terms and conditions of this investment.
(f) RULE 144. Such Purchaser acknowledges and agrees that the
Shares and the Conversion Stock must be held indefinitely unless they are
subsequently registered under
5
<PAGE> 6
the Securities Act or an exemption from such registration is available. Such
Purchaser has been advised or is aware of the provisions of Rule 144 promulgated
under the Securities Act, which permits limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things: the availability of certain current public information about
the Company, the resale occurring not less than two years after a party has
purchased and paid for the security to be sold, the sale being through an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the number of shares being sold during any three-month period not
exceeding specified limitations.
5. CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS
The obligation of each Purchaser to purchase and pay for the Shares
to be delivered to it at the Closing shall be subject to the satisfaction of the
following conditions as of the Closing Date:
(i) the representations and warranties of the Company contained
in this Agreement shall be true and correct on and as of the Closing Date;
(ii) the merger of Mercury Mail, Inc., a Colorado corporation,
with and into the Company (with the Company surviving the merger) shall have
been consummated in accordance with the Delaware General Corporation Law and the
Colorado Business Corporation Act;
(iii) the Purchasers shall have received the legal opinion of
Cooley Godward Castro Huddleson & Tatum, counsel to the Company, in the form of
Exhibit C hereto;
(iv) concurrently with the Closing, the Company, the Purchasers
and the existing stockholders of the Company shall have entered into the
Stockholders Agreement in the form attached hereto as Exhibit D;
(v) the Company shall have provided to Centennial Fund IV, L.P.
("Centennial") a certification of the direct and indirect holdings of securities
of the Company by certain persons designated by Centennial as required by
Centennial's governing documents; and
(vi) all other Purchasers shall have concurrently purchased the
Shares to be purchased by them pursuant to this Agreement.
6. EXPENSE REIMBURSEMENT
The Company hereby agrees to reimburse each Purchaser for its
out-of-pocket expenses incurred in connection with the transactions contemplated
hereby, including all expenses incurred in connection with its due diligence
examination of the Company, the
6
<PAGE> 7
preparation and negotiation of this Agreement, the Stockholders Agreement and
all other documents evidencing the transactions contemplated herein (including
the fees and expenses of one counsel representing all the Purchasers in an
amount not to exceed $20,000 for services performed in connection with the
initial closing hereunder), and in connection with the enforcement of rights and
remedies of the Purchasers hereunder and under the Stockholders Agreement and
the Company's Certificate of Incorporation.
7. MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of Colorado as such laws are applied to agreements
between Colorado residents entered into and performed entirely in Colorado,
except that the General Corporation Law of the State of Delaware shall govern as
to matters of corporate law.
7.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
7.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and the other
documents delivered pursuant hereto, including the Stockholders Agreement,
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
7.5 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7.6 AMENDMENT AND WAIVER. This Agreement may be amended or modified
only upon the mutual written consent of the Company and the Purchasers;
provided, however, that following the Closing such amendment or modification may
be effected with the approval of the holders of two-thirds of the outstanding
Shares.
7.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii)
7
<PAGE> 8
when sent by confirmed telex or facsimile if sent during normal business hours
of the recipient, if not, then on the next business day; (iii) five (5) days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) day after deposit with a nationally
recognized overnight courier, special next day delivery, with verification of
receipt. All communications shall be sent to the Company at 1050 Seventeenth
Street, Suite 1600, Denver, Colorado 80265 and to a Purchaser at the address set
forth on Exhibit A attached hereto or at such other address as the Company or
Purchaser may designate by ten (10) days advance written notice to the other
parties hereto.
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.9 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 7.9 being untrue.
7.10 FUTURE FINANCINGS. The parties hereto acknowledge and agree
that one or more subsequent closings of the sale of up to 500,000 additional
shares of Series B Preferred may be held on or prior to August 31, 1996 on
substantially the same terms and conditions as are applicable to the sale of
Series B Preferred hereunder. Such additional closings may be effected by
execution of an additional signature page to this Agreement and the Stockholders
Agreement and satisfaction of the closing conditions set forth in Section 5
hereof. Nothing contained in this Agreement or any Purchaser's prior dealings
with the Company shall be deemed to constitute a commitment on the part of any
Purchaser to participate in any subsequent closing or any other future
financings by the Company.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed the Agreement
as of the date set forth in the first paragraph hereof.
COMPANY:
MERCURY MAIL, INC.
By: /s/
------------------------------------------
Title: VP FINANCE, CFO
---------------------------------------
PURCHASERS:
CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.
Its General Partner
By: /s/ ADAM GOLDMAN
------------------------------------------
Title: General Partner
TELECOM PARTNERS, L.P.
By: /s/ STEPHEN W. SCHOVEE
------------------------------------------
Title: Managing Member of Telecom
---------------------------------------
Management L.L.L. its General Partner
---------------------------------------
BOULDER VENTURES LTD.
By: /s/ KYLE LEFKOFF
------------------------------------------
Title: Kyle Lefkoff-General Partner
---------------------------------------
<PAGE> 10
SERIES B STOCK PURCHASE AGREEMENT
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Aggregate
Number Purchase
Name and Address of Shares Price
-------------- --------------
<S> <C> <C>
Centennial Fund IV, L.P. 933,333 $ 2,799,999
1999 Broadway, Suite 2100
Denver, CO 80202
Attn: Adam Goldman
Telecom Partners, L.P. 400,000 $ 1,200,000
1999 Broadway, Suite 2100
Denver, CO 80202
Attn: Stephen W. Schovee
Boulder Ventures Ltd. 83,333 249,999
1634 Walnut Street, Suite 301
Boulder, CO 80301
Attn: Kyle Lefkoff
-------------- --------------
Totals 1,416,666 $ 4,249,998
============== ==============
</TABLE>
<PAGE> 11
SERIES B STOCK PURCHASE AGREEMENT
EXHIBIT B
CERTIFICATE OF INCORPORATION
(Intentionally Omitted)
<PAGE> 12
SERIES B STOCK PURCHASE AGREEMENT
EXHIBIT C
FORM OF LEGAL OPINION
(Intentionally Omitted)
<PAGE> 13
SERIES B STOCK PURCHASE AGREEMENT
EXHIBIT D
FORM OF STOCKHOLDERS AGREEMENT
(Intentionally Omitted)
<PAGE> 14
MERCURY MAIL, INC.
AMENDMENT NO. 1
TO
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Amendment No. 1 to Series B Preferred Stock Purchase Agreement
(the "Amendment") is entered into as of September 19, 1996, by and among
Mercury Mail, Inc., a Delaware corporation (the "Company"), the Prior
Purchasers set forth on the Schedule of Purchasers attached hereto as Exhibit A
(the "Prior Purchasers") and SOFTBANK Holdings Inc., a Delaware corporation
("SOFTBANK").
RECITALS
A. The Company and the Prior Purchasers are parties to (i)
the Series B Preferred Stock Purchase Agreement, dated as of July 22, 1996 (the
"Purchase Agreement"), pursuant to which the Prior Purchasers purchased from
the Company an aggregate of 1,416,666 shares (the "Shares") of the Company's
Series B Preferred Stock ("Series B Preferred"), and (ii) the Stockholders
Agreement, dated as of July 22, 1996 (the "Stockholders Agreement"), pursuant
to which the Company granted to the Prior Purchasers certain registration and
other rights with respect to the Shares.
B. Section 7.6 of the Purchase Agreement provides that the
Purchase Agreement may be amended upon mutual written consent of the Company
and the Prior Purchasers.
C. The Company and the Prior Purchasers desire to amend the
Purchase Agreement to provide for the sale of additional shares of Series B
Preferred to SOFTBANK on the terms and conditions set forth in the Purchase
Agreement.
In consideration of the mutual promises hereinafter set
forth, the parties hereto agree as follows:
1. SALE OF NEW SHARES
Subject to the terms and conditions of the Purchase
Agreement, the Company agrees to issue and sell to SOFTBANK and SOFTBANK agrees
to purchase from the Company 440,000 shares of Series B Preferred (the "New
Shares"), at a purchase price of Three Dollars ($3.00) per share or an
aggregate purchase price of $1,320,000.
2. CLOSING DATE OF SALE OF NEW SHARES
The closing of the sale of New Shares described in Section 1
hereof (the "Second Closing") shall be held at the offices of Cooley Godward
Castro Huddleson & Tatum in Boulder,
1
<PAGE> 15
Colorado, at 10:00 a.m., EST, on September 19, 1996, or at such other time and
place as the Company and Softbank shall agree (the "Second Closing Date").
3. AMENDMENTS TO PURCHASE AGREEMENT AND DISCLOSURE
SCHEDULE
3.1 PURCHASE AGREEMENT. The Purchase Agreement is hereby
amended to provide as follows: (i) SOFTBANK shall be deemed to be a "Purchaser"
for all purposes under the Purchase Agreement and shall have all the rights and
benefits and be subject to all the obligations and restrictions set forth
therein; (ii) the New Shares shall be deemed to be "Shares" for all purposes
under the Purchase Agreement; (iii) references in the Purchase Agreement to the
"Closing" and the "Closing Date" shall be deemed to refer to the Second Closing
and the Second Closing Date for purposes of the purchase hereunder by SOFTBANK
of the New Shares; (iv) Section 3.2 of the Purchase Agreement is hereby amended
to include the following: "Immediately prior to the Second Closing, one million
four hundred sixteen thousand six hundred sixty-six (1,416,666) shares of
Series B Preferred Stock are issued and outstanding and, except for outstanding
employee options to purchase a total of 542,700 shares of Common Stock and a
warrant to purchase 549,000 shares of Series B Preferred issued to Tribune
Media Services, Inc., there are no outstanding options, warrants or other
rights to purchase from the Company any of its securities."; and (v) Section
5(vi) of the Purchase Agreement is hereby amended in its entirety to state as
follows: "all other Purchasers shall have concurrently purchased the Shares to
be purchased by them pursuant to the this Agreement, except for any
Purchaser(s) who shall have purchased Shares at a subsequent closing pursuant
to this Agreement or any amendment hereto."
3.2 DISCLOSURE SCHEDULE. For purposes of the Second Closing
only, the Disclosure Schedule attached to the Purchase Agreement, including
Exhibits A through D thereto, is hereby amended and restated in its entirety as
set forth in Exhibit B hereto.
3.3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
following representations and warranties of the Company are hereby added to
Section 3 of the Purchase Agreement:
"3.14 DISCLOSURE. Neither this Agreement nor any schedule
hereto, nor any written disclosure document furnished by or on behalf of the
Company to the Purchasers or counsel to the Purchasers in connection with the
transactions contemplated by this Agreement, when read together, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any information
contained within any of the foregoing relating to future events or the
projected future financial performance of the Company, including any financial
projections or descriptions of potential strategic or business relationships
between the Company and third parties.
3.15 PERMITS. The Company has all franchises, permits,
licenses and other authority necessary for its business as now being conducted
and believes it can obtain, without
2
<PAGE> 16
undue burden or expense, any similar authority for its business as planned to
be conducted. The Company is not in default in any material respect under any
such franchise, permit, license or other authority.
3.16 INTELLECTUAL PROPERTY. The Company owns or has
sufficient rights to use, free and clear of all liens, charges, claims, and
restrictions, all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes and other
intellectual property rights necessary to its business as presently conducted."
4. MISCELLANEOUS
4.1 ENTIRE AGREEMENT. Section 7.4 of the Purchase Agreement
is hereby amended in its entirety to state as follows: "This Agreement, and any
amendment hereto, the Exhibits and the other documents delivered pursuant
hereto or pursuant to any such amendment, including the Stockholders Agreement,
and any amendment thereto, constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein
and therein."
4.2 COUNTERPARTS. This Amendment may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
4.3 BROKER'S FEES. Section 7.9 of the Purchase Agreement is
hereby amended in its entirety to read as follows:
"7.9 BROKER'S FEES. Except for the consultant fee to be paid
by SOFTBANK to Bradley Feld, each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of any such fee or commission payable by such
indemnifying party."
4.4 RIGHT OF ASSIGNMENT. SOFTBANK will be entitled to
transfer all or part of the shares of Series B Preferred purchased by it to one
or more affiliated partnerships managed by it, provided that such transferee
agrees in writing to be subject to the terms of the Purchase Agreement and the
Stockholders Agreement, each as amended, as if it were a purchaser and holder
thereunder.
4.5 REIMBURSEMENT OF EXPENSES.The Company shall pay the
reasonable fees and expenses of counsel for SOFTBANK, up to a maximum of
$15,000.
3
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date set forth in the first paragraph hereof.
COMPANY:
MERCURY MAIL, INC.
By: /s/
------------------------------
Title: President & CEO
------------------------------
PRIOR PURCHASERS:
CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.
Its General Partner
By: /s/
---------------------------------
Title: General Partner
------------------------------
TELECOM PARTNERS, L.P.
By: Telecom Management L.L.C.
Its General Partner
By: /s/
---------------------------------
Title: Managing Member
------------------------------
BOULDER VENTURES LTD.
By: /s/
---------------------------------
Title: General Partner
------------------------------
SOFTBANK:
SOFTBANK HOLDINGS INC.
By: /s/
---------------------------------
Title:
------------------------------
4
<PAGE> 18
AMENDMENT NO. 1
TO
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Aggregate
Number Purchase
Name and Address of Shares Price
- ---------------- ---------- ----------
PRIOR PURCHASERS (FIRST CLOSING):
<S> <C> <C>
Centennial Fund IV, L.P. 933,333 $2,799,999
1999 Broadway, Suite 2100
Denver, CO 80202
Attn: Adam Goldman
Telecom Partners, L.P. 400,000 $1,200,000
1999 Broadway, Suite 2100
Denver, CO 80202
Attn: Stephen W. Schovee
Boulder Ventures Ltd. 83,333 $ 249,999
1634 Walnut Street, Suite 301
Boulder, CO 80301
Attn: Kyle Lefkoff
---------- ----------
First Closing Totals 1,416,666 $4,249,998
---------- ----------
SOFTBANK (SECOND CLOSING):
SOFTBANK Holdings Inc. 440,000 $1,320,000
10 Langley Road
Suite 403
Newton Center, MA 02159
Attn: Charles R. Lax
---------- ----------
Totals of First and Second Closings 1,856,666 $5,569,998
========== ==========
</TABLE>
5
<PAGE> 19
MERCURY MAIL, INC.
AMENDMENT NO. 2
TO
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Amendment No. 2 to Series B Preferred Stock Purchase Agreement
(the "Amendment") is entered into as of November 22, 1996, by and among Mercury
Mail, Inc., a Delaware corporation (the "Company"), the Prior Purchasers set
forth on the Schedule of Purchasers attached hereto as Exhibit A (the "Prior
Purchasers") and Tribune Company, a Delaware corporation ("Tribune").
RECITALS
A. The Company and the Prior Purchasers are parties to (i)
the Series B Preferred Stock Purchase Agreement, dated July 22, 1996, as
amended September 19, 1996 (the "Purchase Agreement"), pursuant to which the
Prior Purchasers purchased from the Company an aggregate of 1,856,666 shares
(the "Shares") of the Company's Series B Preferred Stock ("Series B
Preferred"), and (ii) the Stockholders Agreement, dated July 22, 1996, as
amended September 19, 1996 (the "Stockholders Agreement"), pursuant to which
the Company granted to the Prior Purchasers certain registration and other
rights with respect to the Shares.
B. Section 7.6 of the Purchase Agreement provides that the
Purchase Agreement may be amended upon mutual written consent of the Company
and the Prior Purchasers.
C. Tribune has determined to exercise that certain Amended
and Restated Warrant to purchase 666,667 shares of Series B Preferred, dated
August 9, 1996 (the "Amended Warrant").
D. The Company and the Prior Purchasers desire to amend the
Purchase Agreement to provide for the sale of the shares of Series B Preferred
issuable to Tribune pursuant to the Warrant on the terms and conditions set
forth in the Purchase Agreement.
In consideration of the mutual promises hereinafter set
forth, the parties hereto agree as follows:
1. SALE OF NEW SHARES
Subject to the terms and conditions of the Purchase
Agreement, the Company agrees to issue and sell to Tribune and Tribune agrees
to purchase from the Company 666,667 shares of Series B Preferred (the "New
Shares"), at a purchase price of Three Dollars ($3.00) per share or an
aggregate purchase price of $2,000,001.
1
<PAGE> 20
2. CLOSING DATE OF SALE OF NEW SHARES
The closing of the sale of New Shares described in Section 1
hereof (the "Third Closing") shall be held at the offices of Cooley Godward LLP
in Boulder, Colorado, at 10:00 a.m., EST, on November 22, 1996, or at such
other time and place as the Company and Tribune shall agree (the "Third Closing
Date").
3. AMENDMENTS TO PURCHASE AGREEMENT AND DISCLOSURE
SCHEDULE
3.1 PURCHASE AGREEMENT. The Purchase Agreement is hereby
amended to provide as follows: (i) Tribune shall be deemed to be a "Purchaser"
for all purposes under the Purchase Agreement and shall have all the rights and
benefits and be subject to all the obligations and restrictions set forth
therein; (ii) the New Shares shall be deemed to be "Shares" for all purposes
under the Purchase Agreement; (iii) references in the Purchase Agreement to the
"Closing" and the "Closing Date" shall be deemed to refer to the Third Closing
and the Third Closing Date for purposes of the purchase hereunder by Tribune of
the New Shares; (iv) Section 3.2 of the Purchase Agreement is hereby amended to
include the following: "Immediately prior to the Third Closing, one million
eight hundred fifty-six thousand six hundred sixty-six (1,856,666) shares of
Series B Preferred Stock are issued and outstanding and, except for outstanding
employee and consultant options to purchase a total of 627,643 shares of Common
Stock there are no outstanding options, warrants or other rights to purchase
from the Company any of its securities"; and (v) Section 3.6 of the Purchase
Agreement is hereby amended for purposes of the Third Closing only to replace
references to "June 30, 1996" with "October 31, 1996."
3.2 DISCLOSURE SCHEDULE. For purposes of the Third Closing
only, the Disclosure Schedule attached to the Purchase Agreement, including
Exhibits A through D thereto, is hereby amended and restated in its entirety as
set forth in Exhibit B hereto.
3.3 CONDITION TO COMPANY'S OBLIGATIONS. For purposes of the
Third Closing only, the obligation of the Company to deliver the Shares at the
Third Closing shall be subject to (i) surrender by Tribune at the Third Closing
of that certain Warrant to purchase 525,000 shares of Series B Preferred Stock
of the Company dated August 9,1996, which warrant has been amended and restated
in its entirety by the Amended Warrant, and (ii) delivery by Tribune at the
Third Closing of an executed Notice of Exercise with respect to the Amended
Warrant.
4. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
2
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date set forth in the first paragraph hereof.
COMPANY:
MERCURY MAIL, INC.
By: /s/
---------------------------------
Title: President & CEO
-------------------------------
PRIOR PURCHASERS:
CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.
Its General Partner
By: /s/
---------------------------------
Title: General Partner
TELECOM PARTNERS, L.P.
By: Telecom Management L.L.C.
Its General Partner
By: /s/
---------------------------------
Title: Managing Member
BOULDER VENTURES LTD.
By: /s/
---------------------------------
Title: General Partner
SOFTBANK VENTURES INC.
By: /s/
---------------------------------
Title:
-------------------------------
TRIBUNE COMPANY
By: /s/
---------------------------------
Title: VP/General Counsel
-------------------------------
3
<PAGE> 22
AMENDMENT NO. 2 TO
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Aggregate
Number Purchase
Name and Address of Shares Price
- ---------------- ---------- ----------
<S> <C> <C>
PRIOR PURCHASERS (FIRST CLOSING):
Centennial Fund IV, L.P. 933,333 $2,799,999
1999 Broadway, Suite 2100
Denver, CO 80202
Attn: Adam Goldman
Telecom Partners, L.P. 400,000 $1,200,000
1999 Broadway, Suite 2100
Denver, CO 80202
Attn: Stephen W. Schovee
Boulder Ventures Ltd. 83,333 $ 249,999
1634 Walnut Street, Suite 301
Boulder, CO 80301
Attn: Kyle Lefkoff
---------- ----------
First Closing Totals 1,416,666 $4,249,998
---------- ----------
SOFTBANK (SECOND CLOSING):
SOFTBANK Ventures Inc. 440,000 $1,320,000
10 Langley Road
Suite 403
Newton Center, MA 02159
Attn: Charles R. Lax
TRIBUNE (THIRD CLOSING):
Tribune Company 666,667 $2,000,001
435 North Michigan Avenue
Chicago, IL 60611-4001
Attn: David D. Williams
---------- ----------
Totals of First, Second and Third Closings 2,523,333 $7,563,999
========== ==========
</TABLE>
4
<PAGE> 1
EXHIBIT 10.10
MERCURY MAIL, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of July 24, 1997, by and among MERCURY MAIL, INC., a Delaware
corporation (the "Company") and each of those persons and entities, severally
and not jointly, whose names are set forth on the Schedule of Purchasers
attached hereto as Exhibit A (collectively the "Purchasers" and individually a
"Purchaser").
In consideration of the mutual promises hereinafter set forth, the
parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE
1.1 AUTHORIZATION OF SHARES AND WARRANTS. On or prior to the Closing
(as defined in Section 2 below), the Company shall have authorized the sale and
issuance to the Purchasers of shares of its Series C Preferred Stock (the
"Shares") having the rights, preferences, privileges and restrictions set forth
in the Amended and Restated Certificate of Incorporation of the Company attached
hereto as Exhibit B and its warrants to purchase shares of its Series C
Preferred Stock (the "Warrants").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at
the Closing, the Company hereby agrees to issue and sell to each Purchaser and
each Purchaser severally and not jointly agrees to purchase from the Company,
(i) the number of Shares set forth opposite such Purchaser's name on Exhibit A,
at a purchase price of Four Dollars ($4.00) per Share, and (ii) the number of
Warrants set forth opposite such Purchaser's name on Exhibit A, at a purchase
price of One Tenth of One Cent ($0.001) per Warrant share.
2. CLOSING, DELIVERY AND PAYMENT
The initial closing of the sale and purchase of the Shares under this
Agreement shall take place at 10:00 a.m. on July 24, 1997, at the offices of
Cooley Godward LLP, 2595 Canyon Boulevard, Suite 250, Boulder, Colorado 80302,
or at such other time or place as the Company and Purchasers may mutually agree.
Any subsequent closing of the sale and purchase of the Shares, pursuant to
Section 7.10 of this Agreement, shall take place at such time and place as the
Company and such Purchasers shall mutually agree (such subsequent closings are
hereinafter referred to together with the initial closing as "Closing," and such
subsequent closing dates are hereinafter referred to together with the initial
closing date as the "Closing Date"). At the Closing, subject to the terms and
conditions hereof, the Company will deliver to the Purchasers certificates
representing the number of Shares to be purchased at the Closing by each
Purchaser, against payment of the purchase price therefor by (i) a cancelled
convertible subordinated promissory note (for those Purchasers who participated
in the bridge financing which closed on June 20, 1997) and/or (ii) certified
check or wire transfer of immediately available funds.
1.
<PAGE> 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule attached hereto as
Exhibit C (with each item of the Disclosure Schedule being deemed to apply to a
particular section of this Section 3 and not to all Sections of this Agreement)
the Company hereby represents and warrants to each Purchaser as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, to issue and sell the Shares and the shares of Common Stock
issuable upon conversion thereof (the "Conversion Shares") and to carry out the
other provisions of this Agreement, and to carry on its business as presently
conducted and as presently proposed to be conducted. The Company is qualified or
licensed and in good standing as a foreign corporation in all jurisdictions
where the nature of its business or property makes such qualification or
licensing necessary and the failure to be so qualified or licensed could
materially adversely affect the business, earnings, prospects, properties or
condition (financial or other) of the Company.
3.2 Capitalization.
(a) Immediately prior to the Closing, the authorized capital stock
of the Company will consist of (i) ten million (10,000,000) shares of Common
Stock, one million (1,000,000) shares of which are issued and outstanding, and
(ii) seven million (7,000,000) shares of Preferred Stock, eight hundred eighty
thousand (880,000) shares of which are designated as Series A Preferred Stock,
all of which are issued and outstanding, two million five hundred seventy
thousand (2,570,000) shares of which are designated as Series B Preferred Stock,
two million five hundred twenty-three thousand three hundred thirty-three
(2,523,333) of which are issued and outstanding, and three million five hundred
fifty thousand (3,550,000) shares of which are designated as Series C Preferred
Stock, none of which were issued and outstanding prior to the Closing. All
issued and outstanding shares of the Company's Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable. Except for
outstanding employee options to purchase a total of nine hundred eighty-eight
thousand three hundred four (988,304) shares of Common Stock, warrants to
purchase forty-six thousand six hundred sixty-six (46,666) shares of Series B
Preferred Stock, and warrants to purchase seventy-five thousand (75,000) shares
of Series C Preferred Stock, there are no outstanding options, warrants or other
rights to purchase from the Company any of its securities.
(b) There are no outstanding rights, subscriptions, calls,
options, warrants, conversion rights or agreements granted or issued by or
binding upon the Company for the purchase or acquisition (contingent or
otherwise) from the Company of any shares of its capital stock or any other
securities except in accordance with the terms of this Agreement. The Company is
not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any share of its capital stock or any security
convertible into or exchangeable for any shares of its capital stock. No holder
of Common Stock or Preferred Stock or any other security of the Company or any
other person or entity is entitled to any preemptive right, right of
2.
<PAGE> 3
first refusal or similar right as a result of the issuance of the Shares or
otherwise, except as set forth therein. There is no voting trust, agreement or
arrangement among any of the beneficial holders of Common Stock or Preferred
Stock of the Company affecting the exercise of the voting rights of such stock.
(c) Attached in Part 3.2(c) of the Disclosure Schedule is a
true and complete list of the names and addresses of the record holders of all
of the outstanding Common Stock and Preferred Stock and other securities of the
Company. Such list attached contains a true and complete description of the
number of shares held by each such holder, the price paid per share and the form
of payment therefor. With respect to each outstanding option, such list sets
forth the date of grant, the number of shares subject thereto, the exercise
price, and vesting schedule. Such list also shows the current directors and
officers of the Company.
3.3 SUBSIDIARIES. The Company does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock or equity
interest in any corporation, association or business entity. The Company is not,
directly or indirectly, a participant in any joint venture or partnership.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement, the performance of all obligations of the
Company hereunder at the Closing and the authorization, sale, issuance and
delivery of the Shares and Warrants has been taken or will be taken prior to the
Closing. When issued in compliance with the provisions of this Agreement, the
Shares will be validly issued, fully paid and nonassessable and will be free and
clear of any preemptive rights, security interests, claims, liens or
encumbrances created by the Company. The Conversion Shares have been duly and
validly reserved for issuance and, when issued upon conversion of the Series C
Preferred Stock, will be validly issued, fully paid and nonassessable and will
be free and clear of any preemptive rights, security interests, restrictions on
transfer, claims, liens or encumbrances other than restrictions under applicable
and state securities laws. This Agreement and the Warrants, when executed and
delivered by the Company, shall constitute the valid and binding obligations of
the Company enforceable in accordance with their terms.
3.5 CONSENTS AND APPROVALS. No filings with, notices to, or approvals
or authorizations of any governmental or regulatory body are required to be
obtained or made by the Company in connection with the consummation of the
transactions contemplated hereby. The Company has obtained all consents,
approvals or authorizations of, made all declarations or filings with, and given
all notices to, all federal, state or local governmental or public authorities
or agencies which are necessary for the continued conduct by the Company of its
business as now conducted or as proposed to be conducted in which the failure to
so obtain, make or give could materially adversely affect the business,
earnings, prospects, properties or condition (financial or other) of the
Company.
3.6 NO VIOLATIONS. The execution and delivery of this Agreement and the
performance by the Company of its obligations hereunder (i) do not and will not
conflict with or violate any provision of the Certificate of Incorporation or
bylaws of the Company and (ii) do not and will not (a) conflict with or result
in a breach of the terms, conditions or provisions of,
3.
<PAGE> 4
(b) constitute a default under, (c) result in the creation of any encumbrance
upon the capital stock or assets of the Company pursuant to, (d) give any third
party the right to modify, terminate or accelerate any obligation under, (e)
result in a violation of, or (f) require any authorization, consent, approval,
exemption or other action by or notice to any court or administrative or
governmental body or other third party pursuant to, any law, statute, rule or
regulation or any material agreement or instrument or any order, judgment or
decree to which the Company is subject or by which any of its assets are bound.
3.7 FINANCIAL STATEMENTS; INTERIM CHANGES. The Company's unaudited
balance sheet as of May 31, 1997 (the "Latest Balance Sheet") and unaudited
statements of income and cash flows of the Company for the period from inception
to May 31, 1997 delivered to the Purchasers in connection with the investment
contemplated hereby have been prepared in accordance with generally accepted
accounting principles consistently applied (subject to normal year-end
adjustments and the absence of footnote disclosures) and fairly present in all
material respects the financial position and the results of operations of the
Company for the period covered thereby, and the Company has no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) that are
not either reflected or fully reserved against on the Latest Balance Sheet or
incurred in the ordinary course of the business of the Company subsequent to the
date thereof in an amount not to exceed $50,000 in the aggregate. Since the date
of the Latest Balance Sheet, there has not been any material adverse change in
the business, operations, financial condition or prospects of the Company.
3.8 COMPLIANCE WITH LAWS. The Company's business has been conducted in
compliance with all applicable laws and regulations of governmental authorities,
except for such violations that have been cured or that, individually or in the
aggregate, may not reasonably be expected to have a material adverse effect on
the business, operations, financial condition or prospects of the Company.
3.9 PROPRIETARY RIGHTS. The Company has not received any communications
alleging that it has violated or, by conducting its business as proposed would
violate, any proprietary rights of any other person, nor is the Company aware of
any basis for the foregoing.
3.10 ACTIONS PENDING. There is no action, suit, proceeding or
investigation pending or, to the best knowledge of the Company, threatened in
writing against or affecting the Company or any of its respective properties or
rights before any court or by or before any governmental body or arbitration
board or tribunal. The foregoing includes, without limitation, actions pending
or threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees, the use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to, and none of its assets are
bound by, the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality or arbitrator or arbitration
panel. There is no action, suit, proceeding or investigation by the Company
currently pending or which the Company intends to initiate.
4.
<PAGE> 5
3.11 MATERIAL CONTRACTS. Except as set forth on the Disclosure Schedule
attached hereto, the Company is not a party to (and is not otherwise bound by)
any of the following: (i) any employment or consulting contract (including
employee benefit and welfare arrangements), (ii) any agreement providing for the
issuance or repurchase of any securities of the Company, (iii) any agreement in
respect of registration rights, preemptive rights, rights of first refusal,
voting rights or other rights of security holders, (iv) any agreement evidencing
or providing for any indebtedness for borrowed money, (v) any joint venture
contract or arrangement or other agreement involving a sharing of profits or
expenses to which the Company is a party; (vi) agreements limiting the freedom
of the Company to compete in any line of business or in any geographic area or
with any person; (vii) agreements providing for disposition of the business,
assets or shares of the Company, agreements of merger or consolidation to which
the Company is a party or letters of intent with respect to the foregoing; or
(viii) any other agreement that could reasonably be deemed material to the
Company.
3.12 INVESTMENTS IN UNITED STATES REAL PROPERTY INTERESTS. The
Company's capital stock does not constitute a United States real property
interest as that term is defined in Section 897(c)(1)(A)(ii) of the Internal
Revenue Code of 1986, as amended (the "Code"). The preceding representation is
based on a determination by the Company that the Company is not and has not been
a United States real property holding corporation (as that term is defined in
Section 897(c)(2) of the Code) during the five (5) year period preceding the
date of this letter. The Company shall use its best efforts to ensure that it
does not at any time in the future become a United States real property holding
corporation. If at any time in the future the Company should become a United
States real property holding corporation, the Company shall, as promptly as
possible, notify each Purchaser of such change in status.
3.13 UNRELATED BUSINESS TAXABLE INCOME. Any gross income derived by the
Purchasers from the Company shall be in the form of dividends, interest, capital
gains and losses from the disposition of property, and rents and royalties, but
only such rents and royalties as are excluded pursuant to Code Sections
512(b)(2) and 512(b)(3), respectively, in calculating unrelated business taxable
income and only such dividends, interest, capital gains and losses, and rents
and royalties that are not included under Section 512(b)(4) of the Code in
calculating unrelated business taxable income. This Section 3.12 shall not be
deemed to apply to (i) any compensation (in cash, stock or other form) received
by designees of the Purchasers in their capacities as directors of the Company
that is transferred to the Purchasers or (ii) any income included under Section
512(b)(4) of the Code as a result of acquisition indebtedness incurred by any
Purchaser in connection with the purchase of an interest in the Company.
3.14 QUALIFIED SMALL BUSINESS. To the best of its knowledge, the
Company qualifies as a "Qualified Small Business" as defined in Section 1202(d)
of the Code and covenants that so long as its shares are held by the Purchasers
(or a transferee in whose hands the shares are eligible to qualify as Qualified
Small Business Stock as defined in Section 1202(c) of the Code), it will use its
reasonable efforts to cause the shares to qualify as Qualified Small Business
Stock; provided that, notwithstanding the foregoing, the Company shall not be
obligated to take any action, or refrain from any action, which in its good
faith judgment is not in the best interests of the Company or its stockholders.
5.
<PAGE> 6
3.15 DISCLOSURE. Neither this Agreement nor any schedule hereto, nor
any written disclosure document furnished by or on behalf of the Company to the
Purchasers or counsel to the Purchasers in connection with the transactions
contemplated by this Agreement, when read together, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any information
contained within any of the foregoing relating to future events or the projected
future financial performance of the Company, including any financial projections
or descriptions of potential strategic or business relationships between the
Company and third parties, except that the budget and financial projections
provided to the Purchasers dated July 16, 1997 (the "Financial Projections")
were prepared in good faith based on assumptions which the Company believes were
reasonable at the time the projections were prepared. As of the date of this
Agreement, to the Company's knowledge each of the assumptions upon which the
Financial Projections were based remain reasonable.
3.16 PERMITS. The Company has all franchises, permits, licenses and
other authority necessary for its business as now being conducted and believes
it can obtain, without undue burden or expense, any similar authority for its
business as planned to be conducted. The Company is not in default in any
material respect under any such franchise, permit, license or other authority.
3.17 INTELLECTUAL PROPERTY.
(a) The Company owns or has sufficient rights to use, free and
clear of all liens, charges, claims, and restrictions, all patents, trademarks,
service marks, trade names, copyrights, trade secrets, information, proprietary
rights and processes and other intellectual property rights necessary to its
business as presently conducted.
(b) Since its organization, the Company has taken reasonable
security measures to protect the secrecy, confidentiality and value of all
intellectual property and all Inventions (as defined below). Since its
organization, each of the Company's employees, consultants, and independent
contractors, who, either alone or in concert with others, developed, invented,
discovered, derived, programmed or designed intellectual property or Inventions
(as defined below), or who has knowledge of or access to information about
intellectual property or Inventions, has entered into a written agreement
substantially in the form attached hereto as Exhibit D ("Proprietary Information
Agreement") with the Company. As used herein, "Inventions" means all inventions,
developments and discoveries which during the period of an employee's,
consultant's, or contractor's service to the Company he, she or it makes or
conceives of, either solely or jointly with others, that relate to any subject
matter with which his, her, or its work for the Company may be concerned, or
relate to or are connected with the business, products, services or projects of
the Company, or relate to the actual or demonstrably anticipated research or
development of the Company or involve the use of the Company's funds, time,
material, facilities or trade secret information.
(c) The Company is not aware that any of the Company's employees
or consultants is or will be in violation of his or her Proprietary Information
Agreement, and the
6.
<PAGE> 7
Company shall use its best efforts to prevent any such violation. The Company is
not aware that any of the Company's employees, consultants or contractors are
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would conflict with his or her
obligation to use his or her best efforts to promote the interests of the
Company. Neither the execution nor delivery of this Agreement and the agreements
contemplated thereby, nor the carrying on of the Company's business by its
employees, consultants and contractors, nor the conduct of its business as
proposed, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument known to the Company under which any of such employees, consultants
or contractors is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions, copyrights, or other intellectual property
of any of its employees, consultants or contractors (or people it currently
intends to hire) made or owned prior to their employment with or engagement by
the Company or that it is or will be necessary to utilize any other assets or
rights of any of its employees, consultants or contractors (or people it
currently intends to hire) made or owned prior to their employment with or
engagement by the Company, in violation of any limitations or restrictions to
which any such employee, consultant or contractor is a party or to which any of
such assets or rights may be subject.
3.18 PATENTS AND OTHER INTANGIBLE ASSETS.
(a) Part 3.18(a) of the Disclosure Schedule summarizes all
patents, patent applications, trademarks, copyrights and other intellectual
property of the Company with a description of their scope.
(b) The Company (i) owns or has the right to use, free and clear
of all liens, claims and restrictions, all patents, patent applications,
trademarks, service marks, trade names, inventions, trade secrets, copyrights,
licenses and rights with respect to the foregoing, used in or necessary for the
conduct of its business as now conducted or proposed to be conducted, (ii) is
not infringing upon or otherwise acting adversely to the right or claimed right
of any person or entity under or with respect to any patent, trademark, service
mark, trade name, invention, trade secret, copyright, license or other
intellectual property or right with respect with respect thereto, and (iii) is
not obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, trademark, service mark, trade name, invention, trade secret, or
copyright with respect to the use thereof or in connection with the conduct of
its business or otherwise.
(c) The Company owns and has the unrestricted right to use all
product rights, manufacturing rights, trade secrets, including know-how,
negative know-how, formulas, patterns, compilations, programs, devices, methods,
techniques, processes, inventions, designs, computer programs and technical data
and all information that derives independent economic value, actual or
potential, from not being generally known or known by competitors and which the
Company has taken reasonable steps to maintain in secret (all of the foregoing
of which are collectively referred to herein as "Intellectual Property")
required for the development, manufacture, operation, and sale of all products
and services sold or proposed to be sold by the Company, free and clear of any
right, lien or claim of others, including without limitation former employers of
its
7.
<PAGE> 8
employees, consultants and contractors, and current employers of employees,
consultants and contractors, where such employees, consultants or contractors
are also employed or under contract with another person.
(d) The Company has not sold, transferred, assigned, licensed or
subjected to any lien, security interest, or other encumbrance, any Intellectual
Property, trade secret, know-how, invention, design, process, computer program
or technical data, or any interest therein, necessary or useful for the
development, manufacture, use, operation or sale of any product or service
presently under development or manufactured, sold or rendered by the Company.
(e) No director, officer, employee, agent or stockholder of the
Company owns or has any right in the Intellectual Property of the Company, or
any patents, trademarks, service marks, trade names, copyrights, licenses or
rights with respect to the foregoing, or any inventions, developments or
discoveries used in or necessary for the conduct of the Company's business as
now conducted or as proposed to be conducted.
(f) The Company has no actual knowledge of any facts and has not
received any communication alleging or stating that the Company or any employee,
consultant or contractor has violated or infringed, or by conducting business as
proposed, would violate or infringe, any patent, trademark, service mark, trade
name, copyright, trade secret, proprietary right, process or other Intellectual
Property of any other person or entity; the Company has no knowledge of any
impediment whereby any employee, consultant or contractor who performs or is to
perform services of any kind for the Company that would interfere with such
person's ability to promote the business of the Company or would conflict with
the business or proposed Company business.
(g) Neither the execution nor delivery of this Agreement and the
agreements contemplated thereby, nor the carrying on of the Company's business
by its employees, consultants, and contractors nor the conduct of its business
as proposed, will conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, any contract, covenant or
instrument known to the Company under which any of such employees, consultants
or contractors are now obligated.
(h) The Company has not granted any license to use its proprietary
information or Intellectual Property. The Company has not granted to any other
person or entity rights to license, market or sell its proposed products or
services and the Company is not bound by any agreement that affects the
Company's exclusive right to develop, license, market or sell its products or
services.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally and not jointly hereby represents and warrants
to the Company as follows:
4.1 REQUISITE POWER AND AUTHORITY. Such Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and to carry
8.
<PAGE> 9
out its provisions. All actions on such Purchaser's part required for the lawful
execution and delivery of this Agreement have been or will be effectively taken
prior to the Closing.
4.2 INVESTMENT REPRESENTATIONS. Such Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the Securities
Act of 1933, as amended (the "Securities Act"). Such Purchaser also understands
that the Shares are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon the Purchaser's
representations contained in this Agreement.
(a) PURCHASER BEARS ECONOMIC RISK. Such Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Such Purchaser must bear the economic
risk of this investment indefinitely unless the Shares (or the Conversion
Shares) are registered pursuant to the Securities Act, or an exemption from
registration is available. Such Purchaser understands that the Company has no
present intention of registering the Shares, the Conversion Shares or any shares
of its Common Stock. Such Purchaser also understands that there is no assurance
that any exemption from registration under the Securities Act will be available
and that, even if available, such exemption may not allow such Purchaser to
transfer all or any portion of the Shares or the Conversion Shares under the
circumstances, in the amounts or at the times such Purchaser might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Such Purchaser is acquiring the
Shares and the Conversion Shares for its own account for investment only, and
not with a view towards their distribution in violation of applicable securities
laws.
(c) PURCHASER CAN PROTECT ITS INTEREST. Such Purchaser represents
that, by reason of its or of its management's business or financial experience,
such Purchaser has the capacity to protect its own interests in connection with
the transactions contemplated in this Agreement. Further, such Purchaser is
aware of no publication of any advertisement in connection with the transactions
contemplated by the Agreement.
(d) ACCREDITED INVESTOR. Such Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) COMPANY INFORMATION. Such Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with directors,
officers and management of the Company. Such Purchaser has also had the
opportunity to ask questions of, and receive answers from, the Company and its
management regarding the terms and conditions of this investment.
(f) RULE 144. Such Purchaser acknowledges and agrees that the
Shares and the Conversion Stock must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Such Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act, which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of
9.
<PAGE> 10
certain conditions, including, among other things, the availability of certain
current public information about the Company, the resale occurring not less than
one year after a party has purchased and paid for the security to be sold, the
sale being through an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934, as amended) and the number of shares being sold during any
three-month period not exceeding specified limitations.
5. CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS
The obligation of each Purchaser to purchase and pay for the Shares to
be delivered to it at the Closing shall be subject to the satisfaction of the
following conditions as of the Closing Date:
(i) the representations and warranties of the Company
contained in this Agreement shall be true and correct on and as of the Closing
Date;
(ii) the Purchasers shall have received the legal opinion of
Cooley Godward LLP, counsel to the Company, in the form of Exhibit E hereto;
(iii) concurrently with the Closing, the Company, the
Purchasers and the existing stockholders of the Company shall have entered into
the Amended and Restated Stockholders Agreement in the form attached hereto as
Exhibit F;
(iv) the Company shall have provided to Centennial Fund IV,
L.P. ("Centennial") a certification of the direct and indirect holdings of
securities of the Company by certain persons designated by Centennial as
required by Centennial's governing documents;
(v) all other Purchasers shall have concurrently purchased
the Shares to be purchased by them pursuant to the this Agreement, except for
any Purchaser(s) who shall have purchased Shares at a subsequent closing
pursuant to this Agreement or any amendment hereto;
(vi) all corporate and legal proceedings taken by the Company
in connection with the transactions contemplated by this Agreement and all
documents relating to such transactions shall be satisfactory to the Purchasers
and to its counsel. The Company shall have delivered to the Purchasers a
certificate, executed on behalf of the Company by the President and the
Secretary of the Company, dated the Closing Date, certifying to the fulfillment
of the conditions specified in subsection 5(i); and
(vii) with respect to American Express Travel Related
Services Company, Inc. ("AmEx"), the Company shall have executed the Marketing
Agreement of even date herewith (the "Marketing Agreement").
6. EXPENSE REIMBURSEMENT
The Company hereby agrees to reimburse (i) the Purchasers (not
including AmEx) for the fees and expenses of one counsel representing all the
Purchasers in an amount not to exceed
10.
<PAGE> 11
$5,000 and (ii) AmEx for the fees and expenses of one counsel representing AmEx
in connection with this Agreement in an amount not to exceed $50,000 (payable by
wire transfer at the initial Closing), for services performed in connection with
the initial closing hereunder and the closing of the Marketing Agreement. The
Company agrees to reimburse the fees of counsel and out-of-pocket expenses
incurred by the Purchasers in connection with the enforcement, in a legal
proceeding against the Company, of the rights and remedies of the Purchasers
hereunder and under the Amended and Restated Stockholders Agreement, the
Company's Amended and Restated Certificate of Incorporation (excluding Article
Eleven thereof) and the Marketing Agreement if the Purchasers, either
individually or collectively, are the prevailing party or parties in any such
proceeding.
7. MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Colorado as such laws are applied to agreements between
Colorado residents entered into and performed entirely in Colorado, except that
the General Corporation Law of the State of Delaware shall govern as to matters
of corporate law.
7.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
7.4 ENTIRE AGREEMENT. This Agreement, and any amendment hereto, the
Exhibits and the other documents delivered pursuant hereto or pursuant to any
such amendment, including the Amended and Restated Stockholders Agreement, and
any amendment thereto, constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein and
therein.
7.5 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, it shall, to the extent possible, be modified
in such manner as to be valid, legal, and enforceable but so as to most nearly
retain the intent of the parties, and if such modification is not possible, such
provision shall be severed from this Agreement, and in either case the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
7.6 AMENDMENT AND WAIVER. This Agreement may be amended or modified
only upon the mutual written consent of the Company and each of the Purchasers.
11.
<PAGE> 12
7.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one (1) day after deposit
with a nationally recognized overnight courier, special next day delivery, with
verification of receipt. All communications shall be sent to the Company at 707
Seventeenth Street, Suite 2850, Denver, Colorado 80202 and to a Purchaser at the
address set forth on Exhibit A attached hereto or at such other address as the
Company or Purchaser may designate by ten (10) days advance written notice to
the other parties hereto.
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.9 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of any such fee or commission payable by such
indemnifying party.
7.10 FUTURE CLOSINGS. The parties hereto acknowledge and agree that one
or more subsequent closings of the sale of up to one million five hundred
thousand (1,500,000) additional shares of Series C Preferred may be held on or
prior to November 30, 1997 on substantially the same terms and conditions as are
applicable to the sale of Series C Preferred hereunder. Such additional closings
may be effected by execution of an additional signature page to this Agreement
and the Amended and Restated Stockholders Agreement and satisfaction of the
closing conditions set forth in Section 5 hereof. Nothing contained in this
Agreement or any Purchaser's prior dealings with the Company shall be deemed to
constitute a commitment on the part of any Purchaser to participate in any
subsequent closing or any other future financings by the Company.
12.
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as
of the date set forth in the first paragraph hereof.
COMPANY:
MERCURY MAIL, INC.
By: /s/
------------------------------------
Title:
---------------------------------
PURCHASERS:
AMERICAN EXPRESS TRAVEL RELATED SERVICES
COMPANY, INC.
By: /s/
------------------------------------
Title:
---------------------------------
CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.
Its General Partner
By: /s/
------------------------------------
Title: General Partner
---------------------------------
TELECOM PARTNERS, L.P.
By: /s/
------------------------------------
Title:
---------------------------------
TRIBUNE COMPANY
By: /s/
------------------------------------
Title:
---------------------------------
13.
<PAGE> 14
BOULDER VENTURES LTD.
By: /s/
------------------------------------
Title:
---------------------------------
FL@TIRON PARTNERS LLC
By: /s/
------------------------------------
Title:
---------------------------------
14.
<PAGE> 15
EXHIBIT A
SCHEDULE OF PURCHASERS: INITIAL CLOSING JULY 24, 1997
<TABLE>
<CAPTION>
PURCHASE PRICE NUMBER OF PRICE OF AGGREGATE
NAME AND ADDRESS NUMBER OF SHARES FOR SHARES ($4.00/SH) WARRANTS WARRANTS ($.001/WAR.) PURCHASE PRICE
- ---------------- ---------------- --------------------- --------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
American Express TRS Co. 875,000 $3,500,000 131,250 $131.25 $3,500,131.25
200 Vesey Street
World Financial Center 425,000 425.00 425.00
------
New York, NY 10285 3,500,556.25
Attn: V.P., New Bus. Dev.
Centennial Fund IV, L.P. 402,150 1,608,602 30,268 30.27 1,608,632.27
1999 Broadway, Suite 2100
Denver, CO 80202
Attn: Adam Goldman
Telecom Partners, L.P. 201,290 805,161 12,160 12.16 805,173.16
1999 Broadway, Suite 2100
Denver, CO 80202
Attn: Stephen W. Schovee
Tribune Company 326,075 1,304,301 33,884 33.88 1,304,334.88
435 North Michigan Ave.
Chicago, IL 60611-4001
Attn: David Williams
Fl@tiron Partners LLC 66,120 264,483 -- -- 264,483.00
Madison Avenue, 12th Floor
New York, NY
Attn: Fred Wilson
Boulder Ventures, L.P. 40,898 163,595 3,355 3.36 163,598.36
1634 Walnut Street,
Suite 301
Boulder, CO 80301
Attn: Kyle Lefkoff
Initial Closing Total: 1,911,533 $7,646,142 635,917 $635.92 $7,646,777.92
</TABLE>
<PAGE> 16
SERIES C STOCK PURCHASE AGREEMENT
EXHIBIT B
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
1.
<PAGE> 17
SERIES C STOCK PURCHASE AGREEMENT
EXHIBIT D
PROPRIETARY INFORMATION AGREEMENT
1.
<PAGE> 18
SERIES C STOCK PURCHASE AGREEMENT
EXHIBIT E
FORM OF LEGAL OPINION
1.
<PAGE> 19
SERIES C STOCK PURCHASE AGREEMENT
EXHIBIT F
FORM OF AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
1.
<PAGE> 1
EXHIBIT 10.11
INFOBEAT INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT") is
entered into as of June 8, 1998 by and among InfoBeat Inc., a Delaware
corporation (the "COMPANY") and each of those persons and entities, severally
and not jointly, whose names are set forth on the Schedule of Purchasers
attached hereto as EXHIBIT A (collectively the "PURCHASERS" and individually a
"PURCHASER").
In consideration of the mutual promises hereinafter set forth, the
parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized the sale and issuance to the
Purchasers of shares of its Series D Preferred Stock (the "Shares") having the
rights, preferences, privileges and restrictions set forth in the Restated
Certificate of Incorporation of the Company attached hereto as EXHIBIT B.
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at
the Closing, the Company hereby agrees to issue and sell to each Purchaser and
each Purchaser severally and not jointly agrees to purchase from the Company
the number of Shares set forth opposite such Purchaser's name on EXHIBIT A at a
purchase price of Five Dollars and Eight Cents ($5.08) per Share.
2. CLOSING, DELIVERY AND PAYMENT
The closing of the sale and purchase of the Shares under this Agreement
shall take place at 10:00 a.m. on the date hereof, at the offices of Cooley
Godward LLP, 2595 Canyon Boulevard, Suite 250, Boulder, Colorado 80302, or at
such other time or place as the Company and Purchasers may mutually agree (the
"Closing"). At the Closing, subject to the terms and conditions hereof, the
Company will deliver to the Purchasers certificates representing the number of
Shares to be purchased at the Closing by each Purchaser, against payment of the
purchase price therefor by certified check or wire transfer of immediately
available funds.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule delivered by the Company
to the Purchasers in connection with the signing hereof (with each item of the
Disclosure Schedule being deemed to apply to a particular section of this
Section 3 and not to all Sections of this Agreement) the Company hereby
represents and warrants to each Purchaser as follows:
<PAGE> 2
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite corporate power
and authority to own and operate its properties and assets, to execute and
deliver this Agreement to issue and sell the Shares and the shares of Common
Stock issuable upon conversion thereof (the "Conversion Shares") and to carry
out the other provisions of this Agreement, and to carry on its business as
presently conducted and as presently proposed to be conducted. The Company is
qualified or licensed and in good standing as a foreign corporation in all
jurisdictions where the nature of its business or property makes such
qualification or licensing necessary and the failure to be so qualified or
licensed could materially adversely affect the business, earnings, prospects,
properties or condition (financial or other) of the Company.
3.2 CAPITALIZATION.
(a) Immediately prior to the Closing, the authorized capital
stock of the Company will consist of (i) twelve million five hundred thousand
(12,500,000 shares of Common Stock, one million four thousand ninety-six
(1,004,096) shares of which are issued and outstanding, and (ii) seven million
seven hundred thousand (7,700,000) shares of Preferred Stock, eight hundred
eighty thousand (880,000) shares of which are designated as Series A Preferred
Stock, all of which are issued and outstanding, two million five hundred
seventy thousand (2,570,000) shares of which are designated as Series B
Preferred Stock, two million five hundred twenty-three thousand three hundred
thirty-three (2,523,333) of which are issued and outstanding, three million
five hundred fifty thousand (3,550,000) shares of which are designated as
Series C Preferred Stock, one million nine hundred eleven thousand five hundred
thirty-four (1,911,534) of which are issued and outstanding, and seven hundred
seventy thousand (770,000) shares of which are designated Series D Preferred
Stock, none of which were issued and outstanding prior to the Closing. All
issued and outstanding shares of the Company's Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable. Except for
outstanding employee options to purchase a total of one million thirty six
thousand fifty-three (1,036,053) shares of Common Stock, warrants to purchase
forty-six thousand six hundred sixty-six (46,666) shares of Series B Preferred
Stock, and warrants to purchase seven hundred ten thousand nine hundred
seventeen (710,917) shares of Series C Preferred Stock, there are no
outstanding options, warrants or other rights to purchase from the Company any
of its securities.
(b) There are no outstanding rights, subscriptions, calls,
options, warrants, conversion rights or agreements granted or issued by or
binding upon the Company for the purchase or acquisition (contingent or
otherwise) from the Company of any shares of its capital stock or any other
securities except in accordance with the terms of this Agreement. The Company
is not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any share of its capital stock or any security
convertible into or exchangeable for any shares of its capital stock. No holder
of Common Stock or Preferred Stock or any other security of the Company or
2
<PAGE> 3
any other person or entity is entitled to any preemptive right, right of first
refusal or similar right as a result of the issuance of the Shares or
otherwise, except as set forth therein. There is no voting trust, agreement or
arrangement among any of the beneficial holders of Common Stock or Preferred
Stock of the Company affecting the exercise of the voting rights of such stock.
(c) Attached in Part 3.2(c) of the Disclosure Schedule is a
true and complete list of the names and addresses of the record holders of all
of the outstanding Common Stock and Preferred Stock and other securities of the
Company. Such list attached contains a true and complete description of the
number of shares held by each such holder, the price paid per share and the
form of payment therefor. With respect to each outstanding option, such list
sets forth the date of grant, the number of shares subject thereto, the
exercise price, and vesting schedule. Such list also shows the current
directors and officers of the Company.
3.3 SUBSIDIARIES. The Company does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock or equity
interest in any corporation, association or business entity. The Company is
not, directly or indirectly, a participant in any joint venture or partnership.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on
the part of the Company, its officers, directors and stockholders necessary for
the authorization of this Agreement, the performance of all obligations of the
Company hereunder at the Closing and the authorization, sale, issuance and
delivery of the Shares has been taken or will be taken prior to the Closing.
When issued in compliance with the provisions of this Agreement, the Shares
will be validly issued, fully paid and nonassessable and will be free and clear
of any preemptive rights, security interests, claims, liens or encumbrances
created by the Company. The Conversion Shares have been duly and validly
reserved for issuance and, when issued upon conversion of the Series D
Preferred Stock, will be validly issued, fully paid and nonassessable and will
be free and clear of any preemptive rights, security interests, restrictions on
transfer, claims, liens or encumbrances other than restrictions under
applicable state securities laws. This Agreement shall constitute the valid and
binding obligation of the Company enforceable in accordance with its terms.
3.5 CONSENTS AND APPROVALS. No filings with, notices to, or
approvals or authorizations of any governmental or regulatory body are required
to be obtained or made by the Company in connection with the consummation of
the transactions contemplated hereby. The Company has obtained all consents,
approvals or authorizations of, made all declarations or filings with, and
given all notices to, all federal, state or local governmental or public
authorities or agencies which are necessary for the continued conduct by the
Company of its business as now conducted or as proposed to be conducted in
which the failure to so obtain, make or give could materially adversely affect
the business, earnings, prospects, properties or condition (financial or other)
of the Company.
3
<PAGE> 4
3.6 NO VIOLATIONS. The execution and delivery of this Agreement
and the performance by the Company of its obligations hereunder (i) do not and
will not conflict with or violate any provision of the Restated Certificate of
Incorporation or bylaws of the Company and (ii) do not and will not (a)
conflict with or result in a breach of the terms, conditions or provisions of,
(b) constitute a default under, (c) result in the creation of any encumbrance
upon the capital stock or assets of the Company pursuant to, (d) give any third
party the right to modify, terminate or accelerate any obligation under, (e)
result in a violation of, or (f) require any authorization, consent, approval,
exemption or other action by or notice to any court or administrative or
governmental body or other third party pursuant to, any law, statute, rule or
regulation or any material agreement or instrument or any order, judgment or
decree to which the Company is subject or by which any of its assets are bound.
3.7 FINANCIAL STATEMENTS; INTERIM CHANGES. The Company's unaudited
balance sheet as of April 30, 1998 (the "Latest Balance Sheet") and unaudited
of income and cash flows of the Company for the period from January 1, 1998 to
April 30, 1998 delivered to the Purchasers in connection with the investment
contemplated hereby have been prepared in accordance with generally accepted
accounting principles consistently applied (subject to normal year-end
adjustments and the absence of footnote disclosures) and fairly present in all
material respects the financial position and the results of operations of the
Company for the period covered thereby, and the Company has no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) that are
not either reflected or fully reserved against on the Latest Balance Sheet or
incurred in the ordinary course of the business of the Company subsequent to
the date thereof in an amount not to exceed $100,000 in the aggregate. Since
the date of the Latest Balance Sheet there has not been any material adverse
change in the business, operations, financial condition or prospects of the
Company.
3.8 COMPLIANCE WITH LAWS. The Company's business has been
conducted in compliance with all applicable laws and regulations of
governmental authorities, except for such violations that have been cured or
that, individually or in the aggregate, may not reasonably be expected to have
a material adverse effect on the business, operations, financial condition or
prospects of the Company.
3.9 PROPRIETARY RIGHTS. The Company has not received any
communications alleging that it has violated or, by conducting its business as
proposed would violate, any proprietary rights of any other person, nor is the
Company aware of any basis for the foregoing.
3.10 ACTIONS PENDING. There is no action, suit, proceeding or
investigation pending or, to the best knowledge of the Company, threatened in
writing against or affecting the Company or any of its respective properties or
rights before any court or by or before any governmental body or arbitration
board or tribunal. The foregoing includes, without limitation, actions pending
or threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees,
4
<PAGE> 5
the use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. The Company is not a
party or subject to, and none of its assets are bound by, the provisions of any
order, writ, injunction, judgment or decree of any court or government agency
or instrumentality or arbitrator or arbitration panel. There is no action,
suit, proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
3.11 MATERIAL CONTRACTS. Except as set forth on the Disclosure
Schedule, the Company is not a party to (and is not otherwise bound by) any of
the following: (i) any employment or consulting contract (including employee
benefit and welfare arrangements), (ii) any agreement providing for the
issuance or repurchase of any securities of the Company, (iii) any agreement in
respect of registration rights, preemptive rights, rights of first refusal,
voting rights or other rights of security holders, (iv) any agreement
evidencing or providing for any indebtedness for borrowed money, (v) any joint
venture contract or arrangement or other agreement involving a sharing of
profits or expenses to which the Company is a party; (vi) agreements limiting
the freedom of the Company to compete in any line of business or in any
geographic area or with any person; (vii) agreements providing for disposition
of the business, assets or shares of the Company, agreements of merger or
consolidation to which the Company is a party or letters of intent with respect
to the foregoing; or (viii) any other agreement that could reasonably be deemed
material to the Company.
3.12 INVESTMENTS IN UNITED STATES REAL PROPERTY INTERESTS. The
Company's capital stock does not constitute a United States real property
interest as that term is defined in Section 897(c)(1)(A)(ii) of the Internal
Revenue Code of 1986, as amended (the "Code"). The preceding representation is
based on a determination by the Company that the Company is not and has not
been a United States real property holding corporation (as that term is defined
in Section 897(c)(2) of the Code) during the five (5) year period preceding the
date of this letter. The Company shall use its best efforts to ensure that it
does not at any time in the future become a United States real property holding
corporation. If at any time in the future the Company should become a United
States real property holding corporation, the Company shall, as promptly as
possible, notify each Purchaser of such change in status.
3.13 UNRELATED BUSINESS TAXABLE INCOME. Any gross income derived by
the Purchasers from the Company shall be in the form of dividends, interest,
capital gains and losses from the disposition of property, and rents and
royalties, but only such rents and royalties as are excluded pursuant to Code
Sections 512(b)(2) and 512(b)(3), respectively, in calculating unrelated
business taxable income and only such dividends, interest, capital gains and
losses, and rents and royalties that are not included under Section 512(b)(4)
of the Code in calculating unrelated business taxable income. This Section 3.12
shall not be deemed to apply to (i) any compensation (in cash, stock or other
form) received by designees of the Purchasers in their capacities as directors
of the Company that is transferred to the Purchasers or (ii) any income
included under
5
<PAGE> 6
Section 512(b)(4) of the Code as a result of acquisition indebtedness incurred
by any Purchaser in connection with the purchase of an interest in the Company.
3.14 QUALIFIED SMALL BUSINESS. To the best of its knowledge, the
Company qualifies as a "Qualified Small Business" as defined in Section 1202(d)
of the Code and covenants that so long as its shares are held by the Purchasers
(or a transferee in whose hands the shares are eligible to qualify as Qualified
Small Business Stock as defined in Section 1202(c) of the Code), it will use
its reasonable efforts to cause the shares to qualify as Qualified Small
Business Stock; provided that, notwithstanding the foregoing, the Company shall
not be obligated to take any action, or refrain from any action, which in its
good faith judgment is not in the best interests of the Company or its
stockholders.
3.15 DISCLOSURE. Neither this Agreement nor any schedule hereto,
nor any written disclosure document furnished by or on behalf of the Company to
the Purchasers or counsel to the Purchasers in connection with the transactions
contemplated by this Agreement, when read together, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any information
contained within any of the foregoing relating to future events or the
projected future financial performance of the Company, including any financial
projections or descriptions of potential strategic or business relationships
between the Company and third parties, except that the budget and financial
projections provided to the Purchasers (the "Financial Projections") were
prepared in good faith based on assumptions which the Company believes were
reasonable at the time the projections were prepared. As of the date of this
Agreement, to the Company's knowledge each of the assumptions upon which the
Financial Projections were based remain reasonable.
3.16 PERMITS. The Company has all franchises, permits, licenses and
other authority necessary for its business as now being conducted and believes
it can obtain, without undue burden or expense, any similar authority for its
business as planned to be conducted. The Company is not in default in any
material respect under any such franchise, permit, license or other authority.
3.17 INTELLECTUAL PROPERTY.
(a) The Company owns or has sufficient rights to use, free
and clear of all liens, charges, claims, and restrictions, all patents,
trademarks, service marks, trade names, copyrights, trade secrets, information,
proprietary rights and processes and other intellectual property rights
necessary to its business as presently conducted.
(b) Since its organization, the Company has taken reasonable
security measures to protect the secrecy, confidentiality and value of all
intellectual property and
6
<PAGE> 7
all Inventions (as defined below). Since its organization, each of the
Company's employees, consultants, and independent contractors, who, either
alone or in concert with others, developed, invented, discovered, derived,
programmed or designed intellectual property or Inventions, or who has
knowledge of or access to information about intellectual property or
Inventions, has entered into a written agreement substantially in the form
attached hereto as Exhibit C ("Proprietary Information Agreement") with the
Company. As used herein, "Inventions" means all inventions, developments and
discoveries which during the period of an employee's, consultant's, or
contractor's service to the Company he, she or it makes or conceives of, either
solely or jointly with others, that relate to any subject matter with which
his, her, or its work for the Company may be concerned, or relate to or are
connected with the business, products, services or projects of the Company, or
relate to the actual or demonstrably anticipated research or development of the
Company or involve the use of the Company's funds, time, material, facilities
or trade secret information.
(c) The Company is not aware that any of the Company's
employees or consultants is or will be in violation of his or her Proprietary
Information Agreement, and the Company shall use its best efforts to prevent
any such violation. The Company is not aware that any of the Company's
employees, consultants or contractors are obligated under any contract
(including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would conflict with his or her obligation to use
his or her best efforts to promote the interests of the Company. Neither the
execution nor delivery of this Agreement and the agreements contemplated
thereby, nor the carrying on of the Company's business by its employees,
consultants and contractors, nor the conduct of its business as proposed, will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument known to
the Company under which any of such employees, consultants or contractors is
now obligated. The Company does not believe it is or will be necessary to
utilize any inventions, copyrights, or other intellectual property of any of
its employees, consultants or contractors (or people it currently intends to
hire) made or owned prior to their employment with or engagement by the Company
or that it is or will be necessary to utilize any other assets or rights of any
of its employees, consultants or contractors (or people it currently intends to
hire) made or owned prior to their employment with or engagement by the
Company, in violation of any limitations or restrictions to which any such
employee, consultant or contractor is a party or to which any of such assets or
rights may be subject.
3.18 PATENTS AND OTHER INTANGIBLE ASSETS.
(a) Part 3.18(a) of the Disclosure Schedule summarizes all
patents, patent applications, trademarks, copyrights and other intellectual
property of the Company with a description of their scope.
(b) The Company (i) owns or has the right to use, free and
clear of all
7
<PAGE> 8
liens, claims and restrictions, all patents, patent applications, trademarks,
service marks, trade names, inventions, trade secrets, copyrights, licenses and
rights with respect to the foregoing, used in or necessary for the conduct of
its business as now conducted or proposed to be conducted, (ii) is not
infringing upon or otherwise acting adversely to the right or claimed right of
any person or entity under or with respect to any patent, trademark, service
mark, trade name, invention, trade secret, copyright, license or other
intellectual property or right with respect with respect thereto, and (iii) is
not obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, trademark, service mark, trade name, invention, trade secret, or
copyright with respect to the use thereof or in connection with the conduct of
its business or otherwise.
(c) The Company owns and has the unrestricted right to use
all product rights, manufacturing rights, trade secrets, including know-how,
negative know-how, formulas, patterns, compilations, programs, devices,
methods, techniques, processes, inventions, designs, computer programs and
technical data and all information that derives independent economic value,
actual or potential, from not being generally known or known by competitors and
which the Company has taken reasonable steps to maintain in secret (all of the
foregoing of which are collectively referred to herein as "INTELLECTUAL
PROPERTY") required for the development, manufacture, operation, and sale of
all products and services sold or proposed to be sold by the Company, free and
clear of any right, lien or claim of others, including without limitation
former employers of its employees, consultants and contractors, and current
employers of employees, consultants and contractors, where such employees,
consultants or contractors are also employed or under contract with another
person.
(d) The Company has not sold, transferred, assigned, licensed
or subjected to any lien, security interest, or other encumbrance, any
Intellectual Property, trade secret, know-how, invention, design, process,
computer program or technical data, or any interest therein, necessary or
useful for the development, manufacture, use, operation or sale of any product
or service presently under development or manufactured, sold or rendered by the
Company.
(e) No director, officer, employee, agent or stockholder of
the Company owns or has any right in the Intellectual Property of the Company,
or any patents, trademarks, service marks, trade names, copyrights, licenses or
rights with respect to the foregoing, or any inventions, developments or
discoveries used in or necessary for the conduct of the Company's business as
now conducted or as proposed to be conducted.
(f) The Company has no actual knowledge of any facts and has
not received any communication alleging or stating that the Company or any
employee, consultant or contractor has violated or infringed, or by conducting
business as proposed, would violate or infringe, any patent, trademark, service
mark, trade name, copyright, trade secret, proprietary right, process or other
Intellectual Property of any
8
<PAGE> 9
other person or entity; the Company has no knowledge of any impediment whereby
any employee, consultant or contractor who performs or is to perform services
of any kind for the Company that would interfere with such person's ability to
promote the business of the Company or would conflict with the business or
proposed Company business.
(g) Neither the execution nor delivery of this Agreement and
the agreements contemplated thereby, nor the carrying on of the Company's
business by its employees, consultants, and contractors nor the conduct of its
business as proposed, will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument known to the Company under which any of such employees,
consultants or contractors are now obligated.
(h) The Company has not granted any license to use its
proprietary information or Intellectual Property. The Company has not granted
to any other person or entity rights to license, market or sell its proposed
products or services and the Company is not bound by any agreement that affects
the Company's exclusive right to develop, license, market or sell its products
or services.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally and not jointly hereby represents and
warrants to the Company as follows:
4.1 REQUISITE POWER AND AUTHORITY. Such Purchaser has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement and to carry out its provisions. All actions on such
Purchaser's part required for the lawful execution and delivery of this
Agreement have been or will be effectively taken prior to the Closing.
4.2 INVESTMENT REPRESENTATIONS. Such Purchaser understands that
neither the Shares nor the Conversion Shares have been registered under the
Securities Act of 1933, as amended (the "Securities Act"). Such Purchaser also
understands that the Shares are being offered and sold pursuant to an exemption
from registration contained in the Securities Act based in part upon the
Purchaser's representations contained in this Agreement.
(a) PURCHASER BEARS ECONOMIC RISK. Such Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. Such Purchaser must bear the
economic risk of this investment indefinitely unless the Shares (or the
Conversion Shares) are registered pursuant to the Securities Act, or an
exemption from registration is available. Such Purchaser understands that the
Company has no present intention of registering the Shares, the
9
<PAGE> 10
Conversion Shares or any shares of its Common Stock. Such Purchaser also
understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not allow such Purchaser to transfer all or any portion of the
Shares or the Conversion Shares under the circumstances, in the amounts or at
the times such Purchaser might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Such Purchaser is acquiring
the Shares and the Conversion Shares for its own account for investment only,
and not with a view towards their distribution in violation of applicable
securities laws.
(c) PURCHASER CAN PROTECT ITS INTEREST. Such Purchaser
represents that, by reason of its or of its management's business or financial
experience, such Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement. Further, such
Purchaser is aware of no publication of any advertisement in connection with
the transactions contemplated by the Agreement.
(d) ACCREDITED INVESTOR. Such Purchaser represents that it is
an accredited investor within the meaning of Regulation D under the Securities
Act.
(e) COMPANY INFORMATION. Such Purchaser has had an
opportunity to discuss the Company's business, management and financial affairs
with directors, officers and management of the Company. Such Purchaser has also
had the opportunity to ask questions of, and receive answers from, the Company
and its management regarding the terms and conditions of this investment.
(f) RULE 144. Such Purchaser acknowledges and agrees that the
Shares and the Conversion Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Such Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act, which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the
availability of certain current public information about the Company, the
resale occurring not less than one year after a party has purchased and paid
for the security to be sold, the sale being through an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934, as amended) and the number
of shares being sold during any three-month period not exceeding specified
limitations.
5. CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS
The obligation of each Purchaser to purchase and pay for the Shares to
be delivered to it at the Closing shall be subject to the satisfaction of the
following conditions as of the Closing Date:
10
<PAGE> 11
(i) the representations and warranties of the Company
contained in this Agreement shall be true and correct on and as of the
Closing Date;
(ii) the Purchasers shall have received the legal opinion of
Cooley Godward LLP, counsel to the Company, in the form of EXHIBIT D
hereto;
(iii) concurrently with the Closing, the Company, the
Purchasers and the existing stockholders of the Company shall have
entered into the Second Amended and Restated Stockholders Agreement in
the form attached hereto as EXHIBIT E;
(iv) the Company shall have provided to Centennial Fund IV,
L.P. ("CENTENNIAL") a certification of the direct and indirect
holdings of securities of the Company by certain persons designated by
Centennial as required by Centennial's governing documents;
(v) all other Purchasers shall have concurrently purchased
the Shares to be purchased by them pursuant to this Agreement; and
(vi) all corporate and legal proceedings taken by the Company
in connection with the transactions contemplated by this Agreement and
all documents relating to such transactions shall be satisfactory to
each of the Purchasers and to its counsel. The Company shall have
delivered to the Purchasers a certificate, executed on behalf of the
Company by the President and the Secretary of the Company, dated the
Closing Date, certifying to the fulfillment of the conditions
specified in subsection 5(i).
6. EXPENSE REIMBURSEMENT
The Company hereby agrees to reimburse Global Retail Partners, L.P. at
the Closing for the fees and expenses of one counsel representing it in an
amount not to exceed $7,500; provided that, the Company shall have received an
itemized bill of such fees and expenses prior to the Closing. The Company
agrees to reimburse the fees of counsel and out-of-pocket expenses incurred by
the Purchasers in connection with the enforcement, in a legal proceeding
against the Company, of the rights and remedies of the Purchasers hereunder and
under the Amended and Restated Stockholders Agreement and the Company's Amended
and Restated Certificate of Incorporation(excluding Article Eleven thereof) if
the Purchasers, either individually or collectively, are the prevailing party
or parties in any such proceeding.
7. MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Colorado as such laws are applied to
agreements between Colorado residents entered into and performed entirely in
Colorado, except that the General Corporation Law of the State of Delaware
shall govern as to matters of corporate law.
11
<PAGE> 12
7.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser
and the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by
or on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
7.4 ENTIRE AGREEMENT. This Agreement, and any amendment hereto,
the Exhibits and the other documents delivered pursuant hereto or pursuant to
any such amendment, including the Second Amended and Restated Stockholders
Agreement, and any amendment thereto, constitute the full and entire
understanding and agreement among the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically
set forth herein and therein.
7.5 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal, and enforceable but so as to
most nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
7.6 AMENDMENT AND WAIVER. This Agreement may be amended or
modified only upon the mutual written consent of the Company and each of the
Purchasers.
7.7 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified; (ii) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day; (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (iv) one (1) day
after deposit with a nationally recognized overnight courier, special next day
delivery, with verification of receipt. All communications shall be sent to the
Company at 707 Seventeenth Street, Suite 2850, Denver, Colorado 80202 and to a
Purchaser at the address set forth on Exhibit A attached hereto or at such
other address as the Company or Purchaser may designate by ten (10) days
advance written notice to the other parties hereto.
12
<PAGE> 13
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.9 BROKER'S FEES. Each party hereto represents and warrants that
no agent, broker, investment banker, person or firm acting on behalf of or
under the authority of such party hereto is or will be entitled to any broker's
or finder's fee or any other commission directly or indirectly in connection
with the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of any such fee or commission payable by such
indemnifying party.
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as
of the date set forth in the first paragraph hereof.
COMPANY:
INFOBEAT INC.
By: /s/
Title: President & CEO
PURCHASERS:
Boulder Ventures Ltd.
By: /s/
Title:
13
<PAGE> 14
Global Retail Partners, L.P.
By Global Retail Partners, Inc.
General Partner
By: /s/
Title:
DLJ Diversified Partners, L.P.
By DLJ Diversified Partners, Inc.
General Partner
By: /s/
Title:
14
<PAGE> 15
DLJ Diversified partners-A, L.P.
By DLJ Diversified Partners, Inc.
General Partner
By: /s/
Title:
GRP Partners, L.P.
By Global Retail Partners, Inc.
General Partner
By: /s/
Title:
15
<PAGE> 16
Global Retail Partners Funding, Inc.
By: /s/
Title:
DLJ ESC II L.P.
By DLJ LBO Plans Management Corporation
General Partner
By: /s/
Title:
/s/
Raymond H. Van Wagener, Jr.
16
<PAGE> 17
EXHIBIT A
SCHEDULE OF PURCHASERS
17
<PAGE> 18
EXHIBIT B
RESTATED CERTIFICATE OF INCORPORATION
20
<PAGE> 19
EXHIBIT C
PROPRIETARY INFORMATION AGREEMENT RESTATED CERTIFICATE OF INCORPORATION
21
<PAGE> 20
EXHIBIT D
FORM OF LEGAL OPINION FORM OF THIRD AMENDED AND RESTATED STOCKHOLDERS'
AGREEMENT
22
<PAGE> 21
EXHIBIT E
FORM OF SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
FORM OF LEGAL OPINION
23
<PAGE> 1
EXHIBIT 10.12
EXACTIS.COM, INC.
SERIES E PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS SERIES E PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the
"AGREEMENT") is entered into as of July 15, 1999 by and among EXACTIS.COM, INC.,
a Delaware corporation (the "COMPANY"), and each of those persons and entities,
severally and not jointly, whose names are set forth on the Schedule of
Purchasers attached hereto as Exhibit A (collectively the "PURCHASERS" and
individually a "PURCHASER").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of (i) one million eight hundred forty-six thousand one hundred
fifty-three (1,846,153) shares of its Series E Preferred Stock (the "SERIES E
STOCK") and (ii) warrants to purchase two hundred seventy-six thousand nine
hundred twenty-two (276,922) shares of the Company's Series E Stock,
substantially in the form attached hereto as Exhibit B;
WHEREAS, Purchasers desire to purchase an aggregate of six hundred
thirty thousand seven hundred thirty-eight (630,738) shares of Series E Stock
(the "SHARES") and warrants (the "WARRANTS", and together with the Shares, the
"SECURITIES") to purchase an aggregate of ninety-four thousand six hundred eight
(94,608) shares of Series E Stock (the "WARRANT SHARES") on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Securities to
Purchasers on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE
1.1 AUTHORIZATION OF SECURITIES. On or prior to the First Closing (as
defined in Section 2 below), the Company shall have authorized (a) the sale and
issuance to Purchasers of the Securities to be sold at the First Closing and
Second Closing (as defined in Section 2 below), and (b) the issuance of the
Warrant Shares and the issuance of such shares of Common Stock to be issued upon
conversion of the Series E Stock and of the Warrant Shares (collectively, the
"CONVERSION SHARES"). The Shares and the Conversion Shares shall have the
rights, preferences, privileges and restrictions set forth in the Restated
Certificate of Incorporation of the Company, in the form attached hereto as
Exhibit C (the "RESTATED CERTIFICATE").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at
the First Closing, the Company hereby agrees to issue and sell to each
Purchaser, severally and not jointly, and each Purchaser agrees to purchase from
the Company, severally and not jointly, (a) the number of Shares set forth
opposite such Purchaser's name under the heading "First Closing" on Exhibit A,
at a purchase price of Six Dollars and Fifty Cents ($6.50) per Share, and (b)
the
1
<PAGE> 2
number of Warrants set forth opposite such Purchaser's name under the heading
"First Closing" on Exhibit A, at a purchase price of One Cent ($.01) per Warrant
Share.
2. CLOSING, DELIVERY AND PAYMENT
2.1 CLOSING. The initial closing of the sale and purchase of the
Securities under this Agreement (the "FIRST CLOSING") shall take place at 10:00
a.m. (Colorado time) on the date hereof, at the offices of Cooley Godward LLP,
2595 Canyon Boulevard, Suite 250, Boulder, Colorado 80302, or at such other time
or place as the Company and Purchasers may mutually agree. The closing of the
sale and purchase of the Securities set forth in Section 2.2 below shall take
place at such time and place as the Company and Purchasers participating therein
shall mutually agree (the "SECOND CLOSING") (the First Closing and Second
Closing shall collectively be referred to herein as a "CLOSING" and each such
date is referred to as a "CLOSING DATE"). At each Closing, subject to the terms
and conditions hereof, the Company will deliver to the Purchasers certificates
representing the number of Shares to be purchased and warrants representing the
number of Warrants to be purchased at such Closing by each Purchaser, against
payment of the purchase price therefor by certified check or wire transfer of
immediately available funds.
2.2 SUBSEQUENT SALE OF SECURITIES. Following the First Closing, subject
to the terms and conditions hereof, at the Second Closing, the Company hereby
agrees to issue and sell to each Purchaser, severally and not jointly, and each
Purchaser agrees to purchase from the Company, severally and not jointly, (a)
the number of Shares set forth opposite such Purchaser's name under the heading
"Second Closing" on Exhibit A and (b) the number of Warrants set forth opposite
such Purchaser's name under the heading "Second Closing" on Exhibit A. At the
Second Closing, the Company shall offer the remaining Securities not sold to the
Purchasers at the First Closing or to be sold to the Purchasers at the Second
Closing to the holders of the Company's Common Stock on a pro rata basis (the
"RIGHTS OFFERING"). All sales made pursuant to this Section 2.2 shall be made on
the terms and conditions set forth in this Agreement. Any Shares of Series E
Stock sold pursuant to this Section 2.2 shall be deemed to be "Shares" for all
purposes of this Agreement, any Warrants sold pursuant to this Section 2.2 shall
be deemed to be "Warrants" for all purposes under this Agreement and any
purchasers thereof shall be deemed to be "Purchasers" for all purposes of this
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule delivered by the Company
to the Purchasers in connection with the signing hereof (with each item of the
Disclosure Schedule being deemed to apply to a particular section of this
Section 3 and not to all Sections of this Agreement), the Company hereby
represents and warrants to each Purchaser as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement and the Third Amended and Restated Stockholders' Agreement, in
the form attached hereto as Exhibit D (the "STOCKHOLDERS' AGREEMENT"), to issue
and sell the Securities and issue the Conversion Shares, and to carry out
2
<PAGE> 3
the provisions of this Agreement and the Stockholders' Agreement, and to carry
on its business as presently conducted and as presently proposed to be
conducted. The Company is qualified or licensed and in good standing as a
foreign corporation in all jurisdictions where the nature of its business or
property makes such qualification or licensing necessary and the failure to be
so qualified or licensed could materially adversely affect the business,
earnings, prospects, properties or condition (financial or other) of the
Company.
3.2 Capitalization.
(a) Immediately prior to the Closing, the authorized capital stock
of the Company will consist of (i) fifteen million (15,000,000) shares of Common
Stock, one million nine thousand fifty three (1,009,053) shares of which are
issued and outstanding, and (ii) eleven million (11,000,000) shares of Preferred
Stock, eight hundred eighty thousand (880,000) shares of which are designated as
Series A Preferred Stock, all of which are issued and outstanding, two million
five hundred seventy thousand (2,570,000) shares of which are designated as
Series B Preferred Stock, two million five hundred twenty-three thousand three
hundred thirty-three (2,523,333) of which are issued and outstanding, three
million five hundred fifty thousand (3,550,000) shares of which are designated
as Series C Preferred Stock, one million nine hundred eleven thousand five
hundred thirty-four (1,911,534) of which are issued and outstanding, one million
three hundred thousand (1,300,000) shares of which are designated Series D
Preferred Stock, six hundred twenty five thousand and one (625,001) of which are
issued and outstanding, and two million five hundred thousand (2,500,000) shares
of which are designated Series E Preferred Stock, none of which were issued and
outstanding prior to the Closing. All issued and outstanding shares of the
Company's Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable. Except for outstanding employee options as of June
30, 1999 to purchase a total of one million four hundred twenty-four thousand
four hundred twenty-three (1,424,423) shares of Common Stock, warrants to
purchase forty-six thousand six hundred sixty-six (46,666) shares of Series B
Preferred Stock, warrants to purchase seven hundred ten thousand nine hundred
seventeen (710,917) shares of Series C Preferred Stock and warrants to purchase
six hundred thousand (600,000) shares of Series D Preferred Stock, there are no
outstanding options, warrants or other rights to purchase from the Company any
of its securities.
(b) There are no outstanding rights, subscriptions, calls,
options, warrants, conversion rights or agreements granted or issued by or
binding upon the Company for the purchase or acquisition (contingent or
otherwise) from the Company of any shares of its capital stock or any other
securities except in accordance with the terms of this Agreement. The Company is
not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any share of its capital stock or any security
convertible into or exchangeable for any shares of its capital stock. No holder
of Common Stock or Preferred Stock or any other security of the Company or any
other person or entity is entitled to any preemptive right, right of first
refusal or similar right with respect to the issuance of the Securities or
otherwise, which has not been properly satisfied or waived. There is no voting
trust, agreement or arrangement among any of the beneficial holders of Common
Stock or Preferred Stock of the Company affecting the exercise of the voting
rights of such stock.
3
<PAGE> 4
(c) Attached in Part 3.2(c) of the Disclosure Schedule is a true
and complete list of the names and addresses of the record holders of all of the
outstanding Common Stock and Preferred Stock and other securities of the
Company. Such list attached contains a true and complete description of the
number of shares held by each such holder, the price paid per share and the form
of payment therefor. With respect to each outstanding option, such list sets
forth the date of grant, the number of shares subject thereto, the exercise
price, and vesting schedule. Such list also shows the current directors and
officers of the Company.
3.3 SUBSIDIARIES. The Company does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock or equity
interest in any corporation, association or business entity. The Company is not,
directly or indirectly, a participant in any joint venture or partnership.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement and the Stockholders' Agreement, the performance
of all obligations of the Company hereunder at the Closing and the
authorization, sale, issuance and delivery of the Securities has been taken or
will be taken prior to the Closing. When issued in compliance with the
provisions of this Agreement, the Securities will be validly issued, fully paid
and nonassessable and will be free and clear of any preemptive rights, security
interests, claims, liens or encumbrances created by the Company. The Conversion
Shares have been duly and validly reserved for issuance and, when issued upon
conversion of the Series E Preferred Stock and exercise of the Warrants, will be
validly issued, fully paid and nonassessable and will be free and clear of any
preemptive rights, security interests, restrictions on transfer, claims, liens
or encumbrances other than restrictions under applicable and state securities
laws. This Agreement shall constitute the valid and binding obligation of the
Company enforceable in accordance with its terms.
3.5 CONSENTS AND APPROVALS. No filings with, notices to, or approvals
or authorizations of any governmental or regulatory body are required to be
obtained or made by the Company in connection with the consummation of the
transactions contemplated hereby. The Company has obtained all consents,
approvals or authorizations of, made all declarations or filings with, and given
all notices to, all federal, state or local governmental or public authorities
or agencies which are necessary for the continued conduct by the Company of its
business as now conducted or as proposed to be conducted in which the failure to
so obtain, make or give could materially adversely affect the business,
earnings, prospects, properties or condition (financial or other) of the
Company.
3.6 NO VIOLATIONS. The execution and delivery of this Agreement and the
performance by the Company of its obligations hereunder (i) do not and will not
conflict with or violate any provision of the Restated Certificate of
Incorporation or bylaws of the Company and (ii) do not and will not (a) conflict
with or result in a breach of the terms, conditions or provisions of, (b)
constitute a default under, (c) result in the creation of any encumbrance upon
the capital stock or assets of the Company pursuant to, (d) give any third party
the right to modify, terminate or accelerate any obligation under, (e) result in
a violation of, or (f) require any authorization, consent, approval, exemption
or other action by or notice to any court or administrative or
4
<PAGE> 5
governmental body or other third party pursuant to, any law, statute, rule or
regulation or any material agreement or instrument or any order, judgment or
decree to which the Company is subject or by which any of its assets are bound.
3.7 FINANCIAL STATEMENTS; INTERIM CHANGES. The Company has delivered to
each Purchaser (i) its audited balance sheet as at December 31, 1998 and audited
statement of income and cash flows for the twelve months ending December 31,
1998 and (ii) its unaudited balance sheet (the "LATEST BALANCE SHEET") as of May
31, 1999 (the "STATEMENT DATE") and unaudited statement of income for the five
month period ending on the Statement Date (collectively, the "FINANCIAL
STATEMENTS"). The Financial Statements, together with the notes thereto, are
complete and correct in all material respects, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, except as disclosed therein, and present
fairly the financial condition and position and operating results of the Company
as of December 31, 1998 and the Statement Date; provided, however, that the
unaudited financial statements are subject to normal recurring year-end audit
adjustments (which are not expected to be material), and do not contain all
footnotes required under generally accepted accounting principles. Since the
Statement Date, there has not been any material adverse change in the business,
operations, financial condition or prospects of the Company. The Company has no
liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise) that are not either reflected or fully reserved against on the Latest
Balance Sheet or incurred in the ordinary course of business of the Company
subsequent to the date thereof in an amount not to exceed $100,000 in the
aggregate.
3.8 COMPLIANCE WITH LAWS. The Company's business has been conducted in
compliance with all applicable laws and regulations of governmental authorities,
except for such violations that have been cured or that, individually or in the
aggregate, may not reasonably be expected to have a material adverse effect on
the business, operations, financial condition or prospects of the Company.
3.9 PROPRIETARY RIGHTS. The Company has not received any communications
alleging that it has violated or, by conducting its business as proposed would
violate, any proprietary rights of any other person, nor is the Company aware of
any basis for the foregoing.
3.10 ACTIONS PENDING. There is no action, suit, proceeding or
investigation pending or, to the best knowledge of the Company, threatened in
writing against or affecting the Company or any of its respective properties or
rights before any court or by or before any governmental body or arbitration
board or tribunal. The foregoing includes, without limitation, actions pending
or threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees, the use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to, and none of its assets are
bound by, the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality or arbitrator or arbitration
panel. There is no action, suit, proceeding or investigation by the Company
currently pending or which the Company intends to initiate.
5
<PAGE> 6
3.11 MATERIAL CONTRACTS. Except as set forth on the Disclosure
Schedule, the Company is not a party to (and is not otherwise bound by) any of
the following: (i) any employment or consulting contract (including employee
benefit and welfare arrangements), (ii) any agreement providing for the issuance
or repurchase of any securities of the Company, (iii) any agreement in respect
of registration rights, preemptive rights, rights of first refusal, voting
rights or other rights of security holders, (iv) any agreement evidencing or
providing for any indebtedness for borrowed money, (v) any joint venture
contract or arrangement or other agreement involving a sharing of profits or
expenses to which the Company is a party; (vi) agreements limiting the freedom
of the Company to compete in any line of business or in any geographic area or
with any person; (vii) agreements providing for disposition of the business,
assets or shares of the Company, agreements of merger or consolidation to which
the Company is a party or letters of intent with respect to the foregoing; or
(viii) any other agreement that could reasonably be deemed material to the
Company.
3.12 INVESTMENTS IN UNITED STATES REAL PROPERTY INTERESTS. The
Company's capital stock does not constitute a United States real property
interest as that term is defined in Section 897(c)(1)(A)(ii) of the Internal
Revenue Code of 1986, as amended (the "Code"). The preceding representation is
based on a determination by the Company that the Company is not and has not been
a United States real property holding corporation (as that term is defined in
Section 897(c)(2) of the Code) during the five (5) year period preceding the
date of this letter. The Company shall use its best efforts to ensure that it
does not at any time in the future become a United States real property holding
corporation. If at any time in the future the Company should become a United
States real property holding corporation, the Company shall, as promptly as
possible, notify each Purchaser of such change in status.
3.13 UNRELATED BUSINESS TAXABLE INCOME. Any gross income derived by the
Purchasers from the Company shall be in the form of dividends, interest, capital
gains and losses from the disposition of property, and rents and royalties, but
only such rents and royalties as are excluded pursuant to Code Sections
512(b)(2) and 512(b)(3), respectively, in calculating unrelated business taxable
income and only such dividends, interest, capital gains and losses, and rents
and royalties that are not included under Section 512(b)(4) of the Code in
calculating unrelated business taxable income. This Section 3.12 shall not be
deemed to apply to (i) any compensation (in cash, stock or other form) received
by designees of the Purchasers in their capacities as directors of the Company
that is transferred to the Purchasers or (ii) any income included under Section
512(b)(4) of the Code as a result of acquisition indebtedness incurred by any
Purchaser in connection with the purchase of an interest in the Company.
3.14 QUALIFIED SMALL BUSINESS. To the best of its knowledge, the
Company qualifies as a "Qualified Small Business" as defined in Section 1202(d)
of the Code and covenants that so long as its shares are held by the Purchasers
(or a transferee in whose hands the shares are eligible to qualify as Qualified
Small Business Stock as defined in Section 1202(c) of the Code), it will use its
reasonable efforts to cause the shares to qualify as Qualified Small Business
Stock; provided that, notwithstanding the foregoing, the Company shall not be
obligated to take any action, or refrain from any action, which in its good
faith judgment is not in the best interests of the Company or its stockholders.
6
<PAGE> 7
3.15 DISCLOSURE. Neither this Agreement nor any schedule hereto, nor
any written disclosure document furnished by or on behalf of the Company to the
Purchasers or counsel to the Purchasers in connection with the transactions
contemplated by this Agreement, when read together, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any information
contained within any of the foregoing relating to future events or the projected
future financial performance of the Company, including any financial projections
or descriptions of potential strategic or business relationships between the
Company and third parties, except that the budget and financial projections
provided to the Purchasers (the "Financial Projections") were prepared in good
faith based on assumptions which the Company believes were reasonable at the
time the Financial Projections were prepared. As of the date of this Agreement,
to the Company's knowledge, each of the assumptions upon which the Financial
Projections were based remain reasonable.
3.16 PERMITS. The Company has all franchises, permits, licenses and
other authority necessary for its business as now being conducted and believes
it can obtain, without undue burden or expense, any similar authority for its
business as planned to be conducted. The Company is not in default in any
material respect under any such franchise, permit, license or other authority.
3.17 INTELLECTUAL PROPERTY.
(a) The Company owns or has sufficient rights to use, free and
clear of all liens, charges, claims, and restrictions, all patents, trademarks,
service marks, trade names, copyrights, trade secrets, information, proprietary
rights and processes and other intellectual property rights necessary to its
business as presently conducted.
(b) Since its organization, the Company has taken reasonable
security measures to protect the secrecy, confidentiality and value of all
intellectual property and all Inventions (as defined below). Since its
organization, each of the Company's employees, consultants, and independent
contractors, who, either alone or in concert with others, developed, invented,
discovered, derived, programmed or designed intellectual property or Inventions,
or who has knowledge of or access to information about intellectual property or
Inventions, has entered into a Proprietary Information Agreement set forth on
Exhibit F. As used herein, "INVENTIONS" means all inventions, developments and
discoveries which during the period of an employee's, consultant's, or
contractor's service to the Company he, she or it makes or conceives of, either
solely or jointly with others, that relate to any subject matter with which his,
her, or its work for the Company may be concerned, or relate to or are connected
with the business, products, services or projects of the Company, or relate to
the actual or demonstrably anticipated research or development of the Company or
involve the use of the Company's funds, time, material, facilities or trade
secret information.
(c) The Company is not aware that any of the Company's employees
or consultants is or will be in violation of his or her Proprietary Information
Agreement, and the Company shall use its best efforts to prevent any such
violation. The Company is not aware that
7
<PAGE> 8
any of the Company's employees, consultants or contractors are obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would conflict with his or her obligation to use his
or her best efforts to promote the interests of the Company. Neither the
execution nor delivery of this Agreement and the agreements contemplated
thereby, nor the carrying on of the Company's business by its employees,
consultants and contractors, nor the conduct of its business as proposed, will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument known to the
Company under which any of such employees, consultants or contractors is now
obligated. The Company does not believe it is or will be necessary to utilize
any inventions, copyrights, or other intellectual property of any of its
employees, consultants or contractors (or people it currently intends to hire)
made or owned prior to their employment with or engagement by the Company or
that it is or will be necessary to utilize any other assets or rights of any of
its employees, consultants or contractors (or people it currently intends to
hire) made or owned prior to their employment with or engagement by the Company,
in violation of any limitations or restrictions to which any such employee,
consultant or contractor is a party or to which any of such assets or rights may
be subject.
3.18 PATENTS AND OTHER INTANGIBLE ASSETS.
(a) Part 3.18(a) of the Disclosure Schedule summarizes all
patents, patent applications, trademarks, copyrights and other intellectual
property of the Company with a description of their scope.
(b) The Company (i) owns or has the right to use, free and clear
of all liens, claims and restrictions, all patents, patent applications,
trademarks, service marks, trade names, inventions, trade secrets, copyrights,
licenses and rights with respect to the foregoing, used in or necessary for the
conduct of its business as now conducted or proposed to be conducted, (ii) is
not infringing upon or otherwise acting adversely to the right or claimed right
of any person or entity under or with respect to any patent, trademark, service
mark, trade name, invention, trade secret, copyright, license or other
intellectual property or right with respect with respect thereto, and (iii) is
not obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, trademark, service mark, trade name, invention, trade secret, or
copyright with respect to the use thereof or in connection with the conduct of
its business or otherwise.
(c) The Company owns and has the unrestricted right to use all
product rights, manufacturing rights, trade secrets, including know-how,
negative know-how, formulas, patterns, compilations, programs, devices, methods,
techniques, processes, inventions, designs, computer programs and technical data
and all information that derives independent economic value, actual or
potential, from not being generally known or known by competitors and which the
Company has taken reasonable steps to maintain in secret (all of the foregoing
of which are collectively referred to herein as "INTELLECTUAL PROPERTY")
required for the development, manufacture, operation, and sale of all products
and services sold or proposed to be sold by the Company, free and clear of any
right, lien or claim of others, including without limitation former employers of
its employees, consultants and contractors, and current employers of employees,
consultants and
8
<PAGE> 9
contractors, where such employees, consultants or contractors are also employed
or under contract with another person.
(d) The Company has not sold, transferred, assigned, licensed or
subjected to any lien, security interest, or other encumbrance, any Intellectual
Property, trade secret, know-how, invention, design, process, computer program
or technical data, or any interest therein, necessary or useful for the
development, manufacture, use, operation or sale of any product or service
presently under development or manufactured, sold or rendered by the Company.
(e) No director, officer, employee, agent or stockholder of the
Company owns or has any right in the Intellectual Property of the Company, or
any patents, trademarks, service marks, trade names, copyrights, licenses or
rights with respect to the foregoing, or any inventions, developments or
discoveries used in or necessary for the conduct of the Company's business as
now conducted or as proposed to be conducted.
(f) The Company has no actual knowledge of any facts and has not
received any communication alleging or stating that the Company or any employee,
consultant or contractor has violated or infringed, or by conducting business as
proposed, would violate or infringe, any patent, trademark, service mark, trade
name, copyright, trade secret, proprietary right, process or other Intellectual
Property of any other person or entity; the Company has no knowledge of any
impediment whereby any employee, consultant or contractor who performs or is to
perform services of any kind for the Company that would interfere with such
person's ability to promote the business of the Company or would conflict with
the business or proposed Company business.
(g) Neither the execution nor delivery of this Agreement and the
agreements contemplated thereby, nor the carrying on of the Company's business
by its employees, consultants, and contractors nor the conduct of its business
as proposed, will conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, any contract, covenant or
instrument known to the Company under which any of such employees, consultants
or contractors are now obligated.
(h) The Company has not granted any license to use its proprietary
information or Intellectual Property. The Company has not granted to any other
person or entity rights to license, market or sell its proposed products or
services and the Company is not bound by any agreement that affects the
Company's exclusive right to develop, license, market or sell its products or
services.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally and not jointly hereby represents and warrants
to the Company as follows:
4.1 REQUISITE POWER AND AUTHORITY. Such Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Stockholders' Agreement and to carry out their
respective provisions. All actions on such
9
<PAGE> 10
Purchaser's part required for the lawful execution and delivery of this
Agreement and the Stockholders' Agreement have been or will be effectively taken
prior to the Closing.
4.2 INVESTMENT REPRESENTATIONS. Such Purchaser understands that neither
the Securities nor the Conversion Shares have been registered under the
Securities Act of 1933, as amended (the "Securities Act"). Such Purchaser also
understands that the Securities are being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in part upon
the Purchaser's representations contained in this Agreement.
(a) PURCHASER BEARS ECONOMIC RISK. Such Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Such Purchaser must bear the economic
risk of this investment indefinitely unless the Securities (or the Conversion
Shares) are registered pursuant to the Securities Act, or an exemption from
registration is available. Such Purchaser understands that the Company has no
present intention of registering the Securities, the Conversion Shares or any
shares of its Common Stock. Such Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow such
Purchaser to transfer all or any portion of the Securities or the Conversion
Shares under the circumstances, in the amounts or at the times such Purchaser
might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Such Purchaser is acquiring the
Securities and the Conversion Shares for its own account for investment only,
and not with a view towards their distribution in violation of applicable
securities laws.
(c) PURCHASER CAN PROTECT ITS INTEREST. Such Purchaser represents
that, by reason of its or of its management's business or financial experience,
such Purchaser has the capacity to protect its own interests in connection with
the transactions contemplated in this Agreement. Further, such Purchaser is
aware of no publication of any advertisement in connection with the transactions
contemplated by the Agreement.
(c) ACCREDITED INVESTOR. Such Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) COMPANY INFORMATION. Such Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with directors,
officers and management of the Company. Such Purchaser has also had the
opportunity to ask questions of, and receive answers from, the Company and its
management regarding the terms and conditions of this investment.
(f) RULE 144. Such Purchaser acknowledges and agrees that the
Securities and the Conversion Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Such Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act, which permits
limited resale of shares purchased in a private placement subject to the
10
<PAGE> 11
satisfaction of certain conditions, including, among other things, the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold, the sale being through an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934, as amended) and the number of
shares being sold during any three-month period not exceeding specified
limitations.
(g) If the Purchaser is an individual, then the Purchaser resides
in the state or province identified in the address of the Purchaser set forth on
Exhibit A; if the Purchaser is a partnership, corporation, limited liability
company or other entity, then the office or offices of the Purchaser in which
its investment decision was made is located at the address or addresses of the
Purchaser set forth on Exhibit A
5. CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS
The obligation of each Purchaser to purchase and pay for the Securities
to be delivered to it at the applicable Closing shall be subject to the
satisfaction of the following conditions as of each Closing Date:
5.1 with respect to the First Closing, the representations and
warranties made by the Company in Section 3 hereof shall be true and correct as
of such Closing Date with the same force and effect as if they had been made as
of such Closing Date, and the Company shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to such
Closing. With respect to the Second Closing, the Company shall have delivered an
updated Disclosure Schedule, and the representations and warranties made by the
Company in Section 3 hereof, as modified by the Disclosure Schedule, shall be
true and correct as of such Closing Date, and the Company shall have performed
all obligations and conditions herein required to be performed or observed by it
on or prior to such Closing;
5.2 (a) at the First Closing, the Purchasers shall have received the
legal opinion of Cooley Godward LLP, counsel to the Company, in the form of
Exhibit E hereto (the "Opinion"), and (b) at the Second Closing, the Purchasers
shall have received the legal opinion of Cooley Godward LLP, counsel to the
Company, set forth in paragraph 5 of the Opinion;
5.3 concurrently with the Closing, the Company, the Purchasers and the
existing stockholders of the Company shall have entered into the Third Amended
and Restated Stockholders Agreement in the form attached hereto as Exhibit D;
5.4 at the First Closing, the Company shall have provided to Centennial
Fund IV, L.P. ("CENTENNIAL") a certification of the direct and indirect holdings
of securities of the Company by certain persons designated by Centennial as
required by Centennial's governing documents;
5.5 all other Purchasers shall have concurrently purchased the
Securities to be purchased by them at each Closing pursuant to this Agreement;
11
<PAGE> 12
5.6 all corporate and legal proceedings taken by the Company in
connection with the transactions contemplated by this Agreement and all
documents relating to such transactions shall be satisfactory to each of the
Purchasers and to its counsel. At the Second Closing, the Company shall have
delivered to Purchasers a certificate, executed on behalf of the Company by the
President of the Company, dated as of such Closing Date, certifying as to the
fulfillment of the conditions specified in Section 5.1.
6. EXPENSE REIMBURSEMENT
The Company shall reimburse the reasonable fees and expenses of Holme
Roberts & Owen LLP, counsel to the Purchasers, incurred in connection with the
negotiation, execution, delivery and performance of this Agreement, in an amount
not to exceed $15,000; provided that, the Company shall have received an
itemized bill of such fees and expenses. The Company agrees to reimburse the
reasonable fees of counsel and out-of-pocket expenses incurred by the Purchasers
in connection with the enforcement, in a legal proceeding against the Company,
of the rights and remedies of the Purchasers hereunder and under the
Stockholders' Agreement and the Restated Certificate (excluding Article Eleven
thereof) if the Purchasers, either individually or collectively, are the
prevailing party or parties in any such proceeding.
7. MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Colorado as such laws are applied to agreements between
Colorado residents entered into and performed entirely in Colorado, except that
the General Corporation Law of the State of Delaware shall govern as to matters
of corporate law.
7.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Securities from time to time.
7.4 ENTIRE AGREEMENT. This Agreement, and any amendment hereto, the
Exhibits and the other documents delivered pursuant hereto or pursuant to any
such amendment, including the Stockholders Agreement, and any amendment thereto,
constitute the full and entire understanding and agreement among the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
12
<PAGE> 13
7.5 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, it shall, to the extent possible, be modified
in such manner as to be valid, legal, and enforceable but so as to most nearly
retain the intent of the parties, and if such modification is not possible, such
provision shall be severed from this Agreement, and in either case the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
7.6 AMENDMENT AND WAIVER. This Agreement may be amended or modified
only upon the mutual written consent of the Company and each of the Purchasers
at the First Closing.
7.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one (1) day after deposit
with a nationally recognized overnight courier, special next day delivery, with
verification of receipt. All communications shall be sent to the Company at 707
Seventeenth Street, Suite 2850, Denver, Colorado 80202 and to a Purchaser at the
address set forth on Exhibit A attached hereto or at such other address as the
Company or Purchaser may designate by ten (10) days advance written notice to
the other parties hereto.
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.9 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of any such fee or commission payable by such
indemnifying party.
7.10 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it
is not relying upon any person, firm, or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser who acquires Securities nor
the respective controlling persons, officers, directors, partners, agents, or
employees of any Purchaser shall be liable for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Securities and Conversion Shares.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as
of the date set forth in the first paragraph hereof.
COMPANY:
EXACTIS.COM INC.
By: /s/ E. Thomas Detmer
-----------------------------------------
Title: President and CEO
--------------------------------------
PURCHASERS:
GLOBAL RETAIL PARTNERS, L.P.
By: /s/ OSAMU R. WATANABE
-----------------------------------------
Title: Vice President
--------------------------------------
DLJ DIVERSIFIED PARTNERS, L.P.
By: /s/ OSAMU R. WATANABE
-----------------------------------------
Title: Vice President
--------------------------------------
DLJ DIVERSIFIED PARTNERS-A, L.P.
By: /s/ OSAMU R. WATANABE
-----------------------------------------
Title: Vice President
--------------------------------------
GRP PARTNERS, L.P.
By: /s/ OSAMU R. WATANABE
-----------------------------------------
Title: Vice President
--------------------------------------
GLOBAL RETAIL PARTNERS FUNDING, INC.
By: /s/ OSAMU R. WATANABE
-----------------------------------------
Title: Vice President
--------------------------------------
DLJ ESC II L.P.
By: /s/ OSAMU R. WATANABE
-----------------------------------------
Title: Vice President
--------------------------------------
CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.
-----------------------------------------
Its: General Partner
----------------------------------------
By: /s/ Adam Goldman
-----------------------------------------
Title: General Partner
------------------------------------
14
<PAGE> 15
TRIBUNE COMPANY
By: /s/
-----------------------------------------
Title: President, Tribune Ventures
--------------------------------------
BOULDER VENTURES II, L.P.
By: BV Partner II, LLC
By: /s/
-----------------------------------------
Title: Managing Member
--------------------------------------
/s/
-----------------------------------------
E. Thomas Detmer, Jr.
/s/
-----------------------------------------
Douglas Schneider
GOLIEB FAMILY TRUST
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
Steven Goot
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
Wayne Goss
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
JLS LLC
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
15
<PAGE> 16
Robert Lemle
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
Larry Macks
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
Morty Macks
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
Fred Steiner
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
Trisun Financial
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
WILL'S WEI CORP.
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
Misha Plam
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
16
<PAGE> 17
/s/
--------------------------------------------
Kyle Lefkoff
/s/
--------------------------------------------
Joseph Lefkoff
250 VC ASSOCIATES
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
/s/
--------------------------------------------
Joseph Lefkoff
250 VC ASSOCIATES
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
Erick Becker
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
CARUTHERS FAMILY LLC
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
Josh Fidler
By: BV Partners LLC, Attorney-in-Fact
By: /s/ Kyle Lefkoff
-----------------------------------------
Title: Managing Member
--------------------------------------
/s/ Peter Roshko
--------------------------------------------
Peter Roshko
/s/ Andrew Jones
--------------------------------------------
Andrew Jones
17
<PAGE> 18
EXHIBIT A
SCHEDULE OF PURCHASERS
<PAGE> 19
SERIES E STOCK AND WARRANT PURCHASE AGREEMENT
EXHIBIT B
FORM OF WARRANT
<PAGE> 20
SERIES E STOCK AND WARRANT PURCHASE AGREEMENT
EXHIBIT C
RESTATED CERTIFICATE OF INCORPORATION
<PAGE> 21
SERIES E STOCK AND WARRANT PURCHASE AGREEMENT
EXHIBIT D
FORM OF THIRD AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
<PAGE> 22
SERIES E STOCK AND WARRANT PURCHASE AGREEMENT
EXHIBIT E
FORM OF LEGAL OPINION
<PAGE> 23
SERIES E STOCK AND WARRANT PURCHASE AGREEMENT
EXHIBIT F
FORM OF PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
<PAGE> 1
EXHIBIT 10.15
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION
OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.
MERCURY MAIL, INC.
WARRANT TO PURCHASE SHARES
OF SERIES B PREFERRED STOCK
THIS CERTIFIES THAT, for value received, is entitled to
subscribe for and purchase shares of the fully paid and nonassessable Series B
Preferred Stock, $.01 par Value (as adjusted pursuant to Section 4 hereof, the
"Shares") of Mercury Mail, Inc., a Delaware corporation (the "Company"), at the
price of Three Dollars ($3.00) per share (such price and such other price as
shall result, from time to time, from the adjustments specified in Section 4
hereof is herein referred to as the "Warrant Price"), subject to the provisions
and upon the terms and conditions hereinafter set forth. As used herein, (a) the
term "Series Preferred" shall mean the Company's presently authorized Series B
Preferred Stock, and any stock into or for which such Series B Preferred Stock
may hereafter be converted or exchanged, (b) the term "Date of Grant" shall mean
March 27, 1977, and (c) the term "Other Warrants" shall mean any other warrants
issued by the Company in connection with the transaction with respect to which
this Warrant was issued, and any warrant issued upon transfer or partial
exercise of this Warrant. The term "Warrant" as used herein shall be deemed to
include Other Warrants unless the context clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable,
in whole or in part, in the amounts set forth below at any time and from time
to time from the Date of Grant through the later of (i) ten (10) years after the
Date of Grant or (ii) five (5) years after the closing of the Company's initial
public offering of its Common Stock effected pursuant to a Registration
Statement on Form S-1 (or its successor) filed under the Securities Act of 1933,
as amended (the "Act"): (A) 18,667 shares subject to this Warrant shall be
exercisable upon the Date of Grant and (B) 18,666 shares subject to this Warrant
shall be exercisable on the date on which the conditions precedent set forth in
Section 3.3 of the Loan and Security Agreement of even date herewith (the "Loan
Agreement") are met or waived by Lenders and the total available Credit Amount,
as defined in the Loan Agreement, equals $2,000,000.
1
<PAGE> 2
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, by
either, at the election of the holder hereof, (a) the surrender of this Warrant
(with the notice of exercise form attached hereto as Exhibit A duly executed) at
the principal office of the Company and by the payment to the Company, by check,
of an amount equal to the then applicable Warrant Price multiplied by the number
of Shares then being purchased, or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit A-1 duly executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or from
the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing shares of Series Preferred
shall be issuable upon exercise of this Warrant shall be deemed to have become
the holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty days after such exercise and, unless this Warrant has been
fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Series Preferred
to provide for the exercise of the rights represented by this Warrant and a
sufficient number of shares of its Common Stock to provide for the conversion of
the Series Preferred into Common Stock. Upon conversion of all outstanding
shares of Series Preferred into Common Stock pursuant to the Company's
Certificate of Incorporation, the Warrant shall be exercisable thereafter only
for Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
2
<PAGE> 3
(a) Reclassification or Merger. Notwithstanding the term of this
Warrant fixed pursuant to Section 1 hereof, the right to purchase Series
Preferred as granted herein shall expire, if not previously exercised,
immediately upon the closing of a merger or consolidation of the Company with or
into another corporation when the Company is not the surviving corporation
(other than a merger or consolidation for the principal purpose of changing the
domicile of the Company), or the sale of all or substantially all of the
Company's properties and assets to any other person ("the Merger"), provided
that the price per share paid in the Merger is equal to or greater than four (4)
times the Warrant Price per share and further provided that the Company is not
able, after using commercially reasonable efforts, to have the Warrant assured
or substituted.
Subject to the above provisions, in case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is the acquiring and
the surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially ail of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
duly execute and deliver to the holder of this Warrant a new Warrant (in form
and substance satisfactory to the holder of this Warrant), so that the holder of
this Warrant shall have the right to receive, at a total purchase price not to
exceed that payable upon the exercise of the unexercised portion of this
Warrant, and in lieu of the shares of Series Preferred theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change or
merger by a holder of the number of shares of Series Preferred then purchasable
under this Warrant. Such new Warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 4. In addition, in the event that all the authorized shares of
Series Preferred are converted into shares of Common Stock or any other series
or class of capital stock of the Company or in the case of any amendment or
waiver of any of the terms of the antidilution protection of the Series
Preferred, then this Warrant shall be deemed to be amended so that the holder of
this Warrant shall continue to be entitled to antidilution protection as nearly
equivalent as may be practicable to the antidilution protection applicable to
the Series Preferred on the Date of Grant, and the Company shall duly execute
and deliver to the holder of this Warrant a supplement hereto to such effect, in
form and substance satisfactory to the holder of this Warrant. The provisions of
this subparagraph (a) shall similarly apply to successive reclassifications,
changes, mergers, consolidations, transfers, amendments and waivers.
(b) Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or
3
<PAGE> 4
combine its outstanding shares of Series Preferred, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination, effective at the close of business on the date the subdivision
or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at any
time while this Warrant is outstanding and unexpired shall (i) pay a dividend
with respect to Series Preferred payable in Series Preferred, or (ii) make any
other distribution with respect to Series Preferred (except any distribution
specifically provided for in the foregoing subparagraphs (a) and (b)) of Series
Preferred, then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (i) the numerator of which
shall be the total number of shares of Series Preferred outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of shares of Series Preferred outstanding immediately after
such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the Warrant
Price, the number of Shares of Series Preferred purchasable hereunder shall be
adjusted, to the nearest whole share, to the product obtained by multiplying the
number of Shares purchasable immediately prior to such adjustment in the
Warrant Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter.
(e) Antidilution Rights. The other antidilution rights applicable to
the Shares and the Common Stock of the Company are set forth in Section 5 of
Article 4 of the Company's Certificate of Incorporation, as amended through the
Date of Grant (the "Charter"), a true and complete copy of which is attached
hereto as Exhibit B. Such antidilution rights shall not be restated, amended,
modified or waived in any manner that treats the holder hereof in a manner
differently than the other holders of Series Preferred without such holder's
prior written consent. The Company shall promptly provide the holder hereof with
any restatement, amendment, modification or waiver of the Charter promptly after
the same has been made.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, which shall be mailed (without regard to Section 13 hereof,
by first class mail, postage prepaid) to the holder of this Warrant. In
addition, whenever the conversion price or conversion ratio of the Series
Preferred shall be adjusted, the Company shall
4
<PAGE> 5
make a certificate signed by its chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
conversion price or ratio of the Series Preferred after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (without
regard to Section 13 hereof, by first class mail, postage prepaid) to the holder
of this Warrant.
6. Fractional Shares. No fractional shares of Series Preferred will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Series Preferred on the date of exercise as reasonably determined
in good faith by the Company's Board of Directors.
7. Compliance with Securities Act: Disposition of Warrant or Shares of
Series Preferred.
(a) Compliance with Securities Act. The holder of this Warrant,
by acceptance hereof, agrees that this Warrant, and the shares of Series
Preferred to be issued upon exercise hereof and any Common Stock issued upon
conversion thereof are being acquired for investment and that such holder will
not offer, sell or otherwise dispose of this Warrant, or any shares of Series
Preferred to be issued upon exercise hereof or any Common Stock issued upon
conversion thereof except under circumstances which will not result in a
violation of the Act. Upon exercise of this Warrant, unless the Shares being
acquired are registered under the Act or an exemption from such registration is
available, the holder hereof shall confirm in writing, by executing the form
attached as Schedule 1 to Exhibit A hereto, that the shares of Series Preferred
so purchased (and any shares of Common Stock issued upon conversion thereof) are
being acquired for investment and not with a view toward distribution or resale.
This Warrant and all shares of Series Preferred issued upon exercise of this
Warrant and all shares of Common Stock issued upon conversion thereof (unless
registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS
RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATIONS ARE NOT
REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL
AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE
WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the
holder specifically represents to the Company by acceptance of this Warrant as
follows:
5
<PAGE> 6
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
for purposes of the Act.
(2) The holder understands that this Warrant has not been registered
under the Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of the holder's
investment intent as expressed herein. In this connection, the holder
understands that, in the view of the SEC, the statutory basis for such exemption
may be unavailable if the holder's representation was predicated solely upon a
present intention to hold the Warrant for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Warrant, or for a period of one year or any
other fixed period in the future.
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and any applicable
state securities laws, or unless exemptions from registration are otherwise
available. Moreover, the holder understands that, except as provided in Section
9 hereof, the Company is under no obligation to register this Warrant.
(4) The holder is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, if applicable, including,
among other things: The availability of certain public information about the
Company, the resale occurring not less than one year after the party has
purchased and paid for the securities to be sold; the sale being made through
a broker in an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934, as amended) and the amount of securities being sold during any
three-month period not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it wishes to sell
this Warrant there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, the holder may be precluded from selling this Warrant under
Rule 144 and 144A even if the one-year minimum holding period had been
satisfied.
(6) The holder further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, not withstanding the fact that Rule 144 and 144A are not
exclusive, the Staff of the SEC
6
<PAGE> 7
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 and 144A will have a substantial burden of proof in establishing that
an exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk.
(b) Disposition of Warrant or Shares. With respect to any offer, sale
or other disposition of this Warrant or any shares of Series Preferred acquired
pursuant to the exercise of this Warrant prior to registration of such Warrant
or shares, the holder hereof and each subsequent holder of this Warrant agrees
to give written notice to the Company prior thereto, describing briefly the
manner thereof, together with a written opinion of such holder's counsel, if
reasonably requested by the Company, to the effect that such offer, sale or
other disposition may be effected without registration or qualification (under
the Act as then in effect or any federal or state law then in effect) of this
Warrant or such shares of Series Preferred or Common Stock and indicating
whether or not under the Act certificates for this Warrant or such shares of
Series Preferred to be sold or otherwise disposed of require any restrictive
legend as to applicable restrictions on transferability in order to ensure
compliance with such law. Promptly upon receiving such written notice and
reasonably satisfactory opinion, if so requested, the Company, as promptly as
practicable, shall notify such holder that such holder may sell or otherwise
dispose of this Warrant or such shares of Series Preferred or Common Stock, all
in accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this subsection (b) that the opinion of
counsel for the holder is not reasonably satisfactory to the Company, the
Company shall so notify the holder promptly after such determination has been
made and shall specify in detail the legal analysis supporting any such
conclusion. Notwithstanding the foregoing, this Warrant or such shares of Series
Preferred or Common Stock may, as to such federal laws, be offered, sold or
otherwise disposed of in accordance with Rule 144 or 144A under the Act,
provided that the Company shall have been furnished with such information as the
Company may reasonably request to provide a reasonable assurance that the
provisions of Rule 144 or 144A have been satisfied. Each certificate
representing this Warrant or the shares of Series Preferred thus transferred
(except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the
applicable restrictions on transferability in order to ensure compliance with
such laws, unless in the aforesaid opinion of counsel for the holder, such
legend is not required in order to ensure compliance with such laws. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.
(c) Excepted Transfers. Neither any restrictions of any legend
described in this Warrant nor the requirements of Section 7(b) above shall apply
to any transfer without any additional consideration of, or grant of a security
interest in, this Warrant or any part hereof (i) to a partner of the holder if
the holder is a partnership, (ii) by the holder to a partnership of which the
holder is a general partner, or (iii) to any affiliate as defined in Rule 405
under the Act of the holder if the holder is a corporation; provided, however,
in any such transfer, the transferee
7
<PAGE> 8
shall on the Company's request agree in writing to be bound by the terms of this
Warrant as if an original signatory hereto and further provided that the number
of transfers permitted pursuant to this subparagraph shall be five (5).
8. Rights as Shareholders; Information. No holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Series Preferred or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company will
transmit to the holder of this Warrant such information, documents and reports
as are generally distributed to the holders of any class or series of the
securities of the Company concurrently with the distribution thereof to the
shareholders.
9. Registration Rights. The Company covenants and agrees as follows:
9.1 Definitions. For purposes of this Section 9:
(a) The term "Registrable Shares" means (i) the Common
Stock issuable or issued upon conversion of the Series Preferred issuable or
issued upon exercise or conversion of this Warrant or upon exercise or
conversion of the Other Warrants, and (ii) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such Common Stock or Series
Preferred;
(b) The term "Shareholder" means any person owning or
having the right to acquire Registrable Shares or any assignee thereof in
accordance with Paragraph 9.3 hereof; and
(c) The term "Registration Rights" means the
Stockholders Agreement dated as of July 22, 1996 by and among the Company and
the investors who are signatories thereto (the "Purchase Agreement") (except
Article III), as subsequently amended as of September 19, 1996 and November 27,
1996.
9.2 Grant of Rights. The Company hereby grants to the
Shareholders the rights set forth in the Registration Rights. A true and
complete copy of the Registration Rights is attached hereto as Exhibit C. The
Company represents and warrants to the Shareholders that the Company has
obtained all consents of parties to the Purchase Agreement and of any other
persons that are required in order for the Registrable Shares to be included in
the definition of "Registrable Securities" and for
8
<PAGE> 9
the Shareholders to be included in the definition of "Holders," as such terms
are used in the Registration Rights.
9.3 Assignment of Registration Rights. Notwithstanding any provision of
the Registration Rights, the rights to cause the Company to register Registrable
Shares pursuant to the Registration Rights and this Section 9 may be assigned by
a Shareholder to a transferee or assignee of such securities provided the
Company is, within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act.
9.4 No Conflicting Agreements. The Company represents and warrants to
the Shareholders that the Company is not a party to any agreement that conflicts
in any manner with the Shareholders' rights to cause the Company to register
Registrable Shares pursuant to the Registration Rights and this Section 9. The
Company covenants and agrees that it shall not, without the prior written
consent of the Shareholders holding a majority of the outstanding Registrable
Shares, amend, modify or restate the Registration Rights if the rights of the
Shareholders would be subordinated, diminished or otherwise adversely affected
in a different manner than other "Holders" of "Registrable Securities" (as
defined in the Registration Rights).
9.5 Rights and Obligations Survive Exercise and Expiration of Warrant.
The rights and obligations of the Company, of the holder of this Warrant and of
the Registrable Shares contained in the Registration Rights and this Section 9
shall survive exercise, conversion and expiration of this Warrant.
10. Additional Rights.
10.1 Secondary Sales. The Company agrees that it will not interfere
with the holder of this Warrant in obtaining liquidity if opportunities to make
secondary sales of the Company's securities become available. To this end, the
Company will promptly provide the holder of this Warrant with the same notice
(if any) as it provides to other holders of the Company's securities of any
offer to acquire from the Company's security holders more than five percent (5%)
of the total voting power of the Company and will not interfere with the holder
in arranging the sale of this Warrant to the person or persons making such
offer.
10.2 Mergers. The Company will provide the holder of this Warrant with
at least 20 days' notice of the terms and conditions of any proposed (i) sale,
lease, exchange, conveyance or other disposition of all or substantially all of
its property or business, or (ii) merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary of the Company), or any other
transaction
9
<PAGE> 10
(including a merger or other reorganization) or series of related transactions,
in which more than 50% of the voting power of the Company is disposed of.
10.3 Right to Convert Warrant into Common Stock: Net Issuance.
(a) Right to Convert. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Series Preferred (or Common Stock if the Series Preferred has
been automatically converted into Common Stock) as provided in this Section 10.3
at any time or from time to time during the term of this Warrant. Upon
exercise of the Conversion Right with respect to a particular number of shares
subject to this Warrant (the "Converted Warrant Shares"), the Company shall
deliver to the holder (without payment by the holder of any exercise price or
any cash or other consideration) (X) that number of shares of fully paid and
nonassessable Series Preferred (or Common Stock if the Series Preferred has been
automatically converted into Common Stock) equal to the quotient obtained by
dividing the value of this Warrant (or the specified portion hereof) on the
Conversion Date (as defined in subsection (b) hereof), which value shall be
determined by subtracting (A) the aggregate Warrant Price of the Converted
Warrant Shares immediately prior to the exercise of the Conversion Right from
(B) the aggregate fair market value of the Converted Warrant Shares issuable
upon exercise of this Warrant (or the specified portion hereof) on the
Conversion Date (as herein defined) by (Y) the fair market value of one share of
Series Preferred (or Common Stock if the Series Preferred has been automatically
converted into Common Stock) on the Conversion Date (as herein defined).
Expressed as a formula, such conversion shall be computed as follows:
X = B - A
-----
Y
Where: X = the number of shares of Series Preferred (or Common Stock) that
may be issued to holder
Y = the fair market value (FMV) of one share of Series Preferred (or
Common Stock)
A = the aggregate Warrant Price (i.e., Converted Warrant Shares x
Warrant Price)
B = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
10
<PAGE> 11
holder an amount in cash equal to the fair market Value of the resulting
fractional share on the Conversion Date (as hereinafter defined).
(b) Method of Exercise. The Conversion Right may be exercised by the
holder by the surrender of this Warrant at the principal office of the Company
together with a notice of exercise substantially in the form attached hereto as
Exhibit A-2, specifying that the holder thereby intends to exercise the
Conversion Right and indicating the number of shares subject to this Warrant
that are being surrendered (referred to in subsection (a) hereof as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with the
aforesaid notice of exercise, or on such later date as is specified therein (the
"Conversion Date"), and, at the election of the holder hereof, may be made
contingent upon the closing of the sale of the Company's Common Stock to the
public in a public offering pursuant to a Registration Statement under the Act
(a "Public Offering"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of the
shares remaining subject to this Warrant, shall be issued as of the Conversion
Date and shall be delivered to the holder within thirty (30) days following the
Conversion Date. Any conversion from Series Preferred to Common Stock shall be
in a ratio of one (1) share of Common Stock for each share of Series Preferred
(as adjusted herein and in the Charter). On the Date of Grant, the Series
Preferred purchasable under this Warrant represents underlying shares of Common
Stock at $3.00 per share.
(c) Determination of Fair Market Value. For purposes of this Section
10.3, "fair market value" of a share of Series Preferred (or Common Stock if the
Series Preferred has been automatically converted into Common Stock) as of a
particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the SEC, then the initial "Price to Public" specified in the final
prospectus with respect to such offering multiplied by the number of shares of
Common Stock into which each share of Series Preferred is then convertible.
(ii) If the Conversion Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock shall be deemed to be
the average of the closing or last reported sale prices of the Common Stock on
such exchange or market over the 30-day period ending five business days prior
to the Determination Date, and the fair market value of the Series Preferred
shall be deemed to be such fair market value of the Common Stock multiplied by
the number
11
<PAGE> 12
of shares of Common Stock into which each share of Series Preferred is then
convertible;
(B) If otherwise traded in an over-the-counter market,
the fair market value of the Common Stock shall be deemed to be the average of
the closing ask prices of the Common Stock over the 30-day period ending five
business days prior to the Determination Date, and the fair market value of the
Series Preferred shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into which each share
of Series Preferred is then convertible; and
(C) If there is no public market for the Common Stock,
then fair market value shall be determined in good faith by the Company's Board
of Directors provided that if the holder does not agree with such reduction,
then at the Company's and the holder's equally shared expense by an investment
banker of national reputation selected by the Company and reasonably acceptable
to the holder of this Warrant.
11. Representations and Warranties. The Company represents and warrants
to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable;
(c) The rights, preferences and privileges granted to or imposed
upon the Series Preferred and the holders thereof are as set forth in the
Charter, as amended to the Date of the Grant, a true and complete copy of which
has been delivered to the original holder of this Warrant and is attached hereto
as Exhibit B;
(d) The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved and, when issued in accordance
with the terms of the Charter, as amended, will be validly issued, fully paid
and nonassessable; and
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Charter or by-laws, do
not and will not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and do not and will not conflict with or
contravene any
12
<PAGE> 13
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which it is bound or
require the consent or approval of, the giving of notice to, the registration or
filing with or the taking of any action in respect of or by, any Federal, state
or local government authority or agency or other person, except for the filing
of notices pursuant to federal and state securities laws, which filings will be
effected by the time required thereby.
(f) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
12. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of
the Company, or to the Company at the address indicated therefor on the
signature page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Series Preferred issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights (including, without limitation, any right
to registration of the shares of Registrable Securities to which the holder
hereof shall continue to be entitled after such exercise or conversion in
accordance with this Warrant; provided, that the failure of the holder hereof to
make any such request shall not affect the continuing obligation of the Company
to the holder hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will
13
<PAGE> 14
make and deliver a new Warrant or stock certificate, of like tenor, in lieu of
the lost, stolen, destroyed or mutilated Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
18. Survival of Representations Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative, provided that the foregoing shall not be interpreted to mean that
such representations are true and correct as of any date other than the date
hereof,
19. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. Value. The Company and the holder of this Warrant agree that the
value of this Warrant and the Other Warrants on the Date of Grant is $100.00.
21. Acceptance. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
foregoing
22. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may
14
<PAGE> 15
be necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment.
MERCURY MAIL, INC.
By: /s/
--------------------------------------
Title: CFO
----------------------------------
Address: 707 17th, Suite 2850
Denver CO 80202
Date: March 27, 1997
15
<PAGE> 16
EXHIBIT A
NOTICE OF EXERCISE
To: Mercury Mail, Inc.
1. The undersigned hereby elects to purchase ____ shares of Series B
Preferred Stock of Mercury Mail, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
------------------------
(Name)
------------------------
------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
(Signature)
(Date)
16
<PAGE> 17
EXHIBIT A-1
NOTICE OF EXERCISE
To: Mercury Mail, Inc. (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S-__, filed _________, 199 __ the undersigned hereby elects to
purchase ________ shares of Series B Preferred Stock of the Company (or such
lesser number of shares as may be sold on behalf of the undersigned at the
Closing) pursuant to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such _________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $____________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such shares,
the undersigned agrees to deliver the difference to the Company prior to the
Closing.
(Signature)
(Date)
17
<PAGE> 18
EXHIBIT A-2
NOTICE OF EXERCISE OF NET ISSUANCE CONVERSION RIGHTS
To: Mercury Mail, Inc.
1. The undersigned, the registered holder of the Warrant delivered
herewith (the "Warrant"), hereby elects to exercise the Conversion Right (as
defined in Section 10.3 of the Warrant) as provided herein. ___________ shares
subject to the Warrant are being surrendered hereby in exercise of the
Conversion Right. The number of shares to be issued pursuant to this exercise
shall be determined by reference to the formula in Section 10.3(a) of the
Warrant, which requires the use of the "fair market value" of the Company's
stock. As of the Determination Date (as defined in the Warrant), the "fair
market value" of one share of Series Preferred Stock (or Common Stock if the
Series B Preferred Stock has been automatically converted into Common Stock)
shall be determined in the manner provided in Section 10.3(c) of the Warrant,
which amount has been determined by the undersigned (or agreed to by the holder
of the Warrant and Mercury Mail, Inc.) to be $__________ per share. Therefore,
_________ shares are to be issued to the undersigned pursuant to this exercise.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
-----------------------
(Name)
-----------------------
-----------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
(Signature)
(Date)
18
<PAGE> 1
EXHIBIT 10.16
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE
SHARES OF SERIES C PREFERRED STOCK OF
MERCURY MAIL, INC.
(VOID AFTER JULY 24, 2001)
This certifies that ________________________________________________,
(the "Holder"), or assigns, for value received, is entitled, subject to the
conditions set forth herein, to purchase from Mercury Mail, Inc., a Delaware
corporation (the "Company"), having a place of business at 707 17th Street,
Suite 2850, Denver, Colorado 80202, a total of ______ fully paid and
nonassessable shares (the "Shares") of the Company's Series C Preferred Stock
("Series C Stock") or any security into or for which such Series C Stock may
hereafter be converted or exchanged pursuant to the Certificate of Incorporation
of the Company as from time to time amended as provided by law (including the
conversion of all Series C Stock into shares of the Company's Common Stock in
the circumstances described in the Certificate of Incorporation) at a price of
Four Dollars ($4.00) per share (the "Stock Purchase Price") at any time or from
time to time up to and including 5:00 p.m. (Mountain Time) on the earlier of (i)
July 24, 2001; or (ii) the closing of a consolidation or merger of the Company
with or into any other corporation or corporations where more than 51% of the
voting power of the Company is disposed of, or a sale, conveyance or disposition
of all or substantially all of the assets of the Company, such earlier day being
referred to herein as the "Expiration Date," upon surrender to the Company at
its principal office (or at such other location as the Company may advise the
Holder in writing) of this Warrant properly endorsed with the Subscription Form
attached hereto as Exhibit A duly filled in and signed and, if applicable, upon
payment in cash or by check of the aggregate Stock Purchase Price for the number
of shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of this
Warrant.
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1. GENERAL. This Warrant is exercisable at the option of the Holder
at any time or from time to time, up to the Expiration Date for all or any part
of the shares of Series C Stock (but not for a fraction of a share) which may be
purchased hereunder.
1.2. ISSUANCE OF CERTIFICATES. The Company agrees that the shares of
Series C Stock purchased under this Warrant shall be and are deemed to be issued
to the Holder hereof as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered, properly
endorsed, the completed, executed Subscription Form (a copy of which is attached
hereto as Exhibit A) delivered and payment made for such shares. Certificates
1
<PAGE> 2
for the shares of Series C Stock so purchased, together with any other
securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time (not to exceed three (3) business
days) after the rights represented by this Warrant have been so exercised. Each
stock certificate so delivered shall be in such denominations of Series C Stock
as may be requested by the Holder hereof and shall be registered in the name of
such Holder or, subject to the provisions of Section 4, such Holder's designee.
In case of a purchase of less than all the shares which may be purchased under
this Warrant, the Company shall cancel this Warrant and execute and deliver a
new Warrant or Warrants of like tenor for the balance of the shares purchasable
under the Warrant surrendered upon such purchase to the Holder hereof within a
reasonable time.
1.3. CASHLESS EXERCISE. Notwithstanding any provisions herein to the
contrary, in lieu of exercising this Warrant for cash (x) the Holder may pay the
exercise price by surrendering shares of Series C Stock or other equity
securities of the Company with an aggregate fair market value equal to the
aggregate Stock Purchase Price, or (y) if the fair market value of one share of
the Company's Series C Stock is greater than the Stock Purchase Price (at the
date of calculation as set forth below), the Holder may elect to receive shares
equal to the value (as determined below) of this Warrant (or the portion thereof
being canceled) by surrender of this Warrant at the principal office of the
Company together with the properly endorsed Form of Subscription and notice of
such election in which event the Company shall issue to the Holder a number of
shares of Series C Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Series C Stock to be issued
to the Holder
Y = the number of shares of Series C Stock purchasable
under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the
Warrant being canceled (at the date of such
calculation)
A = the fair market value of one share of the Company's
Series C Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, the fair market value of one share of
Series C Stock shall be determined by the Company's Board of Directors in good
faith but shall in no event be less than the then-current liquidation value
thereof; provided, however, that in the event the Company makes an initial
public offering of its Common Stock the fair market value per share shall mean:
(i) if the Warrant is being converted in connection with and contingent upon a
public offering of the Common Stock, and if the Company's registration statement
relating to such public offering has been declared effective by the U.S.
Securities and Exchange Commission, then the initial "Price to Public" specified
in the final prospectus with respect to such offering multiplied by the number
of shares of Common Stock into which each share of Series C Stock is
2
<PAGE> 3
then convertible; or (ii) if the Warrant is not being converted in connection
with and contingent upon a public offering of the Company's securities, then as
follows: (x) if traded on a securities exchange or the NASDAQ National Market,
the fair market value of the Common Stock shall be deemed to be the average of
the closing or last reported sale prices of the Common Stock on such exchange or
market over the 30-day period ending five business days prior to the date of
calculation, and the fair market value of the Series C Stock shall be deemed to
be such fair market value of the Common Stock multiplied by the number of shares
of Common Stock into which each share of Series C Stock is then convertible or
(y) if otherwise traded in an over-the-counter market, fair market value of the
Common Stock shall be deemed to be the average of the closing bid and ask prices
of the Common Stock over the 30-day period ending five business days prior to
the date of calculation, and the fair market value of the Series C Stock shall
be deemed to be such fair market value of the Common Stock multiplied by the
number of shares of Common Stock into which each share of Series C Stock is then
convertible.
1. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants and
agrees that all shares of Series C Stock that may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable and free from all preemptive rights
of any stockholder and free of all taxes, liens and charges with respect to the
issue thereof. The Company further covenants and agrees that, during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved, for the purpose of issue
or transfer upon exercise of the subscription rights evidenced by this Warrant,
a sufficient number of shares of authorized but unissued Series C Stock, or
other securities and property, when and as required to provide for the exercise
of the rights represented by this Warrant. The Company will take all such action
as may be necessary to assure that such shares of Series C Stock may be issued
as provided herein without violation of any applicable law or regulation, or of
any requirements of any domestic securities exchange upon which the Series C
Stock may be listed; provided, however, that the Company shall not be required
to effect a registration under Federal or State securities laws with respect to
such exercise. The Company will not take any action which would result in any
adjustment of the Stock Purchase Price (as set forth in Section 3 hereof) (i) if
the total number of shares of Series C Stock issuable after such action upon
exercise of all outstanding warrants and options, together with all shares of
Series C Stock then outstanding and all shares of Series C Stock then issuable
upon the conversion of all convertible securities then outstanding, would exceed
the total number of shares of Series C Stock then authorized by the Company's
Certificate of Incorporation, or (ii) if the total number of shares of Common
Stock issuable after such action upon the conversion of all outstanding shares
of Series C Stock, together with all shares of Common Stock then issuable upon
the conversion of all shares of Series C Stock then issuable upon exercise of
all outstanding warrants and options, together with all shares of Common Stock
then outstanding and all shares of Common Stock then issuable upon exercise of
all warrants and options and upon the conversion of all convertible securities
then outstanding would exceed the total number of shares of Common Stock then
authorized by the Company's Certificate of Incorporation.
2. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock Purchase
Price and
3
<PAGE> 4
the number of shares purchasable upon the exercise of this Warrant shall be
subject to adjustment from time to time upon the occurrence of certain events
described in this Section 3. Upon each adjustment of the Stock Purchase Price,
the Holder of this Warrant shall thereafter be entitled to purchase, at the
Stock Purchase Price resulting from such adjustment, the number of shares
obtained by multiplying the Stock Purchase Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment, and dividing the product thereof by the Stock Purchase
Price resulting from such adjustment.
2.1. SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at
any time subdivide its outstanding shares of Series C Stock or Common Stock into
a greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Series C Stock or Common Stock of the Company shall be
combined into a smaller number of shares, the Stock Purchase Price in effect
immediately prior to such combination shall be proportionately increased.
2.2. DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the Holders of Series C
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
2.2.1. Series C Stock or Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Series C Stock or Common Stock, or any rights or options to
subscribe for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution;
2.2.2. Any cash paid or payable otherwise than as a cash dividend out
of current earnings; or
2.2.3. Series C Stock or additional stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
combination of shares or similar corporate rearrangement (other than (i) shares
of Series C Stock issued as a stock split, adjustments in respect of which shall
be covered by the terms of Section 3.1 above or (ii) an event for which
adjustment is otherwise made pursuant to Section 3.3 below);
then and in each such case, the Holder hereof shall, upon the exercise of
this Warrant, be entitled to receive, in addition to the number of shares of
Series C Stock receivable thereupon, and without payment of any additional
consideration therefor, the amount of stock and other securities and property
(including cash in the cases referred to in clauses 3.2.2 and 3.2.3 above) which
such Holder would hold on the date of such exercise had he been the holder of
record of such Series C Stock as of the date on which holders of Series C Stock
received or became entitled to receive such shares or all other additional stock
and other securities and property.
2.3. REORGANIZATION, RECLASSIFICATION OR RECAPITALIZATION. If any
recapitalization, reclassification or capital reorganization of the capital
stock of the Company shall be effected in such a way that holders of Series C
Stock shall be entitled to receive stock, securities, or other assets or
property (a "Restructuring"), then, as a condition of such Restructuring, lawful
and
4
<PAGE> 5
adequate provisions shall be made whereby the Holder hereof shall thereafter
have the right to purchase and receive (in lieu of or in addition to the shares
of the Series C Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares of
stock, securities or other assets or property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Series C
Stock equal to the number of shares of such stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby
and appropriate provision shall be made with respect to the rights and interests
of the Holder of this Warrant to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Stock Purchase Price and
of the number of shares purchasable and receivable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
hereof.
2.4. ISSUANCE OF SERIES C PREFERRED. In the event that the Company
issues shares of its Series C Stock at a price per share less than the Stock
Purchase Price then in effect, the Stock Purchase Price shall immediately be
adjusted to equal the price at which such Series C Stock was so issued.
2.5. NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock Purchase
Price, any increase or decrease in the number of shares purchasable upon the
exercise of this Warrant or any change in the securities or other property
deliverable upon exercise of this Warrant, the Company shall give written notice
thereof, by first class mail, postage prepaid, addressed to the registered
Holder of this Warrant at the address of such Holder as shown on the books of
the Company. The notice shall be signed by the Company's President and shall
state the Stock Purchase Price resulting from such adjustment, the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant or the amount of securities or other property
deliverable upon such exercise, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
2.6. OTHER NOTICES. If at any time:
2.6.1. the Company shall declare any cash dividend upon its Series C
Stock or Common Stock;
2.6.2. the Company shall declare any dividend upon its Series C Stock
or Common Stock payable in stock or make any special dividend or other
distribution to the holders of its Series C Stock or Common Stock;
2.6.3. there shall be any Restructuring;
2.6.4. there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
2.6.5. there shall be an initial public offering of Company securities;
then, in any one or more of said cases, the Company shall give, by first class
mail,
5
<PAGE> 6
postage prepaid, addressed to the Holder of this Warrant at the address of such
Holder as shown on the books of the Company, (a) at least ten (10) days prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such Restructuring,
dissolution, liquidation or winding-up, and (b) in the case of any such
Restructuring, dissolution, liquidation, winding-up or public offering, at least
ten (10) days prior written notice of the date when the same shall take place;
provided, however, that if any response on the part of the Holder is otherwise
required, the Holder shall make its best efforts to respond to such notice as
early as possible after the receipt thereof. Any notice given in accordance with
the foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Series C
Stock shall be entitled thereto. Any notice given in accordance with the
foregoing clause (b) shall also specify the date on which the holders of Series
C Stock shall be entitled to exchange their Series C Stock for securities or
other property deliverable upon such Restructuring, dissolution, liquidation,
winding-up or public offering, as the case may be.
2.7. CERTAIN EVENTS. If any change in the outstanding Series C Stock of
the Company or any other event occurs as to which the other provisions of this
Section 3 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder of the Warrant in accordance with such
provisions, the Board of Directors of the Company shall make an adjustment in
the number and class of shares available under the Warrant, the Stock Purchase
Price or the application of such provisions, so as to protect such purchase
rights as aforesaid. The adjustment shall be such as will give the Holder of the
Warrant upon exercise for the same aggregate Stock Purchase Price the total
number, class and kind of shares as he would have owned had the Warrant been
exercised prior to the event and had he continued to hold such shares until
after the event requiring adjustment.
3. ISSUE TAX. The issuance of certificates for shares of Series C Stock upon the
exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.
4. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Series C Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
5. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing contained in
this Warrant shall be construed as conferring upon the Holder hereof the right
to vote or to consent or to receive notice as a stockholder of the Company or
any other matters or any rights whatsoever as a stockholder of the Company. No
dividends or interest shall be payable or accrued in respect of this Warrant or
the interest represented hereby or the shares purchasable hereunder until, and
only to the extent that, this Warrant shall have been exercised. No provision
hereof in the absence of affirmative action by the holder to purchase shares of
Series C Stock, and no mere enumeration herein of the rights or privileges of
the Holder hereof, shall give rise to any liability
6
<PAGE> 7
of such holder for the Stock Purchase Price or as a stockholder of the Company,
whether such liability is asserted by the Company or by its creditors.
Notwithstanding the foregoing, the Company will transmit to the Holder
(including Holder's successors) such information, documents and reports as are
generally distributed to all of the holders of any class or series of the
securities of the Company concurrently with the distribution thereof to such
stockholders.
6. STOCKHOLDERS AGREEMENT. The registration and other rights of the Holder
(including Holder's successors) with respect to this Warrant and the underlying
stock will be the same as granted to the holders of the Company's Series C Stock
under that certain Amended and Restated Stockholders Agreement dated as of July
24, 1997, as amended, by and among the Company and certain stockholders of the
Company.
7. TRANSFER RESTRICTIONS. Subject to (i) the prior written consent of the
Company (which consent shall not be unreasonably withheld) and (ii) compliance
with applicable federal and state securities laws, this Warrant and all rights
hereunder are transferable, in whole or in part, without charge to the holder
hereof (except for transfer taxes), upon surrender of this Warrant properly
endorsed and in compliance with such provisions.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Series C Stock issued upon exercise of this Warrant, referred to in
Sections 7 and 8 shall survive the exercise of this Warrant.
9. MODIFICATION AND WAIVER. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the holders of Warrants representing a majority of
the Common Stock into which the Warrant may be converted. Any waiver or
amendment effected in accordance with this Section 10 shall be binding upon the
holder of this Warrant and the holder of any securities into which this Warrant
may be converted, and upon the Company.
10. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to the
Holder as follows:
10.1. This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency, and the relief of debtors and the rules of law and principles of
equity governing specific performance, injunctive relief and other equitable
remedies;
10.2. The Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable;
10.3. The rights, preferences, privileges and restrictions granted to
or imposed upon the Series C Stock and the holders thereof are as set forth in
the Certificate of Incorporation of the
7
<PAGE> 8
Company as amended to the date of grant of this Warrant, a true and complete
copy of which has been delivered to the Holder;
10.4. The shares of Common Stock issuable upon conversion of the Shares
have been duly authorized and reserved for issuance by the Company and, when
issued in accordance with the terms of the Certificate of Incorporation then in
effect will be validly issued, fully paid and non-assessable;
10.5. The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the termsof the Certificate of
Incorporation or by-laws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do not and
will not conflict with or contravene any provision of, or constitute a default
under, any indenture, mortgage, contract or other instrument of which the
Company is a party or by which it is bound or require the consent or approval
of, the giving of notice to, the registration or filing with or the taking of
any action in respect of or by, any federal, state or local government authority
or agency or other person, except for the filing of notices pursuant to federal
or state securities laws, which filings will be effected by the time required
thereby; and
10.6. There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
11. NOTICES. Any notice, request or other document required or permitted to be
given or delivered to the holder hereof or the Company shall be delivered or
shall be sent by first-class mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Colorado.
13. LOST WARRANTS. The Company represents and warrants to the Holder hereof that
upon receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction, or mutilation of this Warrant and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant, the Company, at its expense, will make and deliver
a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise of
this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a
8
<PAGE> 9
sum in cash equal to such fraction multiplied by the then effective fair market
value of the Series C Stock.
15. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All representations
and warranties of the Company and the holder hereof contained herein shall
survive the Date of Grant, the exercise or conversion of this Warrant (or any
part hereof) or the termination or expiration of rights hereunder. All
agreements of the Company and the holder hereof contained herein shall survive
indefinitely until, by their respective terms, they are no longer operative.
16. REMEDIES. In case any one or more of the covenants and agreements contained
in this Warrant shall have been breached, the Holders hereof (in the case of a
breach by the Company), or the Company (in the case of a breach by the Holder),
may proceed to protect and enforce their or its rights either by suit in equity
and/or by action at law, including, but not limited to, an action for damages as
a result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this Warrant.
17. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of its
Certificate of Incorporation or through any other means, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant against impairment.
18. SEVERABILITY. The invalidity or unenforceability of any provision of this
Warrant in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction, or affect any other provision of this
Warrant, which shall remain in full force and effect.
19. RECOVERY OF LITIGATION COSTS. If any legal action or other proceeding is
brought for the enforcement of this Warrant, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Warrant, the successful or prevailing party shall be entitled to recover
reasonable attorney's fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its President, thereunto duly authorized this 24th, day of July,
1997.
MERCURY MAIL, INC.,
a Delaware corporation
Raymond H. Van Wagener, Jr.
President
9
<PAGE> 10
EXHIBIT A
SUBSCRIPTION FORM
Date:______________, 19___
Mercury Mail, Inc.
707 17th Street, Suite 2850
Denver, Colorado 80202
Attn: President
Ladies and Gentlemen:
[_] The undersigned hereby elects to exercise the warrant issued to it by
Mercury Mail, Inc. (the "Company") and dated _____________, 1997,
Warrant No. PFW-___ (the "Warrant") and to purchase thereunder
__________ shares of the Series C Preferred Stock of the Company (the
"Shares") at a purchase price of ___ Dollars ($___) per Share, or an
aggregate purchase price of ___________________________________
($__________) (the "Purchase Price").
[_] The undersigned hereby elects to convert ___________________ percent
(___%) of the value of the Warrant pursuant to the provisions of
Section 1.3 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
By:
Title:
<PAGE> 11
EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO MERCURY MAIL, INC.
ALONG WITH THE SUBSCRIPTION FORM BEFORE THE SERIES C PREFERRED STOCK ISSUABLE
UPON EXERCISE OF THE WARRANT DATED JULY 24, 1997, WILL BE ISSUED.
_____________________, 1997
Mercury Mail, Inc.
707 17th Street, Suite 2850
Denver, Colorado 80202
Attn: President
Ladies and Gentlemen:
The undersigned, _________________________ ("Purchaser"), intends to
acquire up to ______________ shares of the Series C Preferred Stock (the "Series
C Stock") of Mercury Mail, Inc. (the "Company") from the Company pursuant to the
exercise or conversion of certain Warrants to purchase Series C Stock held by
Purchaser. The Series C Stock will be issued to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. Purchaser has been advised that the Series C Stock has not been
registered under the 1933 Act or state securities laws on the ground that this
transaction is exempt from registration, and that reliance by the Company on
such exemptions is predicated in part on Purchaser's representations set forth
in this letter. Accordingly, Purchaser represents, warrants and agrees as
follows:
1. Purchaser is acquiring the Series C Stock for its own account
and beneficial interest, to hold for investment and not for sale or with a view
to distribution of the Series C Stock or any part thereof in violation of
applicable securities laws.
2. Each Purchaser acknowledges that it has received all the
information it has requested from the Company and considers necessary or
appropriate for deciding whether to acquire the Series C Stock. Each Purchaser
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Series C Stock and to obtain any additional information necessary to verify the
accuracy of the information given the Purchaser. Each Purchaser further
represents that it has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risk of this investment.
3. Each Purchaser is an "accredited investor" as such term is
defined in Rule 501 under the 1933 Act.
<PAGE> 12
4. Each Purchaser acknowledges that investment in the Series C
Stock involves a high degree of risk, and represents that it is able, without
materially impairing its financial condition, to hold the Series C Stock for an
indefinite period of time and to suffer a complete loss of its investment.
5. Purchaser has been informed that under the 1933 Act, the
Series C Stock must be held indefinitely unless it is subsequently registered
under the 1933 Act or unless an exemption from such registration (such as Rule
144) is available with respect to any proposed transfer or disposition by
Purchaser of the Series C Stock. Purchaser further agrees that the Company may
refuse to permit Purchaser to sell, transfer or dispose of the Series C Stock
(except as permitted under Rule 144 or by the terms of the Series C Preferred
Stock Purchase Agreement dated as of July 24, 1997) unless there is in effect a
registration statement under the 1933 Act and any applicable state securities
laws covering such transfer, or unless Purchaser furnishes an opinion of counsel
reasonably satisfactory to counsel for the Company, to the effect that such
registration is not required. Purchaser shall not make any sale, transfer or
other disposition of the Series C Stock in violation of the 1933 Act or the
General Rules and Regulations promulgated thereunder by the Securities and
Exchange Commission or in violation of any applicable state securities law.
6. Purchaser also understands and agrees that there will be
placed on the certificate(s) for the Series C Stock, or any substitutions
therefor, a legend stating in substance:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), or any
state securities laws. These shares have been acquired for investment
and may not be sold or otherwise transferred in the absence of an
effective registration statement for these shares under the 1933 Act
and applicable state securities laws, or, except as provided by the
terms of the Series C Preferred Stock Purchase Agreement, dated as of
July 24, 1997, an opinion of counsel satisfactory to the Company that
registration is not required and that an applicable exemption is
available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Series C Stock with Purchaser's counsel.
Very truly yours,
By:
Title:
12
<PAGE> 1
EXHIBIT 10.17
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE
SHARES OF SERIES C PREFERRED STOCK OF
MERCURY MAIL, INC.
(VOID AFTER JULY 24, 2000)
This certifies that AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY,
INC. (the "Holder"), or assigns, for value received, is entitled, subject to the
conditions set forth herein, to purchase from Mercury Mail, Inc., a Delaware
corporation (the "Company"), having a place of business at 707 17th Street,
Suite 2850, Denver, Colorado 80202, a total of 425,000 fully paid and
nonassessable shares (the "Shares") of the Company's Series C Preferred Stock
("Series C Stock") or any security into or for which such Series C Stock may
hereafter be converted or exchanged pursuant to the Certificate of Incorporation
of the Company as from time to time amended as provided by law (including the
conversion of all Series C Stock into shares of the Company's Common Stock in
the circumstances described in the Certificate of Incorporation) at a price of
Six Dollars ($6.00) per share (the "Stock Purchase Price") at any time or from
time to time up to and including 5:00 p.m. (Mountain Time) on the earlier of (i)
July 24, 2000; or (ii) the closing of a consolidation or merger of the Company
with or into any other corporation or corporations where more than 51% of the
voting power of the Company is disposed of, or a sale, conveyance or disposition
of all or substantially all of the assets of the Company, such earlier day being
referred to herein as the "Expiration Date," upon surrender to the Company at
its principal office (or at such other location as the Company may advise the
Holder in writing) of this Warrant properly endorsed with the Subscription Form
attached hereto as Exhibit A duly filled in and signed and, if applicable, upon
payment in cash or by check of the aggregate Stock Purchase Price for the number
of shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of this
Warrant. Capitalized terms not defined herein shall have the meanings ascribed
to them in the Marketing Agreement by and between the Holder and the Company
dated as of July 24, 1997 (the "Marketing Agreement").
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1. CONDITIONS TO EXERCISE. Subject to satisfaction by the holder of
the following conditions precedent, this Warrant is exercisable at the option of
the Holder at any time or from time to time, up to the Expiration Date for all
or any part of the shares of Series C Stock (but not for a fraction of a share)
which may be purchased hereunder:
1.1.1. The Holder may exercise this Warrant to purchase up to
Sixty-three
1
<PAGE> 2
Thousand Seven Hundred Fifty (63,750) shares of Series C Stock if, prior to
April 24, 1998, the Holder and the Company jointly define the AMEX Service and
develop a business plan approved by the Board of Directors of the Company and
the Holder for the provision of the AMEX Service.
1.1.2. The Holder may exercise this Warrant to purchase up to One
Hundred Six Thousand Two Hundred Fifty (106,250) shares of Series C Stock if the
Holder either (i) generates more than $100,000 of gross revenues per month for
the Company for two months during any six-month period prior to January 24,
1999, which revenues derive from AMEX Subscribers through AMEX Service
advertising or subscription fees, from the Holder as either agent or client for
the Bureau Service or otherwise in connection with the Marketing Agreement, or
(ii) generates more than $100,000 of gross revenues for the Company prior to the
Expiration Date, which revenues derive from the Holder as either agent or client
for the Bureau Service.
1.1.3. The Holder may exercise this Warrant to purchase up to One
Hundred Six Thousand Two Hundred Fifty (106,250) shares of Series C Stock if the
Holder either (i) generates more than $375,000 per month of gross revenues for
the Company for two months during any six-month period prior to October 24,
1999, which revenues derive from AMEX Subscribers through AMEX Service
advertising or subscription fees, from the Holder as either agent or client for
the Bureau Service or otherwise in connection with the Marketing Agreement, or
(ii) generates more than $375,000 of gross revenues for the Company prior to the
Expiration Date, which revenues derive from the Holder as either agent or client
for the Bureau Service.
1.1.4. The Holder may exercise this Warrant to purchase up to One
Hundred Forty-eight Thousand Seven Hundred Fifty (148,750) shares of Series C
Stock if the Holder generates more than $750,000 per month of gross revenues for
the Company for two months during any six-month period prior to the Expiration
Date, which revenues derive from AMEX Subscribers through AMEX Service
advertising or subscription fees, from the Holder as either agent or client for
the Bureau Service or otherwise in connection with the Marketing Agreement.
1.1.5. In the case of Section 1.1.1 hereof, if the Holder does not
satisfy the condition precedent specified therein prior to April 24, 1998, the
Holder's right to exercise this Warrant shall expire as the 63,750 shares of
Series C Stock which were subject to the timely satisfaction of such condition
precedent, and the total number of Shares of Series C Stock subject to this
Warrant shall be reduced accordingly.
1.2. ISSUANCE OF CERTIFICATES. The Company agrees that the shares of
Series C Stock purchased under this Warrant shall be and are deemed to be issued
to the Holder hereof as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered, properly
endorsed, the completed, executed Subscription Form (a copy of which is attached
hereto as Exhibit A) delivered and payment made for such shares. Certificates
for the shares of Series C Stock so purchased, together with any other
securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time (not to exceed three (3) business
days) after the rights represented by this Warrant have been so exercised. Each
stock
2
<PAGE> 3
certificate so delivered shall be in such denominations of Series C Stock as may
be requested by the Holder hereof and shall be registered in the name of such
Holder or, subject to the provisions of Section 4, such Holder's designee. In
case of a purchase of less than all the shares which may be purchased under this
Warrant, the Company shall cancel this Warrant and execute and deliver a new
Warrant or Warrants of like tenor for the balance of the shares purchasable
under the Warrant surrendered upon such purchase to the Holder hereof within a
reasonable time.
1.3. CASHLESS EXERCISE. Notwithstanding any provisions herein to the
contrary, in lieu of exercising this Warrant for cash (x) the Holder may pay the
exercise price by surrendering shares of Series C Stock or other equity
securities of the Company with an aggregate fair market value equal to the
aggregate Stock Purchase Price, or (y) if the fair market value of one share of
the Company's Series C Stock is greater than the Stock Purchase Price (at the
date of calculation as set forth below), the Holder may elect to receive shares
equal to the value (as determined below) of this Warrant (or the portion thereof
being canceled) by surrender of this Warrant at the principal office of the
Company together with the properly endorsed Form of Subscription and notice of
such election in which event the Company shall issue to the Holder a number of
shares of Series C Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Series C Stock to be issued
to the Holder
Y = the number of shares of Series C Stock purchasable
under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the
Warrant being canceled (at the date of such
calculation)
A = the fair market value of one share of the Company's
Series C Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, the fair market value of one share of
Series C Stock shall be determined by the Company's Board of Directors in good
faith but shall in no event be less than the then-current liquidation value
thereof; provided, however, that in the event the Company makes an initial
public offering of its Common Stock the fair market value per share shall mean:
(i) if the Warrant is being converted in connection with and contingent upon a
public offering of the Common Stock, and if the Company's registration statement
relating to such public offering has been declared effective by the U.S.
Securities and Exchange Commission, then the initial "Price to Public" specified
in the final prospectus with respect to such offering multiplied by the number
of shares of Common Stock into which each share of Series C Stock is then
convertible; or (ii) if the Warrant is not being converted in connection with
and contingent upon a public offering of the Company's securities, then as
follows: (x) if traded on a securities exchange or the NASDAQ National Market,
the fair market value of the Common Stock shall be deemed to be the average of
the closing or last reported sale prices of the Common Stock on such exchange or
market over the 30-day period ending five business days prior to the date of
calculation, and the
3
<PAGE> 4
fair market value of the Series C Stock shall be deemed to be such fair market
value of the Common Stock multiplied by the number of shares of Common Stock
into which each share of Series C Stock is then convertible or (y) if otherwise
traded in an over-the-counter market, fair market value of the Common Stock
shall be deemed to be the average of the closing bid and ask prices of the
Common Stock over the 30-day period ending five business days prior to the date
of calculation, and the fair market value of the Series C Stock shall be deemed
to be such fair market value of the Common Stock multiplied by the number of
shares of Common Stock into which each share of Series C Stock is then
convertible.
1. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants and
agrees that all shares of Series C Stock that may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable and free from all preemptive rights
of any stockholder and free of all taxes, liens and charges with respect to the
issue thereof. The Company further covenants and agrees that, during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved, for the purpose of issue
or transfer upon exercise of the subscription rights evidenced by this Warrant,
a sufficient number of shares of authorized but unissued Series C Stock, or
other securities and property, when and as required to provide for the exercise
of the rights represented by this Warrant. The Company will take all such action
as may be necessary to assure that such shares of Series C Stock may be issued
as provided herein without violation of any applicable law or regulation, or of
any requirements of any domestic securities exchange upon which the Series C
Stock may be listed; provided, however, that the Company shall not be required
to effect a registration under Federal or State securities laws with respect to
such exercise. The Company will not take any action which would result in any
adjustment of the Stock Purchase Price (as set forth in Section 3 hereof) (i) if
the total number of shares of Series C Stock issuable after such action upon
exercise of all outstanding warrants and options, together with all shares of
Series C Stock then outstanding and all shares of Series C Stock then issuable
upon the conversion of all convertible securities then outstanding, would exceed
the total number of shares of Series C Stock then authorized by the Company's
Certificate of Incorporation, or (ii) if the total number of shares of Common
Stock issuable after such action upon the conversion of all outstanding shares
of Series C Stock, together with all shares of Common Stock then issuable upon
the conversion of all shares of Series C Stock then issuable upon exercise of
all outstanding warrants and options, together with all shares of Common Stock
then outstanding and all shares of Common Stock then issuable upon exercise of
all warrants and options and upon the conversion of all convertible securities
then outstanding would exceed the total number of shares of Common Stock then
authorized by the Company's Certificate of Incorporation.
2. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock Purchase
Price and the number of shares purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the occurrence of certain
events described in this Section 3. Upon each adjustment of the Stock Purchase
Price, the Holder of this Warrant shall thereafter be entitled to purchase, at
the Stock Purchase Price resulting from such adjustment, the number of shares
obtained by multiplying the Stock Purchase Price in effect immediately prior to
such
4
<PAGE> 5
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment, and dividing the product thereof by the Stock Purchase Price
resulting from such adjustment.
2.1. SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at
any time subdivide its outstanding shares of Series C Stock or Common Stock into
a greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Series C Stock or Common Stock of the Company shall be
combined into a smaller number of shares, the Stock Purchase Price in effect
immediately prior to such combination shall be proportionately increased.
2.2. DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the Holders of Series C
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
2.2.1. Series C Stock or Common Stock or any shares of stock or
other securities which are at any time directly or indirectly convertible into
or exchangeable for Series C Stock or Common Stock, or any rights or options to
subscribe for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution;
2.2.2. Any cash paid or payable otherwise than as a cash dividend
out of current earnings; or
2.2.3. Series C Stock or additional stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
combination of shares or similar corporate rearrangement (other than (i) shares
of Series C Stock issued as a stock split, adjustments in respect of which shall
be covered by the terms of Section 3.1 above or (ii) an event for which
adjustment is otherwise made pursuant to Section 3.3 below);
then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Series C
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses 3.2.2 and 3.2.3 above) which such Holder
would hold on the date of such exercise had he been the holder of record of such
Series C Stock as of the date on which holders of Series C Stock received or
became entitled to receive such shares or all other additional stock and other
securities and property.
2.3. REORGANIZATION, RECLASSIFICATION OR RECAPITALIZATION. If any
recapitalization, reclassification or capital reorganization of the capital
stock of the Company shall be effected in such a way that holders of Series C
Stock shall be entitled to receive stock, securities, or other assets or
property (a "Restructuring"), then, as a condition of such Restructuring, lawful
and adequate provisions shall be made whereby the Holder hereof shall thereafter
have the right to purchase and receive (in lieu of or in addition to the shares
of the Series C Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented
5
<PAGE> 6
hereby) such shares of stock, securities or other assets or property as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Series C Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby and appropriate provision shall be made with respect
to the rights and interests of the Holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Stock Purchase Price and of the number of shares purchasable and receivable
upon the exercise of this Warrant) shall thereafter be applicable, as nearly as
may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof.
2.4. ISSUANCE OF SERIES C PREFERRED. In the event that the Company
issues shares of its Series C Stock at a price per share less than the Stock
Purchase Price then in effect, the Stock Purchase Price shall immediately be
adjusted to equal the price at which such Series C Stock was so issued.
2.5. NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock Purchase
Price, any increase or decrease in the number of shares purchasable upon the
exercise of this Warrant or any change in the securities or other property
deliverable upon exercise of this Warrant, the Company shall give written notice
thereof, by first class mail, postage prepaid, addressed to the registered
Holder of this Warrant at the address of such Holder as shown on the books of
the Company. The notice shall be signed by the Company's President and shall
state the Stock Purchase Price resulting from such adjustment, the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant or the amount of securities or other property
deliverable upon such exercise, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
2.6. OTHER NOTICES. If at any time:
2.6.1. the Company shall declare any cash dividend upon its Series
C Stock or Common Stock;
2.6.2. the Company shall declare any dividend upon its Series C
Stock or Common Stock payable in stock or make any special dividend or other
distribution to the holders of its Series C Stock or Common Stock;
2.6.3. there shall be any Restructuring;
2.6.4. there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
2.6.5. there shall be an initial public offering of Company
securities;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least ten (10) days
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such Restructuring,
dissolution, liquidation or winding-up, and (b) in the case of any such
Restructuring, dissolution,
6
<PAGE> 7
liquidation, winding-up or public offering, at least ten (10) days prior written
notice of the date when the same shall take place; provided, however, that if
any response on the part of the Holder is otherwise required, the Holder shall
make its best efforts to respond to such notice as early as possible after the
receipt thereof. Any notice given in accordance with the foregoing clause (a)
shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Series C Stock shall be
entitled thereto. Any notice given in accordance with the foregoing clause (b)
shall also specify the date on which the holders of Series C Stock shall be
entitled to exchange their Series C Stock for securities or other property
deliverable upon such Restructuring, dissolution, liquidation, winding-up or
public offering, as the case may be.
2.7. CERTAIN EVENTS. If any change in the outstanding Series C Stock of
the Company or any other event occurs as to which the other provisions of this
Section 3 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder of the Warrant in accordance with such
provisions, the Board of Directors of the Company shall make an adjustment in
the number and class of shares available under the Warrant, the Stock Purchase
Price or the application of such provisions, so as to protect such purchase
rights as aforesaid. The adjustment shall be such as will give the Holder of the
Warrant upon exercise for the same aggregate Stock Purchase Price the total
number, class and kind of shares as he would have owned had the Warrant been
exercised prior to the event and had he continued to hold such shares until
after the event requiring adjustment.
3. ISSUE TAX. The issuance of certificates for shares of Series C Stock upon the
exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.
4. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Series C Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
5. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing contained in
this Warrant shall be construed as conferring upon the Holder hereof the right
to vote or to consent or to receive notice as a stockholder of the Company or
any other matters or any rights whatsoever as a stockholder of the Company. No
dividends or interest shall be payable or accrued in respect of this Warrant or
the interest represented hereby or the shares purchasable hereunder until, and
only to the extent that, this Warrant shall have been exercised. No provision
hereof in the absence of affirmative action by the holder to purchase shares of
Series C Stock, and no mere enumeration herein of the rights or privileges of
the Holder hereof, shall give rise to any liability of such holder for the Stock
Purchase Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by its creditors. Notwithstanding the foregoing, the
Company will transmit to the Holder (including Holder's successors) such
information, documents and reports as are generally distributed to all of the
holders of any class or series of
7
<PAGE> 8
the securities of the Company concurrently with the distribution thereof to such
stockholders.
6. STOCKHOLDERS AGREEMENT. The registration and other rights of the Holder
(including Holder's successors) with respect to this Warrant and the underlying
stock will be the same as granted to the holders of the Company's Series C Stock
under that certain Amended and Restated Stockholders Agreement dated as of July
24, 1997, as amended, by and among the Company and certain stockholders of the
Company.
7. TRANSFER RESTRICTIONS. Subject to (i) the prior written consent of the
Company (which consent shall not be unreasonably withheld) and (ii) compliance
with applicable federal and state securities laws, this Warrant and all rights
hereunder are transferable, in whole or in part, without charge to the holder
hereof (except for transfer taxes), upon surrender of this Warrant properly
endorsed and in compliance with such provisions.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Series C Stock issued upon exercise of this Warrant, referred to in
Sections 7 and 8 shall survive the exercise of this Warrant.
9. MODIFICATION AND WAIVER. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the holders of Warrants representing a majority of
the Common Stock into which the Warrant may be converted. Any waiver or
amendment effected in accordance with this Section 10 shall be binding upon the
holder of this Warrant and the holder of any securities into which this Warrant
may be converted, and upon the Company.
10. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to the
Holder as follows:
10.1. This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency, and the relief of debtors and the rules of law and principles of
equity governing specific performance, injunctive relief and other equitable
remedies;
10.2. The Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable;
10.3. The rights, preferences, privileges and restrictions granted to
or imposed upon the Series C Stock and the holders thereof are as set forth in
the Certificate of Incorporation of the Company as amended to the date of grant
of this Warrant, a true and complete copy of which has been delivered to the
Holder;
10.4. The shares of Common Stock issuable upon conversion of the Shares
have been duly
8
<PAGE> 9
authorized and reserved for issuance by the Company and, when issued in
accordance with the terms of the Certificate of Incorporation then in effect
will be validly issued, fully paid and non-assessable;
10.5. The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the termsof the Certificate of
Incorporation or by-laws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do not and
will not conflict with or contravene any provision of, or constitute a default
under, any indenture, mortgage, contract or other instrument of which the
Company is a party or by which it is bound or require the consent or approval
of, the giving of notice to, the registration or filing with or the taking of
any action in respect of or by, any federal, state or local government authority
or agency or other person, except for the filing of notices pursuant to federal
or state securities laws, which filings will be effected by the time required
thereby; and
10.6. There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
11. NOTICES. Any notice, request or other document required or permitted to be
given or delivered to the holder hereof or the Company shall be delivered or
shall be sent by first-class mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Colorado.
13. LOST WARRANTS. The Company represents and warrants to the Holder hereof that
upon receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction, or mutilation of this Warrant and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant, the Company, at its expense, will make and deliver
a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise of
this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective fair market value of the Series C Stock.
15. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All representations
and warranties of the Company and the holder hereof contained herein shall
survive the Date of
9
<PAGE> 10
Grant, the exercise or conversion of this Warrant (or any part hereof) or the
termination or expiration of rights hereunder. All agreements of the Company and
the holder hereof contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative.
16. REMEDIES. In case any one or more of the covenants and agreements contained
in this Warrant shall have been breached, the Holders hereof (in the case of a
breach by the Company), or the Company (in the case of a breach by the Holder),
may proceed to protect and enforce their or its rights either by suit in equity
and/or by action at law, including, but not limited to, an action for damages as
a result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this Warrant.
17. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of its
Certificate of Incorporation or through any other means, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant against impairment.
18. SEVERABILITY. The invalidity or unenforceability of any provision of this
Warrant in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction, or affect any other provision of this
Warrant, which shall remain in full force and effect.
19. RECOVERY OF LITIGATION COSTS. If any legal action or other proceeding is
brought for the enforcement of this Warrant, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Warrant, the successful or prevailing party shall be entitled to recover
reasonable attorney's fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its President, thereunto duly authorized this 24th, day of July,
1997.
MERCURY MAIL, INC.,
a Delaware corporation
Raymond H. Van Wagener, Jr.
President
10
<PAGE> 11
EXHIBIT A
SUBSCRIPTION FORM
Date:______________, 19___
Mercury Mail, Inc.
707 17th Street, Suite 2850
Denver, Colorado 80202
Attn: President
Ladies and Gentlemen:
[ ] The undersigned hereby elects to exercise the warrant issued to it by
Mercury Mail, Inc. (the "Company") and dated _____________, 1997,
Warrant No. PFW-___ (the "Warrant") and to purchase thereunder
__________ shares of the Series C Preferred Stock of the Company (the
"Shares") at a purchase price of ___ Dollars ($___) per Share, or an
aggregate purchase price of ___________________________________
($__________) (the "Purchase Price").
[ ] The undersigned hereby elects to convert ___________________ percent
(___%) of the value of the Warrant pursuant to the provisions of
Section 1.3 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
By:
Title:
<PAGE> 12
EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO MERCURY MAIL, INC.
ALONG WITH THE SUBSCRIPTION FORM BEFORE THE SERIES C PREFERRED STOCK ISSUABLE
UPON EXERCISE OF THE WARRANT DATED JULY 24, 1997, WILL BE ISSUED.
_____________________, 1997
Mercury Mail, Inc.
707 17th Street, Suite 2850
Denver, Colorado 80202
Attn: President
Ladies and Gentlemen:
The undersigned, _________________________ ("Purchaser"), intends to
acquire up to ______________ shares of the Series C Preferred Stock (the "Series
C Stock") of Mercury Mail, Inc. (the "Company") from the Company pursuant to the
exercise or conversion of certain Warrants to purchase Series C Stock held by
Purchaser. The Series C Stock will be issued to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. Purchaser has been advised that the Series C Stock has not been
registered under the 1933 Act or state securities laws on the ground that this
transaction is exempt from registration, and that reliance by the Company on
such exemptions is predicated in part on Purchaser's representations set forth
in this letter. Accordingly, Purchaser represents, warrants and agrees as
follows:
1. Purchaser is acquiring the Series C Stock for its own account and
beneficial interest, to hold for investment and not for sale or with a view to
distribution of the Series C Stock or any part thereof in violation of
applicable securities laws.
2. Each Purchaser acknowledges that it has received all the information
it has requested from the Company and considers necessary or appropriate for
deciding whether to acquire the Series C Stock. Each Purchaser represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series C Stock and to
obtain any additional information necessary to verify the accuracy of the
information given the Purchaser. Each Purchaser further represents that it has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risk of this investment.
3. Each Purchaser is an "accredited investor" as such term is defined
in Rule 501 under the 1933 Act.
<PAGE> 13
4. Each Purchaser acknowledges that investment in the Series C Stock
involves a high degree of risk, and represents that it is able, without
materially impairing its financial condition, to hold the Series C Stock for an
indefinite period of time and to suffer a complete loss of its investment.
5. Purchaser has been informed that under the 1933 Act, the Series C
Stock must be held indefinitely unless it is subsequently registered under the
1933 Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Series C Stock. Purchaser further agrees that the Company may refuse to
permit Purchaser to sell, transfer or dispose of the Series C Stock (except as
permitted under Rule 144 or by the terms of the Series C Preferred Stock
Purchase Agreement dated as of July 24, 1997) unless there is in effect a
registration statement under the 1933 Act and any applicable state securities
laws covering such transfer, or unless Purchaser furnishes an opinion of counsel
reasonably satisfactory to counsel for the Company, to the effect that such
registration is not required. Purchaser shall not make any sale, transfer or
other disposition of the Series C Stock in violation of the 1933 Act or the
General Rules and Regulations promulgated thereunder by the Securities and
Exchange Commission or in violation of any applicable state securities law.
6. Purchaser also understands and agrees that there will be placed on
the certificate(s) for the Series C Stock, or any substitutions therefor, a
legend stating in substance:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), or any
state securities laws. These shares have been acquired for investment
and may not be sold or otherwise transferred in the absence of an
effective registration statement for these shares under the 1933 Act
and applicable state securities laws, or, except as provided by the
terms of the Series C Preferred Stock Purchase Agreement, dated as of
July 24, 1997, an opinion of counsel satisfactory to the Company that
registration is not required and that an applicable exemption is
available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Series C Stock with Purchaser's counsel.
Very truly yours,
By:
Title:
<PAGE> 1
EXHIBIT 10.18
December 30, 1998
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE UP TO 600,000
SHARES OF SERIES D PREFERRED STOCK OF
INFOBEAT INC.
(VOID AFTER DECEMBER 30, 2003)
THIS CERTIFIES that SONY MUSIC, A GROUP OF SONY MUSIC ENTERTAINMENT
INC. (the "HOLDER"), or assigns, for value received, is entitled, subject to the
conditions set forth herein, to purchase from INFOBEAT INC., a Delaware
corporation (the "COMPANY"), having a place of business at 707 17th Street,
Suite 2850, Denver, Colorado 80202, up to a maximum of six hundred thousand
(600,000) fully paid and nonassessable shares (the "SHARES") of the Company's
Series D Preferred Stock ("SERIES D STOCK") or any security into or for which
such Series D Stock may hereafter be converted or exchanged pursuant to the
Restated Certificate of Incorporation of the Company as from time to time
amended as provided by law (including the conversion of all Series D Stock into
shares of the Company's Common Stock in the circumstances described in the
Certificate of Incorporation), as described below, for cash at a price per share
as determined herein (the "STOCK PURCHASE PRICE") at any time or from time to
time up to and including 5:00 p.m. (Mountain Time) on the earlier to occur of
(i) December 30, 2003; and (ii) the closing of (A) a consolidation or merger of
the Company with or into any other corporation or other entity or person, or any
other corporate reorganization, in which the stockholders of the Company
immediately prior to such consolidation, merger or reorganization, own less than
fifty percent (50%) of the outstanding voting power of the surviving entity (or
its parent) following the consolidation, merger or reorganization or (B) any
transaction (or series of related transactions involving a person or entity, or
a group of affiliated persons or entities) in which in excess of fifty percent
(50%) of the Company's outstanding voting power is transferred from the
stockholders of the Company as of immediately prior to such transfer, such
earlier day being referred to herein as the "EXPIRATION DATE," upon surrender to
the Company at its principal office (or at such other location as the Company
may advise the Holder in writing) of this Warrant properly endorsed with the
Subscription Form and Investment Representation Statement attached hereto as
Exhibit A duly filled in and signed and, if applicable, upon payment in cash or
by check of the aggregate Stock Purchase Price for the number of shares for
which this Warrant is being exercised determined in accordance with the
provisions hereof. The Stock Purchase Price and the number of shares purchasable
hereunder are subject to adjustment as provided in Section 3 of this Warrant.
<PAGE> 2
1. CONDITIONS TO EXERCISE; EXERCISE PRICE; ISSUANCE OF CERTIFICATES;
PAYMENT FOR SHARES.
1.1. CONDITIONS TO EXERCISE. Subject to satisfaction by the Holder
of the following conditions precedent (the "CONDITIONS PRECEDENT"), this Warrant
is exercisable at the option of the Holder at any time or from time to time, up
to the Expiration Date for all or any part of the shares of Series D Stock (but
not for a fraction of a share) which may be purchased hereunder as follows:
(a) The Holder may exercise this Warrant to purchase up
to one hundred thousand (100,000) shares of Series D Stock if the Holder (i)
generates more than Fifty Thousand ($50,000) of monthly gross revenues for a
period of three (3) consecutive months pursuant to the provisions of Sections
5.1(a)(ii), 5.1(b)(ii) or 5.1(c)(ii) of the Service Bureau Agreement, by and
between the Company and Holder, dated as of January 1, 1999 (the "SERVICE BUREAU
AGREEMENT"), prior to the Expiration Date ("GROSS REVENUES") or (ii) generates
more than Fifty Thousand ($50,000) of monthly Gross Revenues for a period of two
(2) consecutive months (the "MEASUREMENT MONTHS") in which the Gross Revenues
generated in those Measurement Months do not represent more than 125% of the
average Gross Revenues generated during such Measurement Months and the two (2)
preceding months. Such Gross Revenues shall include revenues generated by the
Holder under the Service Bureau Agreement, as well as any revenues which are
generated by the Company as a direct result of an introduction made by the
Holder.
(b) In addition to the rights set forth in Section
1.1(a), the Holder may exercise this Warrant to purchase up to an additional one
hundred fifty thousand (150,000) shares of Series D Stock if the Holder (i)
generates more than One Hundred Thousand ($100,000) of monthly Gross Revenues
for a period of three (3) consecutive months or (ii) generates more than One
Hundred Thousand Dollars ($100,000) of monthly Gross Revenues for a period of
two (2) consecutive months (the "MEASUREMENT MONTHS") in which the Gross
Revenues generated in those Measurement Months do not represent more than 125%
of the average Gross Revenues generated during such Measurement Months and the
two (2) preceding months. Such Gross Revenues shall include revenues generated
by the Holder under the Service Bureau Agreement, as well as any revenues which
are generated by the Company as a direct result of an introduction made by the
Holder.
(c) In addition to the rights set forth in Sections
1.1(a) and (b), the Holder may exercise this Warrant to purchase up to an
additional one hundred fifty thousand (150,000) shares of Series D Stock if the
Holder (i) generates more than Three Hundred Seventy-Five Thousand ($375,000) of
monthly Gross Revenues for a period of three (3) consecutive months or (ii)
generates more than Three Hundred Seventy-Five Thousand ($375,000) of monthly
Gross Revenues for a period of two (2) consecutive months (the "MEASUREMENT
Months") in which the Gross Revenues generated in those Measurement Months do
not represent more than 125% of the average Gross Revenues generated during such
Measurement Months and the two (2) preceding months. Such Gross Revenues shall
include revenues generated by the Holder under the Service Bureau Agreement, as
well as any revenues which are generated by the Company as a direct result of an
introduction made by the Holder.
(d) In addition to the rights set forth in Sections
1.1(a), (b) and (c), the Holder may exercise this Warrant to purchase up to an
additional two hundred thousand (200,000)
<PAGE> 3
shares of Series D Stock if the Holder generates more than Seven Hundred Fifty
Thousand ($750,000) of monthly Gross Revenues for a period of three (3)
consecutive months or (ii) generates more than Seven Hundred Fifty Thousand
($750,000) of monthly Gross Revenues for a period of two (2) consecutive months
(the "MEASUREMENT MONTHS") in which the Gross Revenues generated in those
Measurement Months do not represent more than 125% of the average Gross Revenues
generated during such Measurement Months and the two (2) preceding months. Such
Gross Revenues shall include revenues generated by the Holder under the Service
Bureau Agreement, as well as any revenues which are generated by the Company as
a direct result of an introduction made by the Holder.
(e) Notwithstanding the foregoing, no unattained
Conditions Precedent shall be attained after such time as the Company ceases to
provide services to Holder pursuant to the terms of the Service Bureau
Agreement.
1.2. EXERCISE PRICE. The exercise price per Share shall be equal to
the greater of (a) $6.00 per Share and (b) with respect to each tranche set
forth in Section 1.1 above, the price per share that is received in a Qualified
Financing as of the date in which the conditions to exercise are met with
respect to such tranche. A "QUALIFIED FINANCING" shall mean the most recent
round of preferred stock financing in which the gross proceeds to the Company
are at least Two Million Dollars ($2,000,000) and in which at least one (1)
investor, who is not then an investor in the Company, participates.
1.3. ISSUANCE OF CERTIFICATES. The Company agrees that the shares
of Series D Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
properly endorsed and payment (if any) made for such shares. Certificates for
the shares of Series D Stock so purchased, together with any other securities or
property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Company at the Company's expense within a
reasonable time after the rights represented by this Warrant have been so
exercised. Each stock certificate so delivered shall be in such denominations of
Series D Stock as may be requested by the Holder hereof and shall be registered
in the name of such Holder or as directed by such Holder. In case of a purchase
of less than all the shares which may be purchased under this Warrant, the
Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under the
Warrant surrendered upon such purchase to the Holder hereof within a reasonable
time.
2. COVENANTS OF THE COMPANY.
2.1 SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Series D Stock that may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Series D Stock, or other securities and property, when and as required
to provide for the exercise of the rights represented by this Warrant. The
Company will take all
<PAGE> 4
such action as may be necessary to assure that such shares of Series D Stock may
be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon
which the Series D Stock may be listed; provided, however, that the Company
shall not be required to effect a registration under Federal or State securities
laws with respect to such exercise. The Company will not take any action which
would result in any adjustment of the Stock Purchase Price (as set forth in
Section 3 hereof) (i) if the total number of shares of Series D Stock issuable
after such action upon exercise of all outstanding warrants and options,
together with all shares of Series D Stock then outstanding and all shares of
Series D Stock then issuable upon the conversion of all convertible securities
then outstanding, would exceed the total number of shares of Series D Stock then
authorized by the Company's Restated Certificate of Incorporation or (ii) if the
total number of shares of Common Stock issuable after such action upon the
conversion of all outstanding shares of Series D Stock, together with all shares
of Common Stock then issuable upon the conversion of all shares of Series D
Stock then issuable upon exercise of all outstanding warrants and options,
together with all shares of Common Stock then outstanding and all shares of
Common Stock then issuable upon exercise of all warrants and options and upon
the conversion of all convertible securities then outstanding would exceed the
total number of shares of Common Stock then authorized by the Company's
Certificate of Incorporation.
2.2 INFORMATION RIGHTS. The Company covenants and agrees that,
during the period within which the rights represented by this Warrant may be
exercised, the Company shall provide the Holder with any information of the
Company which is generally provided to the holders of the Company's Series D
Stock.
2.3 NO IMPAIRMENT. The Company shall not, without the consent of
Holder, amend its Restated Certificate of Incorporation, as then in effect, for
the purpose of avoiding or seeking to avoid the observance or performance of any
of the terms to be observed or performed with respect to the Series D Stock
thereunder by the Company but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the rights of the Holder hereunder.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall
at any time subdivide its outstanding shares of Series D Stock or Common Stock
into a greater number of shares, the Stock Purchase Price in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely, in
case the outstanding shares of Series D Stock or Common Stock of the Company
shall be combined into a smaller number of shares, the Stock Purchase Price in
effect immediately prior to such combination shall be proportionately increased.
<PAGE> 5
3.2 DIVIDENDS IN PREFERRED STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the Holders of Series D
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(a) Series D Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Series D Stock or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution;
(b) Any cash paid or payable otherwise than as a cash
dividend out of current earnings; or
(c) Series D Stock or additional stock or other
securities or property (including cash) by way of spin-off, split-up,
reclassification, combination of shares or similar corporate rearrangement
(other than (i) shares of Series D Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 3.1 above or (ii) an
event for which adjustment is otherwise made pursuant to Section 3.3 below);
then and in each such case, the Holder hereof shall, upon the exercise
of this Warrant, be entitled to receive, in addition to the number of shares of
Series D Stock receivable thereupon, and without payment of any additional
consideration therefor, the amount of stock and other securities and property
(including cash in the cases referred to in clauses 3.2(b) and 3.2(c) above)
which such Holder would hold on the date of such exercise had he been the holder
of record of such Series D Stock as of the date on which holders of Series D
Stock received or became entitled to receive such shares or all other additional
stock and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION OR RECAPITALIZATION. Subject
to the terms of the introductory paragraph of this Warrant, if any
recapitalization, reclassification or capital reorganization of the capital
stock of the Company shall be effected in such a way that holders of Series D
Stock shall be entitled to receive stock, securities, or other assets or
property (a "RESTRUCTURING"), then, as a condition of such Restructuring, lawful
and adequate provisions shall be made whereby the Holder hereof shall thereafter
have the right to purchase and receive (in lieu of or in addition to the shares
of the Series D Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares of
stock, securities or other assets or property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Series D
Stock equal to the number of shares of such stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby
and appropriate provision shall be made with respect to the rights and interests
of the Holder of this Warrant to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Stock Purchase Price and
of the number of shares purchasable and receivable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
hereof.
3.4 NOTICE OF ADJUSTMENT. Upon (a) any adjustment of the Stock
Purchase Price, (b) any increase or decrease in the number of shares purchasable
upon the exercise of this Warrant or (c) any other reorganization,
reclassification, consolidation, merger or sale, the Company shall give written
notice thereof, by first class mail, postage prepaid, addressed to the
registered
<PAGE> 6
Holder of this Warrant at the address of such Holder as shown on the books of
the Company. The notice shall be signed by the Company's President and shall
state the Stock Purchase Price resulting from such adjustment, the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant or the amount of securities or other property
deliverable upon such exercise, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
3.5 OTHER NOTICES. If at any time:
(a) the Company shall declare any cash dividend upon its
Series D Stock or Common Stock;
(b) the Company shall declare any dividend upon its
Series D Stock or Common Stock payable in stock or make any special dividend or
other distribution to the holders of its Series D Stock or Common Stock;
(c) there shall be any Restructuring or other action of
the type set forth in (ii) of the introductory paragraph of this Warrant;
(d) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(e) there shall be an initial public offering of Company
securities;
then, in any one or more of said cases, the Company shall give, by
first class mail, postage prepaid, addressed to the Holder of this Warrant at
the address of such Holder as shown on the books of the Company, (a) at least
ten (10) days prior written notice of the date on which the books of the Company
shall close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any such
Restructuring, dissolution, liquidation or winding-up and (b) in the case of any
such Restructuring, dissolution, liquidation, winding-up or public offering, at
least ten (10) days prior written notice of the date when the same shall take
place; provided, however, that if any response on the part of the Holder is
otherwise required, the Holder shall make its best efforts to respond to such
notice as early as possible after the receipt thereof. Any notice given in
accordance with the foregoing clause (a) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Series D Stock shall be entitled thereto. Any notice given in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Series D Stock shall be entitled to exchange their Series D Stock
for securities or other property deliverable upon such Restructuring,
dissolution, liquidation, winding-up or public offering, as the case may be.
3.6 CERTAIN EVENTS. If any change in the outstanding Series D
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, the Board of Directors of the Company shall
make an adjustment in the number and class of shares available under the
Warrant, the Stock Purchase Price or the application of such provisions, so as
to protect such purchase rights as aforesaid. The adjustment shall be such as
will give the Holder of the Warrant upon exercise for the same aggregate Stock
Purchase Price the total number, class and kind of shares as he would
<PAGE> 7
have owned had the Warrant been exercised prior to the event and had he
continued to hold such shares until after the event requiring adjustment.
4. ISSUE TAX. The issuance of certificates for shares of Series D Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Series D Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder of
the Company or any other matters or any rights whatsoever as a stockholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provision hereof in the absence of affirmative action by the
holder to purchase shares of Series D Stock, and no mere enumeration herein of
the rights or privileges of the Holder hereof, shall give rise to any liability
of such holder for the Stock Purchase Price or as a stockholder of the Company,
whether such liability is asserted by the Company or by its creditors.
7. STOCKHOLDERS' AGREEMENT. The registration and other rights of the
Holder (including Holder's successors) with respect to this Warrant and the
underlying stock will be the same as granted to the holders of the Company's
Series D Stock under that certain Second Amended and Restated Stockholders'
Agreement, dated as of June 8, 1998, by and among the Company and certain
stockholders of the Company.
8. TRANSFER RESTRICTIONS. Subject to (i) the prior written consent of the
Company (which consent shall not be unreasonably withheld) and (ii) compliance
with applicable federal and state securities laws, this Warrant and all rights
hereunder are transferable, in whole or in part, without charge to the holder
hereof (except for transfer taxes), upon surrender of this Warrant properly
endorsed and in compliance with such provisions; provided, that, the prior
written consent of the Company shall not be required in connection with a
transfer by Holder to a Sony Party (as defined in the Service Bureau Agreement,
by and between Holder and the Company, of even date herewith). Each taker and
holder of this Warrant, by taking or holding the same, consents and agrees that
this Warrant, when endorsed in blank, shall be deemed negotiable, and that the
holder hereof, when this Warrant shall have been so endorsed, may be treated by
the Company, at the Company's option, and all other persons dealing with this
Warrant as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented by this Warrant, or to transfer this Warrant
on the books of the Company any notice to the contrary notwithstanding; but
until such transfer on such books, the Company may treat the registered owner
hereof as the owner for all purposes.
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Series D Stock issued
<PAGE> 8
upon exercise of this Warrant, referred to in Sections 7 and 8 shall survive the
exercise of this Warrant.
10. MODIFICATION AND WAIVER. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively), with the
written consent of the Company and the holders of Warrants representing a
majority of the Common Stock into which the Warrant may be converted. Any waiver
or amendment effected in accordance with this Section 10 shall be binding upon
the holder of this Warrant and the holder of any securities into which this
Warrant may be converted, and upon the Company.
11. NOTICES. Any notice, request or other document required or permitted to
be given or delivered to the holder hereof or the Company shall be delivered or
shall be sent by first-class mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Colorado.
13. LOST WARRANTS. The Company represents and warrants to the Holder hereof
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction, or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective fair market value of the Series D Stock.
15. ATTORNEYS' FEES. In the event that any dispute between the Company and
Holder should result in litigation with respect to this Warrant, the prevailing
party in such dispute shall be entitled to recover from the losing party all
fees, costs and expenses of enforcing any right of such prevailing party under
or with respect to this Agreement, including without limitation, such reasonable
fees and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this ___ day of
________________, 1998.
INFOBEAT INC.,
a Delaware corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
WARRANT
<PAGE> 10
EXHIBIT A
SUBSCRIPTION FORM
Date:____________, 19___
InfoBeat Inc.
707 17th Street, Suite 2850
Denver, Colorado 80202
Attn: President
Ladies and Gentlemen:
[ ] The undersigned hereby elects to exercise the warrant issued to it by
InfoBeat Inc. (the "COMPANY") and dated December 30, 1998 (the
"WARRANT") and to purchase thereunder __________ shares of the Series D
Preferred Stock of the Company (the "Shares") at a purchase price of
_____________________ Dollars ($___) per Share, or an aggregate
purchase price of ___________________________________ ($__________)
(the "PURCHASE PRICE").
[ ] The undersigned hereby elects to convert ___________________ percent
(___%) of the value of the Warrant pursuant to the provisions of
Section 1.4 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
-------------------------------------
By:
----------------------------------
Title:
-------------------------------
<PAGE> 11
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
InfoBeat Inc.
707 17th Street, Suite 2850
Denver, Colorado 80202
Attn: President
Ladies and Gentlemen:
With respect to the __________ shares of Series D Preferred Stock
("SHARES") of INFOBEAT INC. ("Company") which the undersigned ("PURCHASER") has
purchased from the Company today, the Purchaser hereby represents and warrants
as follows:
1. The Purchaser acknowledges that it has received no formal prospectus
or offering memorandum describing the business and operations of the Company. It
has, however, by virtue of his relationship with the Company, been given access
to all information that it believes is material to his decision to purchase the
Shares. The Purchaser has had the opportunity to ask questions of, and receive
answers from, representatives of the Company concerning its business operations.
Any questions raised by the Purchaser have been answered to his satisfaction.
2. The Shares are being acquired by the Purchaser for its account, for
investment purposes only, and not with a view to the distribution or resale
thereof.
3. No representations or promises have been made concerning the
marketability or value of the Shares. The Purchaser understands that there is
currently no market for the transfer of the Shares. The Purchaser further
acknowledges that, because the Shares have not been registered under the
Securities Act of 1933, as amended (the "ACT"), or applicable state securities
laws, they cannot be resold unless they are subsequently registered under the
Act or applicable state securities laws, or an exemption from registration is
available, and the Purchaser must continue to bear the economic risk of his
investment in the Shares for an indefinite period of time. Specifically, the
Purchaser agrees that the Shares may not be transferred, except to a registered
investment company with a common investment advisor, until the Company has
received, if reasonably requested by the Company, an opinion of counsel
reasonably satisfactory to it that the proposed transfer will not violate
federal or state securities laws. The Company has not agreed or represented to
the Purchaser that the Shares will be purchased or redeemed from the Purchaser
at any time in the future. The Purchaser further understands that a notation
will be made on the appropriate records of the Company and on the stock
certificate representing the Shares so that the transfers of Shares will not be
effected on those records without compliance with the restrictions referred to
above.
Date: By:
--------------------------------- -----------------------------------
Name:
---------------------------------
Title:
--------------------------------
2.
<PAGE> 1
EXHIBIT 10.19
July 15, 1999
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE UP TO [SHARES]
SHARES OF SERIES E PREFERRED STOCK
OF EXACTIS.COM, INC.
(VOID AFTER JULY 15, 2004)
THIS CERTIFIES that [warrantholder] or its assigns (the "HOLDER"),
for value received, is entitled to purchase from EXACTIS.COM, INC., a Delaware
corporation (the "COMPANY"), having a place of business at 707-17th Street,
Suite 2850, Denver, CO 80202, up to a maximum of [shares]
[shares_spelledout] fully paid and nonassessable shares of Series E
Preferred Stock (the "PREFERRED STOCK"), for cash at a price of $8.00 per share
(the "STOCK PURCHASE PRICE") at any time or from time to time up to and
including 5:00 p.m. (Colorado Time) on July 15, 2004 (such date being referred
to herein as the "EXPIRATION DATE"), upon surrender to the Company at its
principal office (or at such other location as the Company may advise the Holder
in writing) of this Warrant properly endorsed with the Notice of Exercise and
Investment Representation Statement attached hereto duly filled in and executed
and, if applicable, upon payment in cash or by check of the aggregate Stock
Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant.
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
(a) GENERAL. This Warrant is exercisable at the option of the Holder of
record hereof, at any time or from time to time, up to the Expiration Date for
all or any part of the shares of Preferred Stock (but not for a fraction of a
share) which may be purchased hereunder.
(b) ISSUANCE OF CERTIFICATES. The Company agrees that the shares of
Preferred Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered,
properly endorsed and payment (if any) made for such shares. Certificates for
the shares of Preferred Stock so purchased, together with any other securities
or property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Company at the Company's expense within a
reasonable time after the rights represented by this Warrant have been so
exercised. In case of a purchase of less than all the shares which may be
purchased under this Warrant, the Company shall cancel this Warrant and execute
and deliver a new Warrant or Warrants of like tenor for the balance of the
shares purchasable under the Warrant surrendered upon such purchase to the
Holder hereof within a reasonable time. Each stock certificate so delivered
shall be in such denominations of Preferred Stock as may be requested by the
Holder hereof and shall be registered in the name of such Holder or as directed
by such Holder.
<PAGE> 2
(c) NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Preferred Stock
is greater than the Stock Purchase Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company and notice of such election in which event the
Company shall issue to the Holder a number of shares of Preferred Stock computed
using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Preferred Stock to be
issued to the Holder
Y = the number of shares of Preferred Stock
purchasable under the Warrant or, if only a portion
of the Warrant is being exercised, the portion of the
Warrant being canceled (at the date of such
calculation)
A = the fair markEt value of one share of the
Company's Preferred Stock (at the date of such
calculation)
B = Stock Purchase Price (as adjusted to the date of
such calculation)
For purposes of the above calculation, the fair market value of one share of
Preferred Stock shall be determined by the Company's Board of Directors in good
faith; provided, however, that in the event Holder exercises this Warrant in
connection with the Company's initial public offering of its Common Stock, the
fair market value per share shall be the product of (i) the per share offering
price to the public of the Company's initial public offering and (ii) the number
of shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise; and, provided, further, that following
the Company's initial public offering of its Common Stock, the fair market value
per share shall be the average of the closing prices quoted on any exchange or
the Nasdaq Stock Market, whichever is applicable, on which the Common Stock is
listed for the ten (10) trading days prior to the date of determination of fair
market value.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Preferred Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this Warrant, a sufficient number of shares of authorized but unissued
Preferred Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such shares of
Preferred Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Preferred Stock may be listed, provided, however, that
the Company shall not be required to effect a registration under federal or
state securities laws with respect to such issuance.
2.
<PAGE> 3
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
(a) SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall
at any time subdivide its outstanding shares of Preferred Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Preferred Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
(b) DIVIDENDS IN PREFERRED STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time any holder of Preferred
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(i) (a) any shares of stock or (b) other securities which are
at any time directly or indirectly convertible into or exchangeable for shares
of stock, or any rights or options to subscribe for, purchase or otherwise
acquire any of the foregoing by way of dividend or other distribution;
(ii) Any cash paid or payable otherwise than as a cash
dividend out of current earnings; or
(iii) Preferred Stock or additional stock or other securities
or property (including cash) by way of spin-off, split-up, reclassification,
combination of shares or similar corporate rearrangement (other than (a) shares
of Preferred Stock issued as a stock split, adjustments in respect of which
shall be covered by the terms of Section 3(a) above or (b) an event for which
adjustment is otherwise made pursuant to Section 3(c) below);
then and in each such case, the Holder hereof shall, upon the
exercise of this Warrant, be entitled to receive, in addition to the number of
shares of Preferred Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of stock and other securities and
property (including cash in the case referred to in clause 3(b)(ii) above) which
such Holder would hold on the date of such exercise had he been the holder of
record of such Preferred Stock as of the date on which Holder of Preferred Stock
received or became entitled to receive such shares or all other additional stock
and other securities and property.
(C) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any capital reorganization or reclassification of the capital stock of
the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation (an "ORGANIC CHANGE") shall be effected in such a way that a holder
of
3.
<PAGE> 4
Preferred Stock shall be entitled to receive stock, securities, or other assets
or property, then, as a condition of such Organic Change, lawful and adequate
provisions shall be made whereby the Holder hereof shall thereafter have the
right to purchase and receive (in lieu of the shares of the Preferred Stock of
the Company immediately theretofore purchasable and receivable upon the exercise
of the rights represented hereby) such shares of stock, securities or other
assets or property as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Preferred Stock equal to the number
of shares of such stock immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby; provided, however, that in the
event the value of the stock, securities or other assets or property (determined
in good faith by the Board of Directors of the Company) issuable or payable with
respect to one share of the Preferred Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby is in excess of the Stock Purchase Price hereof effective at
the time of an Organic Change and securities received in such Organic Change, if
any, are publicly traded, then this Warrant shall expire unless exercised prior
to such Organic Change. The Company will not effect any such Organic Change,
unless prior to the consummation thereof, the successor corporation (if other
than the Company) or such corporation's parent resulting from such consolidation
or the corporation purchasing such assets shall assume by written instrument,
executed and mailed or delivered to the registered Holder hereof at the last
address of such Holder appearing on the books of the Company, the obligation to
deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
purchase.
(d) NOTICES. Upon (i) any adjustment of the Stock Purchase Price,
(ii) any increase or decrease in the number of shares purchasable upon the
exercise of this Warrant (iii) any Organic Change, (iv) any declaration by the
Company of a cash dividend or other distribution on its Preferred Stock or
Common Stock, (v) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company or (vi) any initial public offering of Company's
securities, the Company shall give written notice thereof, by certified or first
class mail, postage prepaid, addressed to the registered Holder of this Warrant
at the address of such Holder as shown on the books of the Company no less than
ten (10) days in advance of the closing or effective date of such event. The
notice shall state the Stock Purchase Price resulting from such adjustment and
the increase or decrease, if any, in the number of shares purchasable at such
price upon the exercise of this Warrant or the amount of securities to be
received by the Company's stockholders, as applicable, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(e) CERTAIN EVENTS. If any change in the outstanding Preferred
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, the Board of Directors of the Company shall
make an adjustment in the number and class of shares available under the
Warrant, the Stock Purchase Price or the application of such provisions, so as
to protect such purchase rights as aforesaid. The adjustment shall be such as
will give the Holder of the Warrant upon exercise for the same aggregate Stock
Purchase Price the total number, class and kind of shares as he would have owned
had the Warrant been exercised prior to the event and had he continued to hold
such shares until after the event requiring adjustment.
4.
<PAGE> 5
4. ISSUE TAX. The issuance of certificates for shares of Preferred
Stock upon the exercise of the Warrant shall be made without charge to the
Holder of the Warrant for any issue tax (other than any applicable income taxes)
in respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Preferred Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof the right to vote or to consent or to receive notice as a stockholder of
the Company or any other matters or any rights whatsoever as a stockholder of
the Company. Except as otherwise provided herein, no dividends or interest shall
be payable or accrued in respect of this Warrant or the interest represented
hereby or the shares purchasable hereunder until, and only to the extent that,
this Warrant shall have been exercised. No provision hereof in the absence of
affirmative action by the holder to purchase shares of Preferred Stock, and no
mere enumeration herein of the rights or privileges of the holder hereof, shall
give rise to any liability of such holder for the Stock Purchase Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by its creditors.
7. WARRANTS TRANSFERABLE. Subject to compliance with applicable federal
and state securities laws, and the transfer restrictions set forth below, this
Warrant and all rights hereunder are transferable, in whole or in part, without
charge to the holder hereof (except for transfer taxes), upon surrender of this
Warrant properly endorsed. Each taker and holder of this Warrant, by taking or
holding the same, consents and agrees that this Warrant, when endorsed in blank,
shall be deemed negotiable, and that the holder hereof, when this Warrant shall
have been so endorsed, may be treated by the Company, at the Company's option,
and all other persons dealing with this Warrant as the absolute owner hereof for
any purpose and as the person entitled to exercise the rights represented by
this Warrant, or to transfer this Warrant on the books of the Company any notice
to the contrary notwithstanding; but until such transfer on such books, the
Company may treat the registered owner hereof as the owner for all purposes.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the Holder of this Warrant and of the Holder of
shares of Preferred Stock issued upon exercise of this Warrant, referred to in
Section 7 shall survive the exercise of this Warrant.
9. MODIFICATION AND WAIVER. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party or parties against which enforcement of the same is sought.
10. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other and shall be
deemed to be received four
5.
<PAGE> 6
days after deposit in the U.S. Mail or two (2) days after deposit with a
nationally recognized overnight courier.
11. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the obligations of
the Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Colorado.
13. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6.
<PAGE> 7
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this ___ day of ________,
1999.
EXACTIS.COM, INC.
a Delaware Corporation
By:
------------------------------------
Thomas Detmer
President
<PAGE> 8
NOTICE OF EXERCISE
Date: _________________, 19___
Exactis.com, Inc.
707- 17th Street, Suite 2850
Denver, CO 80202
Attn: Chief Executive Officer
Ladies and Gentlemen:
|_| The undersigned hereby elects to exercise the warrant issued to it by
Exactis.com, Inc. (the "COMPANY") and dated _____ ___, 1999 (the
"WARRANT") and to purchase thereunder ________________________________
shares of Series E Preferred Stock of the Company (the "SHARES") at a
purchase price of Eight Dollars ($8.00) per Share or an aggregate
purchase price of ______________________________ Dollars ($__________)
(the "PURCHASE PRICE").
|_| The undersigned hereby elects to convert _______________________
percent (____%) of the value of the Warrant pursuant to the provisions
of Section 1(c) of the Warrant.
Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name as is
specified below:
-----------------------------------
(name)
-----------------------------------
-----------------------------------
(address)
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price, if any, herewith in full in cash or by certified check or wire
transfer. The undersigned also makes the representations set forth on the
attached Investment Representation Letter.
Very truly yours,
------------------------------------
By:
--------------------------------
Title:
------------------------------
9.
<PAGE> 9
INVESTMENT REPRESENTATION STATEMENT
TO: EXACTIS.COM, INC.
With respect to the __________ shares of Series E Preferred Stock ("SHARES") of
EXACTIS.COM, INC. ("COMPANY") which the undersigned ("PURCHASER") has purchased
from the Company today, the Purchaser hereby represents and warrants as follows:
1. The Purchaser acknowledges that it has received no formal prospectus
or offering memorandum describing the business and operations of the Company. It
has, however, by virtue of his relationship with the Company, been given access
to all information that it believes is material to his decision to purchase the
Shares. The Purchaser has had the opportunity to ask questions of, and receive
answers from, representatives of the Company concerning its business operations.
Any questions raised by the Purchaser have been answered to his satisfaction.
2. The Shares are being acquired by the Purchaser for its account, for
investment purposes only, and not with a view to the distribution or resale
thereof.
3. No representations or promises have been made concerning the
marketability or value of the Shares. The Purchaser understands that there is
currently no market for the transfer of the Shares. The Purchaser further
acknowledges that, because the Shares have not been registered under the
Securities Act of 1933, as amended (the "ACT"), or applicable state securities
laws, they cannot be resold unless they are subsequently registered under the
Act or applicable state securities laws, or an exemption from registration is
available, and the Purchaser must continue to bear the economic risk of his
investment in the Shares for an indefinite period of time. Specifically, the
Purchaser agrees that the Shares may not be transferred, except to an investment
company with an investment advisor under common control, until the Company has
received, if reasonably requested by the Company, an opinion of counsel
reasonably satisfactory to it that the proposed transfer will not violate
federal or state securities laws. The Company has not agreed or represented to
the Purchaser that the Shares will be purchased or redeemed from the Purchaser
at any time in the future. The Purchaser further understands that a notation
will be made on the appropriate records of the Company and on the stock
certificate representing the Shares so that the transfers of Shares will not be
effected on those records without compliance with the restrictions referred to
above.
Date: By:
---------------------------------- ----------------------------------
Name:
--------------------------------
Title:
-------------------------------
10.
<PAGE> 1
EXHIBIT 23.2
ACCOUNTANTS' CONSENT
The Board of Directors
Exactis.com, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG LLP
/s/ KPMG LLP
Denver, Colorado
August 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Exactis.com, Inc. and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0001092393
<NAME> EXACTIS.COM, INC.
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 JUN-30-1999
<CASH> 4,497,023 6,383,255 556,628
<SECURITIES> 0 0 0
<RECEIVABLES> 268,687 2,302,295 3,047,969
<ALLOWANCES> 75,000 75,000 75,000
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 4,794,917 8,707,511 3,829,216
<PP&E> 2,958,625 3,847,384 5,422,036
<DEPRECIATION> 982,324 2,010,118 2,686,594
<TOTAL-ASSETS> 7,065,387 10,806,271 6,793,086
<CURRENT-LIABILITIES> 931,464 4,355,245 4,282,168
<BONDS> 824,485 609,700 300,100
15,348,922 18,672,523 18,725,139
1,094,413 1,094,413 1,094,413
<COMMON> 10,010 10,091 10,091
<OTHER-SE> (11,143,907) (15,681,194) (18,895,302)
<TOTAL-LIABILITY-AND-EQUITY> 7,065,387 10,806,271 6,793,086
<SALES> 358,801 821,410 3,574,498
<TOTAL-REVENUES> 358,801 821,410 3,574,498
<CGS> 132,000 255,976 398,706
<TOTAL-COSTS> 132,000 255,976 398,706
<OTHER-EXPENSES> 1,281,708 2,537,717 3,823,673
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> (3,983,189) (5,539,926) (3,868,612)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (3,983,189) (5,539,926) (3,868,612)
<DISCONTINUED> (3,715,724) 1,065,806 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (7,698,913) (4,474,120) (3,868,612)
<EPS-BASIC> (7.75) (4.56) (3.89)
<EPS-DILUTED> (7.75) (4.56) (3.89)
</TABLE>
